Why invest in renewable energy, a comprehensive guide

If you’re wondering about where to make your next investment, renewable energy might be your best bet.

Why invest in renewable energy, a comprehensive guide

If you’re wondering about where to make your next investment, renewable energy might be your best bet.

Introduction

Renewable energy investments are taking place across the globe, with more people turning to sustainability. But why? Investment in renewable energy is not just smart, it’s exciting! It’s all about backing cleaner, greener power that’s changing the game for our planet and your portfolio. With new tech and growing demand, the chances to profit and make a difference keep getting better. More people are realizing that renewable energy is not just good for the environment but also a strong financial opportunity. If you’re excited about hopping onto the green bandwagon and making wise financial decisions, here is a deep dive into the world of renewable energy investments.

But before we begin, here is a little refresher on what is renewable energy and why it is the need of the hour for our planet.

 

What is renewable energy?

Renewable energy is energy derived from natural sources that replenish themselves faster than they are consumed, such as sunlight, wind, rain, and tides. Unlike fossil fuels like coal, oil, and gas that take millions of years to form and release harmful greenhouse gases when burned, renewable energy produces far fewer emissions and helps protect the environment. Renewable energy investment supports these cleaner power sources. Although renewable energy has been used for centuries, modern technology is making it easier and cheaper to harness than ever before. Renewables are also creating more jobs and reducing our dependence on polluting fossil fuels.

 

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Why invest in renewable energy?

The world is grappling with climate change, volatile fossil fuel prices, and growing energy insecurity, making renewable energy investment more crucial than ever. Thanks to rapid technological advances and declining costs, global renewable capacity increased by 536 gigawatts in 2023 alone, with renewables now accounting for nearly 13% of the world’s energy. The switch to clean energy sources like wind, solar, green hydrogen, and biomass not only helps reduce the impact of climate change but also addresses air pollution and health challenges. If you’re still wondering why invest in renewable energy, here is a list of the biggest benefits of renewable energy investments in India:

1. Environmental protection and climate mitigation
 

  • Renewable energy drastically reduces greenhouse gas emissions and air pollutants compared to fossil fuels, mitigating climate change and improving air quality.
  • Minimal water usage by renewable technologies conserves India’s critical freshwater resources, addressing the country’s water stress challenges.
  • Renewable projects have low impact on land use and biodiversity compared to conventional energy infrastructure.

2. Public health improvements
 

  • Reduced air pollution from coal, oil, and biomass burning lowers respiratory and cardiovascular diseases, decreasing premature deaths and healthcare costs.
  • Cleaner air improves overall population health and quality of life, especially in urban and industrial regions.

3. Economic growth and job creation
 

  • India’s renewable energy sector employed over 1 million people in 2023, with growth expected to generate millions more jobs across manufacturing, installation, operations, and maintenance.
  • Investments in renewables create approximately three times more jobs per dollar than fossil fuel projects.
  • Growth in renewable infrastructure stimulates local economies and encourages entrepreneurship, particularly in rural areas.

4. Energy security and independence
 

  • Utilizing abundant domestic solar, wind, and bioenergy resources reduces dependence on imported fossil fuels, protecting India from international price shocks and geopolitical risks.
  • Renewable power generation enhances grid stability and diversifies the energy mix, increasing resilience.

5. Affordable, stable, and decentralized energy access
 

  • Falling costs of solar and wind technology translate to affordable and predictable energy prices over the long term, benefiting consumers and businesses alike.
  • Renewable energy supports decentralized power systems, including rooftop solar and mini-grids, enabling energy access in remote and underserved communities.
  • Net metering policies allow consumers to feed surplus solar energy back into the grid, reducing electricity bills and incentivizing rooftop solar adoption.

6. Social empowerment and inclusive development
 

  • Renewable energy projects create new livelihood opportunities, especially for women, marginalized communities, and indigenous populations.
  • Solar-powered agricultural solutions such as irrigation pumps and cold storage enhance rural productivity and reduce urban migration pressures.
  • Local ownership models and community-based projects promote energy justice and social inclusion.

