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Material intensity and storage requirements are becoming the principal roadblocks to deeper renewable energy utilisation, even as India pushes ahead with one of its most ambitious reform phases in recent years, the Economic Survey 2025-26, tabled during the winter session of Parliament on January 29, said, framing the energy transition as part of a broader economic and institutional transformation.
The Survey situated energy policy within a period of accelerated structural reform. In recent months, the government has undertaken sweeping measures, including a major overhaul of the Goods and Services Tax framework, opening nuclear power generation to private participation, permitting 100 per cent foreign direct investment in insurance, notifying the four labour codes, easing green cover norms based on pollution potential, and pausing indiscriminate Quality Control Orders that affected downstream industries. This reform push coincides with India projecting real GDP growth above 7 per cent, marking one of its strongest macroeconomic phases in decades.
Yet the Survey notes a paradox: strong domestic macroeconomic performance now operates in a global environment where growth does not automatically translate into stable capital flows or favourable financial conditions. This constraint is particularly relevant for energy transition financing, as global capital remains costly and risk-averse for developing economies.
India recorded a historic 34.56 GW of non-fossil capacity additions in the first eight months of FY26, led by solar. Renewable energy now accounts for nearly half of installed capacity. However, the Survey stresses that capacity expansion alone does not ensure reliable supply, especially during evening peaks or periods of variability.
Solar and wind technologies are material-intensive, raising implications for critical minerals, mining and processing, while large-scale integration requires capital-heavy storage systems. These material and storage requirements, the Survey notes, are the two major constraints limiting faster renewable penetration.
Experiences in advanced economies show that renewable deployment that outpaces grid reinforcement, storage and balancing capacity can lead to congestion, curtailment and reliability stress. The Survey argues that transitions are durable only when sequencing, buffers and institutional depth are built into system design.
For India, the transition must align with industrial growth, rising demand and energy security. As renewable penetration rises, dispatchable thermal capacity remains necessary, even as its utilisation falls, increasing the cost of maintaining reliability. The Survey therefore calls for an energy system strategy, not a narrow climate policy lens.
Key priorities include:
Maintaining sufficient dispatchable power to support industrialisation
Strengthening transmission and distribution networks
Scaling battery storage and pumped storage
Reinforcing hydro and nuclear as long-horizon low-carbon anchors
The Survey highlights inadequate global capital flows to developing countries as a persistent constraint, despite abundant global liquidity. It calls for reforms in multilateral financial systems and stresses that India’s international stance should emphasise predictable, front-loaded climate finance, technology flows that build resilience, and commitments reflecting differentiated capabilities.
A central theme is that energy costs are as critical as capital costs for industrial competitiveness. Efficient, reliable and affordable electricity is therefore fundamental to India’s development strategy, linking power sector reform directly to manufacturing growth and economic resilience.
The Survey concludes that decarbonisation at scale is an engineering, financial and institutional undertaking, requiring pragmatism over signalling. India’s pathway, it argues, must protect growth, maintain system stability and preserve strategic flexibility, ensuring the clean energy transition advances in step with development and energy security.
The Survey positions nuclear energy and green hydrogen as critical complements to variable renewables in India’s long-term energy architecture. Nuclear power is being reframed not just as a clean source, but as a firm, low-carbon anchor capable of providing round-the-clock supply without the intermittency and storage burdens associated with solar and wind. Recent policy moves, including opening nuclear generation to greater private participation and accelerating the National Nuclear Mission, reflect a shift toward treating nuclear as a strategic infrastructure sector tied to energy security, industrial reliability and deep decarbonisation of the grid.
Green hydrogen, meanwhile, is seen less as a power-sector solution and more as an industrial transition vector. Under the Green Hydrogen Mission, India is targeting hard-to-abate sectors such as fertilisers, refining, steel and heavy transport, where direct electrification is difficult. The Survey underscores that hydrogen’s role is closely linked to renewable expansion, electrolyser manufacturing, and access to affordable finance, while also cautioning that costs remain high and infrastructure ecosystems — storage, transport and end-use adaptation — are still nascent. Together, nuclear for grid stability and hydrogen for industrial decarbonisation form part of a broader strategy to ensure the transition supports competitiveness, energy security and technological depth, rather than relying solely on variable renewable capacity additions.