A new report by the Institute for Energy Economics and Financial Analysis (IEEFA) finds that India's credit markets are already differentiating between clean and thermal energy assets. The country’s dependence on imported fossil fuels, such as crude oil and liquefied natural gas (LNG) for power, means that its economy is acutely exposed to geopolitical shocks and supply disruptions. This in turn reinforces the urgent to accelerate the Indian energy transition.
The report, “Financing the energy transition: A credit perspective on India’s power sector”, examines financial indicators for eight key power generators —Adani Green Energy Limited (AGEL), Adani Power, JSW Energy Limited (JSWEL), ReNew Power, NLC India Limited (NLCIL), NTPC Limited, SJVN Limited, and Tata Power — together representing roughly one-third of India's installed capacity.
Annual investments in renewables, storage and transmission are estimated to surge from around $68 billion (INR6.18 trillion) by 2032 to around $145 billion (INR13.19 trillion) by 2035. With renewable assets being capital-intensive with long operating lives, long-tenor amortising debt is the most efficient form of financing and will determine the pace of India's transition.
“The power sector is already among the largest borrowers in India’s domestic debt markets, and this role is likely to expand as investments accelerate” said Kevin Leung, Sustainable Finance Analyst, Debt Markets, IEEFA – Europe, and a contributing author of the report. “In this context, transition planning is, fundamentally, a question of debt market planning. The availability, tenor and cost of debt will decide how fast capacity can be added — and who gets left behind.”
The credit divergence between renewable and thermal assets is already visible across key financial metrics. Renewable-focused utilities enjoy stronger margins, thanks to zero fuel costs, broader access to offshore and international financing, and stronger interest from global institutional lenders. Meanwhile, thermal-linked credits are being progressively shut out of international capital markets. All outstanding US dollar -denominated bonds from Indian power utilities are linked to renewable or hydro assets. Tata Power's 2021 offshore bond repayment marked a de facto exit for thermal credit from that channel.
“Adani Green Energy Limited consistently outperforms Adani Power on EBITDA margins within the same corporate group” added co-author Soni Tiwari, Energy Finance Analyst, India, IEEFA. “Similarly, NTPC Green outperforms NTPC's legacy thermal operations. These are not cyclical differences. They reflect a structural shift in the economics of power generation that will compound over time as renewable portfolios mature and generate stable, contracted cash flows.”
The report finds that not all issuers will face transition risks equally. Financially constrained players will face a dual challenge: Limited balance sheet flexibility to adapt decarbonisation strategies, alongside increasingly restricted access to the funding sources that remain available to higher-quality credits. State-owned enterprises like NTPC and SJVN benefit from implicit government backing that provides refinancing flexibility unavailable to private issuers.
Among the utilities, NTPC is central to unlocking transition finance. It is India’s largest integrated power utility accounting for around 17 percent of installed capacity, with 51.1 percent government ownership and a credit rating aligned with sovereign debt.
Scaling renewable capacity can help deepen India’s debt markets and reduce climate-related systemic risk. With the right reforms, debt finance becomes not just an enabler, but a strategic lever for building a more resilient financial system and supporting sustainable growth.
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Institute for Energy Economics and Financial Analysis (IEEFA)
Report: “Financing the energy transition: A credit perspective on India’s power sector”
