India needs USD $145bn a year to fund net-zero path

India needs average annual energy investment of about USD $145 billion to keep pace with economic growth while following a net-zero pathway, according to analysis from Wood Mackenzie.

The firm said capital would need to concentrate on power generation, energy storage and grid infrastructure. It said the next decade would shape whether India adds long-lived high-emissions assets or builds out low-carbon systems at scale.

"India's next decade is decisive," said Joshua Ngu, Vice Chairman, Asia Pacific, Wood Mackenzie. "The challenge is a dual mandate: India must de-risk its immediate energy security while simultaneously building the low-carbon architecture required to support a top-tier global economy. Today's investment choices will determine whether the country locks in carbon-intensive infrastructure or leads the world in low-carbon industrialisation".

Power Priorities

Wood Mackenzie said the power sector remains India's largest source of emissions. It also said the sector represents the main channel for emissions reduction across the economy as electrification increases in industry, transport and buildings.

The firm said India's installed capacity mix has already shifted. It said non-fossil capacity now exceeds fossil capacity. It expects renewables to drive most new supply over the coming years, with grid flexibility and storage growing in importance.

It said new coal additions would focus on reliability and peak balancing rather than energy demand growth. It said this change creates system integration issues as variable generation increases.

Rashika Gupta said grid investment and reforms would influence whether private capital flows into networks and related infrastructure. "The US$1.5 trillion investment between 2026 and 2035 for energy transition is not just about adding megawatts; it is about the wires," said Rashika Gupta, Vice President, Power and Renewables Research, Wood Mackenzie. "Success hinges on the pace of market reforms, specifically the Electricity Amendment Bill to improve distribution competition and provide the transparent investment signals needed to unlock private capital for grid modernisation."

Fossil Fuel Balance

Wood Mackenzie said hydrocarbons would remain important for near-term energy security. It said India remains on track to reach a coal production target of 1.5 billion tonnes by 2030. It also noted a growing emphasis on coal gasification as policymakers seek to diversify the energy mix.

It flagged a rising oil import dependency risk. It projected crude import reliance would reach 87% by 2035. Ngu linked the outlook to upstream investment and the policy environment for exploration and production.

"To mitigate this, India must revitalise its upstream sector," said Ngu. "Attracting International Oil Companies (IOCs) back to Indian exploration and production (E&P) is no longer optional. It is a security imperative."

Wood Mackenzie also set out a longer-term growth outlook for natural gas. It said national demand would more than double from 72 bcm in 2024 to over 140 bcm by 2050. It said industry would drive most of that demand, accounting for more than two-thirds through 2030 and remaining above 55% through 2050.

It projected LNG imports would grow at a compound annual rate of 4.8% and peak at 90 mmtpa by 2050. It said demand growth would sit alongside falling local supply. It also said price sensitivity would remain a major constraint on fuel switching.

"The LNG opportunity in India is significant, with imports projected to grow at a 4.8% CAGR and peak at 90 mmtpa by 2050. This growth is underpinned by a 2.6% CAGR in overall demand set against declining local supply. However, the pivot to gas remains sensitive to market dynamics; for this expansion to be sustainable, gas must remain price-competitive against alternative fuels."

Manufacturing Gaps

Wood Mackenzie said India's energy transition plan relies on domestic manufacturing to reduce import exposure in low-carbon technologies. It said India has become the world's second-largest solar module manufacturer. It also said gaps remain in upstream supply for cells and wafers.

It said domestic content requirements for solar cells would start in June 2026. It expects short-term supply pressure. It said around 24 GW of new capacity would come online later in the year.

It said the battery sector faced larger execution risks. It cited more than 200 GWh of announced plans. It forecast around 100 GWh would likely come on stream by 2030. It linked the shortfall to project delivery risks and issues in the Advanced Chemistry Cell battery Production Linked Incentive scheme. It said the scheme would need changes.

Hydrogen And CCUS

Wood Mackenzie said India's green hydrogen ambition faces slower progress than targets imply. It said the 5 Mtpa target for 2030 now has a widening gap. It said most announced projects remain at early feasibility stages.

It also described carbon capture, utilisation and storage as nascent. It said efforts focus on policy design rather than industrial-scale deployment.

Hetal Gandhi linked policy direction to industrial compliance.

"the 2026 launch of the Carbon Credit Trading Scheme (CCTS) marks a definitive shift in India's climate policy, transitioning the industrial sector from the energy-efficiency focus of the PAT scheme toward mandatory emissions caps. By imposing these limits, the framework will incentivise the decoupling of industrial growth from emissions intensity. Ultimately, this shift is the right first step to transform carbon compliance into a competitive differentiator and provides the regulatory certainty required to enable adoption of low-carbon technologies," said Hetal Gandhi, Lead - CCUS, Asia Pacific, Wood Mackenzie.

Wood Mackenzie said India could still become a large-scale alternative manufacturing base to China for solar and batteries as buyers diversify supply chains. It pointed to growth in domestic manufacturing ecosystems and policy momentum as factors shaping that outlook.

"India is at a crossroads, but its long-term trajectory is undeniably bright," said Ngu. "By scaling domestic manufacturing and maintaining policy momentum, India will not only hit its 500 GW target but emerge as a central pillar of the global renewable market. This decade of investment is the foundation for India to lead the new energy economy."