The World Energy Outlook 2025 (WEO 2025) confirms India’s rise as a central driver of global energy demand. India’s non-fossil capacity now accounts for half of its total installed power, five years ahead of schedule. Yet the International Energy Agency (IEA) cautions that generation shares, institutional capabilities and investment patterns will determine what happens next. This blog examines what the IEA’s findings mean for India’s energy transition and what the country must focus on next.

Drivers of India’s Energy Demand

In the WEO’s Stated Policies Scenario (STEPS), India accounts for the largest absolute increase in global energy demand through 2035, surpassing the rise seen in China during its comparable phase. The IEA projects that India’s total energy demand will grow by about 3% annually till 2035. In the near term, much of this demand will be distributed across households, cities, and micro, small and medium enterprises (MSMEs). Over the longer term, industry will become the primary driver because of its higher energy intensity and slower capital turnover.

India’s profile is distinct, as its layered demand means the transition cannot rely on one policy lever or one sector. Buildings, cooling, mobility and electrification of small enterprises will matter as much as industry. These patterns mirror what emerges in WRI India’s work with states and sectors under the Energy Transition Preparedness Initiative (ETPI). The transition will be socially diffuse and politically complex, but if managed well, it can also be equitable. The central question is no longer technological feasibility; it is whether institutions can keep pace with ambition while supporting the country’s developmental priorities.

Why Capacity is Not the Finish Line

India reaching 50% non-fossil capacity in mid-2025 is an important milestone, but capacity alone does not ensure reliable or affordable low-carbon energy supply. Currently, non-fossil sources account for one third of electricity generation, reflecting lower operating hours for solar and wind and limited grid flexibility.

Investment trends are evidently shifting — the fossil to non-fossil power investment ratio shifted from 1:1 in 2015 to 1:4 by 2025. Solar PV alone drew $113 billion in investments over the past decade. However, most capital still flows into generation and not the grid and storage systems required to translate capacity into usable power. In fact, the Ministry of New and Renewable Energy (MNRE) recently signaled a temporary slowdown in renewable tendering for 2026-27, because generation is outpacing the grid’s ability to absorb new capacity.

The IEA estimates that India will need over 230 GWh of battery storage and more than 60,000 kilometers of transmission lines dedicated to renewable integration by 2030. Capital availability remains necessary for meaningful decarbonization but the ability of institutions to absorb, plan and deploy it at the pace projections assume must be seen as critical.

Harder-To-Abate Sectors and Material Constraints

Coal remains structurally embedded in India’s power system and industrial economy. The IEA projects a plateau in coal demand by 2035 with total generation broadly stable even as coal’s share declines. This is partly because existing coal plants remain inexpensive to operate and difficult to retire, especially as industrial growth raises the need for dispatchable supply.

Industry accounts for more than half the projected increase in India’s total energy demand through 2050, and electrification will be a key contributor to reducing near-term industrial emissions. But the pace of industrial electrification depends on supply reliability and tariffs, both of which remain uneven across states.

Transport adds further complexity. Oil demand is expected to grow through the 2030s even as electric mobility expands. WRI India’s modelling shows that electrification, modal shift and efficiency measures together offer the strongest pathway to moderate this growth, but infrastructure readiness varies across states.

Material supply chains introduce another source of exposure. India depends on concentrated global mineral refining even as storage becomes essential to grid stability. Responsible Energy Initiative’s research shows how improved design, collection, recycling and reuse systems can strengthen domestic value-chains and reduce vulnerability. However, without clearer standards and predictable end-markets, circularity will remain peripheral to mainstream planning.

Institutional Needs for Infrastructure Integration

India’s storage and transmission needs in this decade are substantial. Intra-state transmission planning remains fragmented, while storage investment is slowed by uncertainty over cost recovery and revenue structures. These challenges are compounded by a weak distribution sector, where persistent financial distress constrains procurement and slows renewable integration. Cumulative losses of distribution utilities are around $80 billion and the outstanding dues to generators fluctuated between $6-9 billion in 2025. Together, these create uncertainty for generators and investors, and limit what states can execute.

Electricity demand from data centers and digital infrastructure is also rising. As open-access procurement expands, tariff design must remain equitable so that costs are not shifted disproportionately to households or small enterprises.

Across these issues, the binding constraints are institutional. Technology costs are falling faster than regulatory frameworks are adapting. Transmission corridors require coordinated decision-making and significant public investment. Distribution reform depends on predictable tariffs and transparent subsidy frameworks. Work carried out under ETPI shows how states require distinct approaches that must align for planning and procurement.

Access, Equity and Demand

Energy access has improved, but the nature of the challenge has shifted. Even in an accelerated pathway, IEA’s ACCESS scenario shows universal electricity access only by 2035. Instead of connectivity, the central constraint now is quality, affordability and reliability of supply. As temperatures rise, cooling alone could add up to 500 GW to peak demand by 2035. While efficiency codes and building standards could moderate this, their enforcement remains uneven.

These pressures are even more visible in essential services. Many primary health centers face reliability, maintenance and equipment constraints even when connected to the grid. WRI India’s research across primary health facilities shows that connectivity alone does not guarantee service. Reliability and institutional capacity determine whether essential facilities can function. Our research in agrifood systems shows a similar pattern: fragmented coordination across energy, rural development and finance slows the adoption of decentralized cold storage and efficient equipment. These gaps intersect with gender, caste and geography, shaping who benefits from improved energy systems and who remains vulnerable to unreliability.

Distributed systems offer a complementary pathway for areas with unreliable centralized supply. Climate smart villages, model solar villages and targeted livelihood systems such as cold storage or irrigation pumps demonstrate how communities use decentralized infrastructure to adapt to grid limitations. These systems don’t replace but complement public infrastructure and require sustained public and concessional finance to scale in meaningful ways.

India’s Plural Transition Pathway

India’s energy transition is mediated by multiple institutions. Renewable integration depends on state electricity regulators and utility governance. Industrial decarbonization relies on national standards, investment signals, robust markets and sector-specific technology choices. Essential services such as healthcare and rural livelihoods depend on reliable local supply shaped by infrastructure and administrative capacity. Critical minerals and circularity add further institutional requirements as clean energy systems scale. This plurality creates room for innovation, but it also means that the transition will not unfold along a single pathway. Political choices around tariffs, subsidies and public finance will shape what states can realistically deliver.

The next decade will determine whether rising capacity delivers decarbonization, reliable supply, and equitable access – outcomes shaped less by technology, and more by the systems that plan, regulate and deliver power. India’s energy transition is underway, but its direction and pace will hinge on resolving institutional bottlenecks and turning capacity into dependable, affordable, development-enabling energy services.

With contributions from Preeti Kumari, Hemakshi Malik and Baalaji Ravichandran.