7. Climate resilience and adaptation
 

  • Renewable power can sustain critical services like healthcare facilities, water pumping, and irrigation during climate-related disasters and grid outages.
  • Distributed renewable systems enhance community resilience by providing reliable off-grid or backup energy solutions.

8. Investor confidence and policy support
 

  • India offers strong government incentives such as accelerated depreciation on renewable energy assets, tax exemptions, and 100% Foreign Direct Investment (FDI) under the automatic route, creating an enabling environment for investors.
  • Clear renewable energy targets, solar park schemes, and bio-gas initiatives further enhance investor certainty.
  • Net metering and other regulatory frameworks facilitate integration of distributed renewable generation into the grid.

9. Strong market growth and innovation
 

  • India has attracted over $20 billion in renewable energy foreign investment since 2000, with projections estimating an $80 billion market for low-carbon technologies by 2030.
  • The sector drives technological innovation in battery storage, electric vehicles, green hydrogen, and smart grids, positioning India as a hub for clean technology manufacturing and exports.

10. Alignment with India’s climate commitments and ESG compliance
 

  • Renewable energy investment is crucial for India’s climate goals, including a 45% reduction in carbon intensity by 2030 and achieving net-zero emissions by 2070, as outlined in the Panchamrit initiative.
  • Investors increasingly demand ESG-compliant opportunities; India’s renewable sector aligns with these standards by promoting environmental stewardship, social equity, and transparent governance.
  • Clean energy projects contribute to sustainable finance flows, attract green bonds, and improve India’s global climate leadership.

11. Boost to rural and agricultural development
 

  • Deployment of solar-powered irrigation pumps and electrification of rural areas supports increased agricultural productivity and rural livelihoods.
  • Renewable energy infrastructure enables cold storage facilities that reduce post-harvest losses and support food security.
  • Improved rural electrification reduces poverty and strengthens education and health outcomes.

12. Global leadership and export opportunities
 

  • India is emerging as a key exporter of renewable energy technologies, such as solar panels, green hydrogen, electrolyzers, and battery storage solutions.
  • Strengthening clean energy manufacturing and supply chains boosts India’s global influence in climate diplomacy and the worldwide energy transition.

India is emerging as a clean energy leader. Over the past eight years, the country’s non-fossil capacity has risen nearly 400%, reaching 205 GW, around 42% of total power capacity. Solar alone has grown 30-fold since 2014 and now accounts for 20% of the energy mix. With a target of 500 GW by 2030 and robust policies like 100% FDI, solar parks, and bio-gas initiatives, India offers strong momentum and clarity for investors. Understanding how and where to invest in this booming sector has never been more important.

 

How to invest in renewable energy

You can enter the renewable energy market through multiple avenues:

 

  • Direct project investment: Funding or developing solar, wind, or biomass projects. This requires significant capital and technical expertise but offers high control and potential returns.
  • Equity investments: Buying shares in publicly listed renewable companies like Tata Power, etc. This option is accessible through stock markets and carries market-related risks.
  • Mutual funds and ETFs: Investing in funds focused on renewable energy companies helps diversify risk while gaining exposure to the sector. Examples include SBI Green Energy Fund and Aditya Birla Sun Life Renewable Energy Fund.
  • Green bonds: Debt instruments dedicated to renewable projects offer fixed returns and support sustainable initiatives.
  • Government schemes and PPPs: Partnering in Public-Private Projects and leveraging subsidies, tax benefits, and incentives provided under programs like the National Solar Mission.

 

Types of renewable energy investments in India

Different types of renewable energy investments are helping contribute to India’s clean energy goals in the following ways:

Physical achievements (as of April 2025) as per the Ministry of New and Renewable Energy

Sector

FY 2025-26 achievements (Apr 1–30, 2025) (MW)

Cumulative achievements (MW)

Wind power

1020.73

51,058.55

Solar power*

2299.12

1,07,945.61

Small hydro power

1.50

5,102.05

Biomass (bagasse) cogeneration

0.00

9,821.32

Biomass (non-bagasse) cogeneration

0.00

921.79

Waste to power

0.00

309.34

Waste to energy (off-grid)

10.70

541.57

Total

3332.05

1,75,700.23

 

Note: Solar power cumulative capacity is 107.95 GW, including:
 

