Challenges in transitioning India’s industrial clusters India’s transition to a low-carbon economy faces significant technological, financial, policy and social challenges that must be addressed to ensure a smooth and inclusive shift. If left unaddressed, these challenges will hinder the deployment of clean energy solutions and delay India’s energy transition ambitions.Technological challenges While some technological barriers, such as battery supply chain constraints, solar power intermittency, and hydrogen storage and transport limitations, are global, India’s transition is further complicated by its unique infrastructure, energy security concerns and other constraints: Solar photovoltaic (PV) supply chain: India relies heavily on imports for its solar energy infrastructure. In 2023-2024, the country imported $7 billion of solar equipment, with nearly 63% sourced from China.24 Despite expanding domestic manufacturing supported by the Production-Linked Incentive scheme, the country still lacks production capabilities for polysilicon, wafers and ingots,25, 26, 27 which are essential for solar panel manufacturing. Grid modernization and energy storage: India’s power grid faces high transmission and distribution32 losses due to outdated infrastructure and technical inefficiencies. As India expands its renewable capacity, grid modernization and Battery Energy Storage System (BESS) and Pumped Storage Plant (PSP) assets are crucial to integrating variable solar and wind power successfully into the grid.33 India’s renewable energy transition will require a strategic mix of domestic capacity expansion and targeted imports. Strengthening domestic manufacturing, securing supply chains for critical minerals, and investing in R&D will be essential to reducing dependency and achieving long-term energy independence.Battery storage and electric vehicle (EV) components: Battery storage is a key enabler of India’s clean energy transition and relies on imports to meet its lithium-ion battery requirements. In the fiscal year 2023, the nation imported nearly all its 15 GWh28 battery demand.29 India’s local battery manufacturing, such as lithium-ion batteries (LIBs), is still in its early stages and should address raw material dependency.30 Moreover, the charging infrastructure is limited and concentrated in metro cities, leaving rural and semi-urban areas underserved.31 Green hydrogen infrastructure: India aims to become a global leader in green hydrogen but needs to boost electrolyser manufacturing.34 Government- led initiatives, such as the National Green Hydrogen Mission, are promoting local production, with significant investment and R&D needed to establish a fully self-reliant hydrogen ecosystem. Financial challenges India’s goal of achieving net-zero emissions by 2070 will require a staggering $10.1 trillion in cumulative investment,35 according to the Council on Energy, Environment and Water. However, funding sources are projected to cover only $6.6 trillion, leaving a substantial gap of $3.5 trillion36, equivalent to India’s GDP .37 High upfront costs for renewable energy infrastructure and emerging technologies such as green hydrogen, sustainable aviation fuel (SAF), and carbon capture utilization and storage (CCUS) necessitate the exploration of innovative and non- traditional financing approaches, strong financial incentives and policy support. While these solutions offer long-term cost savings and emissions reductions, their high initial capital requirements make it a challenge to finance and commit to decarbonization efforts.38, 39 Compounding this issue is the lack of sufficient financing mechanisms,40 as traditional lending structures are often ill-equipped to support green projects with long payback periods and low confidence in expected returns.

Accelerating India%E2%80%99s Energy Transition through Industrial Clusters 2025