31 Oct 2025
The Shift Towards Clean Energy
India’s energy landscape is undergoing a remarkable transformation. For decades, the country relied heavily on coal to power its growth. As India moves towards sustainability, renewable energy is taking centre stage, especially as India accounts for 7.5% of global CO₂ emissions, with over half coming from the electricity sector.
India has set ambitious targets: 500gw of non-fossil capacity by 2030 and net zero carbon emissions by 2070. The momentum is visible with solar and wind power are rapidly gaining ground. In just the last ten years, solar capacity has grown 26 times, and wind capacity has doubled. This surge is not just about numbers; it’s about a fundamental shift in how India generates and consumes energy.
Sources: IEA (2022 data), PIB, CEA.
Economics and Technology: Renewables Come of Age
What’s driving this shift? The economics of renewables have changed dramatically. Solar tariffs have dropped by 61% since FY15, thanks to an 80% fall in module prices. Wind power, too, has become more competitive, with tariffs stabilising as adoption has increased. Today, the levelised cost of solar and wind is on par with, or even lower than, coal without the environmental drawbacks.
Yet, the journey isn’t without challenges. Solar energy is available only during the day, and wind is often seasonal. This means coal still plays a crucial role in meeting base load demand, especially during non-solar hours. To truly harness the potential of renewables, India needs robust energy storage solutions.
Sources: SECI, PSUs, SERC, Citi database, Bloomberg.
Storage: The Bridge to a Sustainable Future
Energy storage systems (ESS) are emerging as the linchpin of India’s renewable ambitions. These systems store excess energy when supply outpaces demand and release it during peak hours, ensuring grid stability and round-the-clock power. Technologies like Battery Energy Storage Systems (BESS), pumped hydro storage, and even hydrogen storage are being explored and deployed.
India already has 6.7gw of operational pumped hydro storage, with much more in the pipeline. BESS, while currently more import-dependent and costlier, is gaining traction due to its rapid deployment capabilities and narrowing cost gap with traditional storage. However, building a self-sufficient supply chain for these technologies remains a priority, as much of the value chain especially for solar modules and batteries still relies on imports.
Sources: CEA
Policy Support and the Road Ahead
The government has responded with a suite of supportive policies: Production Linked Incentives (PLI) for domestic manufacturing, Viability Gap Funding (VGF) for storage projects, and mandates for using domestically produced components. Initiatives like the National Green Hydrogen Mission and the Critical Minerals Policy are designed to secure the raw materials and technologies needed for a resilient, homegrown renewable ecosystem.
Despite impressive progress, the journey is far from over. India must continue to invest across the value chain, from raw materials to advanced storage and capital machinery. Policy support, innovation, and a focus on self-sufficiency will be key to ensuring that the renewable transition is both sustainable and secure.
Arijit Dutta, Analyst at Kotak AMC says, “India’s renewable energy transition is driven by greening the grid, without compromising the energy security in manufacturing the entire value chain of equipment”
Ghanshyam Prasad, CEA Chairperson says, “India has about 3,300 MW of energy storage capacity in the pipeline, which is expected to culminate in 8,500 MWh over the next two years.”
Source: Economic Times, https://manufacturing.economictimes.indiatimes.com/news/energy/energy-storage-push-govt-eyes-74-gw-bess-50-gw-pumped-hydro-by-2032/122345118
The stocks/sectors mentioned do not constitute any recommendation and Kotak Mahindra Mutual Fund may or may not have any future position in these sectors/stocks. Use of the company brand names does not imply any affiliation with or endorsement by them or any of its holding companies, subsidiaries or affiliates and are used for illustrative purpose only.
KMAMC is not guaranteeing/offering/communicating any indicative yield/returns on investments. The stocks/sectors mentioned do not constitute any kind of recommendation and are for information purpose only.
These materials are not intended for distribution to or use by any person in any jurisdiction where such distribution would be contrary to local law or regulation. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Kotak Mahindra Mutual Fund may or may not hold position in the mentioned stock(s)/sector(s).
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