  • Ground-mounted solar plant: 82.39 GW
  • Grid-connected solar rooftop: 17.69 GW
  • Hybrid projects (solar component): 2.89 GW
  • Off-grid solar: 4.98 GW

 

Key renewable energy investment highlights and developments
 

  • FDI inflow in the renewable sector reached $15.36 billion from April 2000 to September 2023.
  • Renewable energy investment is projected to rise 83% in 2024, reaching $16.5 billion.
  • India plans to invest $360 billion in renewables by 2030, including $150–170 billion for transmission and storage.
  • Offshore wind: ₹7,453 crore viability gap funding for 1 GW capacity.
  • 59 solar parks with 40 GW capacity approved; top ones include Pavagada, Kurnool, and Bhadla-II.
  • India is developing the world’s largest renewable energy park (30 GW) in Gujarat.

Emerging renewable energy investment trends in India

Renewable energy is taking on different forms in 2025, with an array of trends taking over the market: read here.
 

  • Solar boom: India added 25.2 GW solar capacity in 2024, up 204% from 2023.
  • Wind expansion: 4.15 GW added in FY 2024–25; offshore wind is gaining momentum.
  • Grid and storage: India has expanded its grid with 180,000 km of transmission lines over a decade.
  • Electric mobility: The Electric two-wheeler market grew from 1.2% in 2021 to 5.2% today.
  • Combined heat and power: Biomass-powered CHP plants offer high efficiency and dual energy output.
  • Heat pumps and geothermal: Used for space heating and cooling, tapping underground or ambient heat.

 

 

Investing in a renewable energy startup in India

As renewable energy continues to reshape the global energy landscape, startups are at the heart of this transformation, pioneering innovations in clean power, storage, grid modernization, and sustainable mobility. Businesses, from large enterprises to forward-looking SMEs, are increasingly recognizing the strategic value of investing in these young, high-potential companies. While general renewable energy investment is about supporting and expanding proven clean energy solutions, investing specifically in startups is about capturing innovation, early-stage growth, and the potential to reshape the future of energy.

Why invest in a renewable energy startup?

Here’s why many investors are increasingly channeling resources into these emerging companies:

1. Driving innovation and technological advancement
Startups are at the forefront of cutting-edge technologies, from advanced energy storage and smart grids to new solar, wind, and bioenergy solutions. Investing in these ventures helps accelerate breakthroughs that can reshape the energy landscape and create competitive advantages.

2. High growth potential
Renewable energy startups often operate in rapidly evolving markets with significant room for expansion. Early investments can translate into substantial returns as these startups scale and disrupt traditional energy sectors, making them attractive for investors seeking growth opportunities.

3. Capitalizing on favorable policy and market trends
Governments worldwide are promoting renewable energy through subsidies, tax benefits, and supportive regulations. Startups, agile by nature, can quickly capitalize on these policies, creating windows of opportunity for investors to benefit from growing market demand.

4. Diversifying investment portfolios
Adding renewable energy startups to investment portfolios introduces diversification across sectors and technologies, reducing risk exposure and balancing investments against traditional energy assets.

5. Potential for strategic partnerships or acquisitions

Investing in startups can open doors for future partnerships, technology licensing, or acquisitions that bolster a business’s competitive edge.

By backing renewable energy startups, businesses not only contribute to a greener future but also position themselves strategically in an evolving global energy economy.

How to invest in a renewable energy startup

There are multiple ways companies are getting involved with renewable energy startups:
 

  • Corporate Venture Capital (CVC): Investing directly through in-house funds targeting clean-tech innovation.
  • Accelerators and incubators: Supporting or launching platforms that mentor and fund early-stage green startups.
  • Co-development and pilots: Partnering with startups to co-create new energy solutions tailored to specific business needs.
  • Procurement and Technology Adoption: Integrating startup innovations into existing operations, e.g., smart metering, solar rooftops, or microgrid systems.

 

Factors affecting renewable energy investment in India

India's renewable energy sector is on a steep growth trajectory, with a 14.2% increase in installed capacity and a significant 30% rise in solar power over the past year. This momentum is driven by several key factors:

1. Government initiatives and policy support

India is taking major strides towards a sustainable energy future, supported by robust government policies and attractive incentives. These initiatives aim to accelerate the adoption of renewable energy, encourage manufacturing, and create a favorable environment for investors.

