India’s Energy Transition Amid the Regulatory Targets

By Naveed Qazi, Sustainability Analyst

Photo Source: Wire Science

India’s energy transition is not only about reducing carbon emissions, or expanding renewable energy. It is also about whether Indian economy can reconcile three objectives namely sustaining economic growth, strengthening energy security, and meeting high climate commitments. With time, the debate has put India part of a broader Global South dilemma.

The country also presents a unique case. Instead of many advanced economies, that embarked on decarbonisation after rapid industrialisation, India is pursuing development and green transitions simultaneously. This dual challenge makes India’s case interestingly complex. The transition will also depend on whether its institutions, markets, technology, and public policy converge in long term.

Historian of energy Vaclav Smil has consistently argued societies do not replace one source of energy with another. They rather transform entire eco-systems. He further postulates that every major transition, from biomass to coal, from coal to oil, reshapes industry, transport, finance, urbanisation and patterns of consumption for many decades. Judged against this historical perspective, India’s renewed expansion appears less like a culmination of a transition.

Climate economist Nicholas Stern has argued that the transition to low fuel economies should not be viewed as a burden of growth but a new model of development capable of stimulating innovation, productivity, competitiveness and employment. Yet Stern believes that markets alone cannot create those outcomes. They require stability of institutions, credible policy frameworks, and sustained public investment. In his perspective, renewable energy represents only one side of a broader development strategy.

In addition to this, public policy scholar Navroz K Dubash has long argued that India’s climate strategy cannot be divorced from its core developmental priorities. Unlike wealthier economies where emissions peaked after decades of industrial expansion, India continues to strive for strong balance in instilling comprehensive climate policy amid broader economic objectives within a developing economy.

For achieving long term objectives by strengthening sectors through industrial expansion, economist Dani Rodrik argues that clean energy has come out as one of the principal arenas for activism.

At the same time, it will be equally misleading to overlook any attempts India has achieved over past five years in renewal energy policy. The country has launched National Green Hydrogen Mission to foster a domestic clean energy manufacturing ecosystem, and strengthened industrial policy through product linked initiative schemes for solar modules, batteries and other strategic technologies. As Vibhuti Garg notes, significant challenges remain in grid integration, storage, financing and coal dependence, India’s recent energy policy demonstrates a discernible shift towards combining climate objectives with industrial competitiveness and long term energy security. He also believes that battery storage, pumped hydro, modern transmission corridors, financially viable electricity distribution companies will prove just as important as solar farms or wind farms. The real challenge, however, remains that the clean electricity remain accessible, affordable and reliable.

Even if green systems evolve in India, another challenge remains. Economist Michael Grubb argues that successful decarbonisation depends as much on institutions as on engineering. Market, regulatory frameworks and pricing mechanisms determine whether solar energy can be integrated efficiently into national grids, for example. As the share of solar and wind power increases, questions of storage, transmissions, and system flexibility becomes increasingly important.

Another important dimension to consider is the centralisation of finance. Economist Avinash Persaud argues that the principal obstacle facing many developing economies is not technological readiness but cost of capital. Renewable energy projects in developing nations face significantly higher borrowing costs than comparable investments in advanced economies, limiting deployment despite decreasing declining technology costs. The International Energy Agency (IEA) estimates that the cost of capital for India's grid-scale renewable energy projects remains around 80 per cent higher than in advanced economies.

Governance in India about green transition is equally important. Nobel laureate Elinor Ostrom challenged the notion that complex environmental problems can be solely solved through centralised policymaking. Effective governance, she argued, emerges through coordination among national governments, regional authorities, regulators, businesses and local communities. The characteristics of India's federal structure make this insight particularly relevant.

The debate over India's energy transition has therefore entered a more demanding phase. The central question is no longer whether renewable energy should expand. There is broad agreement that it should but whether the institutions supporting that expansion can evolve at a comparable pace is the real matter at hand.