Incentives and schemes for renewable energy investment in India
 

  • 500 GW Renewable Energy Target by 2030 India has committed to installing 500 GW of non-fossil fuel capacity by 2030 as part of its pledge at COP26. This target supports large-scale renewable energy deployment across sectors.
  • Solar Parks and Ultra-Mega Solar Projects Aimed at developing 40,000 MW of solar capacity, this scheme facilitates the creation of large solar parks with ready infrastructure, such as land, roads, and transmission systems, making project execution easier for developers.
  • Central Public Sector Undertaking (CPSU) Scheme Phase-II This scheme supports grid-connected solar PV projects using domestically manufactured cells and modules. It provides financial backing through Viability Gap Funding (VGF), ensuring that government-run projects promote local manufacturing.
  • Production Linked Incentive (PLI) Scheme for Solar PV Modules With a budget of ₹19,500 crore, the PLI scheme aims to establish a gigawatt-scale domestic manufacturing ecosystem for high-efficiency solar PV modules, reducing import dependency and boosting local industry.
  • PM-KUSUM Scheme This initiative promotes solar-powered irrigation by supporting installation of stand-alone solar pumps and small solar plants on barren lands. It helps farmers reduce diesel dependency and ensures affordable power supply to the agriculture sector.
  • Rooftop Solar Programme Phase II The program offers direct subsidies for rooftop solar installation in the residential sector and performance-based incentives to DISCOMs. It targets mainstream adoption of solar energy in urban households.
  • Green Energy Corridor (GEC) Implemented in two phases, this scheme aims to create intra-state transmission networks for renewable energy, ensuring efficient evacuation and integration of power into the grid.
  • Bio-Energy and Waste to Energy Programs These initiatives support power generation from urban waste, agricultural residues, and biomass. Sub-schemes include biogas, biomass pellet manufacturing, and cogeneration plants in industries.
  • National Green Hydrogen Mission With an outlay of ₹19,744 crore, this mission envisions India as a global hub for the production and export of green hydrogen and its derivatives, focusing on decarbonizing hard-to-abate sectors like steel and transport.
  • 100% FDI in Renewable Energy Foreign Direct Investment (FDI) up to 100% is permitted under the automatic route in the renewable energy sector, boosting investor confidence and foreign participation.
  • Waiver of Inter-State Transmission Charges Projects commissioned by June 30, 2025, enjoy a complete waiver of transmission charges, improving the cost-effectiveness of renewable power distribution across states.
  • RE-INVEST (Renewable Energy Investors Meet and Expo) A flagship event organized by MNRE to attract global investors, RE-INVEST showcases India’s RE potential and fosters dialogue between industry stakeholders and policymakers.
  • Investment in Transmission Infrastructure ₹9.12 lakh crore is planned for upgrading power transmission infrastructure by 2032. This investment will support the evacuation and distribution of renewable power across the country.
  • Sovereign Green Bonds Framework Launched to raise funds for green infrastructure, the framework aligns with international standards and helps attract capital from environmentally conscious investors.
  • Ladakh RE and Storage Project The government approved 13,000 MW of renewable capacity and 12,000 MWh of Battery Energy Storage Systems (BESS) in Ladakh, alongside an Inter-State Transmission System (ISTS) for power evacuation.
  • PM Surya Ghar Muft Bijli Yojana Announced in 2024, this scheme offers free rooftop solar electricity to 1 crore households, supported by subsidies and concessional loans, reducing electricity bills and promoting clean energy at the grassroots.
  • Urban Planning for Sustainable Cities Under Budget 2023-24, urban reforms were proposed to create “Sustainable Cities of Tomorrow,” including clean energy integration, electric mobility, and eco-friendly infrastructure.
  • National Action Plan on Climate Change (NAPCC) Focuses on increasing India's reliance on renewable energy to minimize carbon emissions and enhance sustainability.
  • Panchamrit Goals A commitment to achieving net-zero emissions by 2070, with a primary emphasis on solar and wind energy.
  • Renewable Purchase Obligations (RPO) Mandates states and utilities to source a portion of energy from renewables.

2. Technological advancements

Advancements in technology have significantly impacted the renewable energy sector:
 

  • Falling solar costs: The cost per watt of solar energy has dropped significantly, making it more affordable for both consumers and businesses.
  • Improved solar panel efficiency: New technologies have made solar panels more efficient, enabling better energy generation even under less-than-ideal weather conditions.
  • Energy storage solutions: The development of battery storage technologies has allowed solar power to be stored and used during non-sunny hours, ensuring a more reliable energy supply.

3. Private sector investment

Private sector investment has played a crucial role in India's renewable energy growth:
 

  • Leading firms: Companies such as Tata Power, Adani Power, ReNew Power, etc. have invested heavily in renewable energy projects across India.
  • International investments: Foreign companies are also contributing to India's renewable energy boom, providing both capital and expertise.
  • Green bonds: These financial instruments are being used to raise funds for sustainable projects, including solar and wind energy installations.

4. Infrastructure development

Strong infrastructure is essential for harnessing renewable energy efficiently:
 

  • Smart grids: These ensure improved reliability of electricity supply and accommodate decentralized renewable sources.
  • Battery storage systems: These store the surplus daytime solar production during the day and supply to the system at low sun generation hours or at high demand times.
  • Grid modernization: This facilitates integrating more seamlessly renewable sources onto the grid with upgraded power grids, minimizing energy loss while also raising power supply delivery efficiencies.

5. Environmental and economic factors

India's transition to renewable energy is driven not only by environmental concerns but also by economic factors:
 

  • Climate change mitigation: India's commitment to the Paris Agreement drives its focus on increasing renewable energy sources.
  • Energy security: Reducing dependence on imported fossil fuels is critical for India's energy independence and long-term economic stability.
  • Job creation: The renewable energy sector is rapidly expanding, creating thousands of jobs in the manufacturing, installation, and maintenance of solar and wind energy systems.

The wave of renewable energy in India is becoming bigger as more power companies go green. Investing in renewable energy does not only have to come through stocks or equity; a simple transition from grid electricity to solar for your home or employing wind energy resources for your business can help you make the difference. Not sure where to start?

Tata Power is leading the renewable energy industry in India with there revolutionary projects. From floating power plants in the most inaccessible villages to wind energy farms across 7 states, they are covering the length and breadth of our country. Learn more!

Bottomline

India’s journey toward renewable energy is more than just a shift in how we power our homes and businesses; it's a movement toward a cleaner, more sustainable future. With strong government support, rising private investment, and continuous innovation, the country is laying the groundwork for a greener tomorrow. Even with a few bumps along the way, such as infrastructure delays and financial challenges, the sector remains full of promise and potential.

For investors, this is the perfect time to step in. As India works to meet its growing energy demands while reducing its carbon footprint, the renewable energy sector offers not just impact but opportunity. The future of energy in India is not only bright, it’s solar-powered, wind-driven, and investor-ready.

Frequently asked questions

Sources
 

1.       Why is Renewable Energy Important

2.       Why Invest in Renewable Energy

3.       Renewable Energy

4.       Renewable Energy – Powering a Safer Future

5.       Becoming a Clean Energy Investor: Why It Might Be a Good Addition to Your Portfolio

6.       World Energy Investment 2024 – Overview and Key Findings

7.       Physical Achievements

8.       Renewable Energy in India: A Comprehensive Guide

9.       Which Types of Renewable Energy Sources Are Used in India?

10.   India’s Renewable Energy Growth: Solar Power & More | IBEF

11.   6 Major Types of Green Energy in India

12.   Investing in India’s Green Future

13.   What Factors Contributed to India’s 14.2% Increase in Renewable Energy and 30% Surge in Solar Power?

14.   De-Risking Can Boost Investment in India’s Renewable Energy Sector

15.   Navigating The Rise of Green Energy Investments in India: A Sustainable Wealth-Building Opportunity

16.   Renewable Energy: The Clean Facts

17.   India's Renewable Energy Capacity Hits 200 GW Milestone

18.   Major ongoing Renewable Energy Schemes and Programmes

19.   Incentives for Adoption of Renewable Energy