India’s energy investment to reach record USD 170 billion in 2026: IEA

India’s energy investment is expected to reach a record USD 170 billion in 2026, driven by rising spending on solar power, oil refining, grid infrastructure and clean energy projects, according to the International Energy Agency (IEA).

In its World Energy Investment 2026 report, the IEA said India’s energy investment has grown at an average annual rate of 11 per cent over the past five years.

The report said investment in solar photovoltaic (PV) projects rose 25 per cent annually during the period, while oil refining investment increased 23 per cent annually. Together, the two sectors accounted for roughly one-fourth of the increase in India’s overall energy spending.

The IEA said the rise in refining investment has put India on track to expand refining capacity by nearly 15 per cent by 2030, even as the country remains heavily dependent on imported crude oil.

At the same time, upstream oil and gas investment has contracted by an average of 7 per cent annually since 2020. The report said the government has introduced a new licensing regime aimed at attracting fresh capital into exploration and production.

According to the IEA, India is now the world’s second-largest investor in coal supply, with investments in the sector tripling over the past decade.

Coal continues to dominate India’s energy mix and remains central to power generation and industrial demand. Investment in coal supply is projected to reach USD 13 billion in 2026 as India aims to increase domestic coal production to 1.5 billion tonnes by 2030 from around 1 billion tonnes currently.

The report said the power sector accounts for roughly half of India’s total energy spending.

In 2025, India achieved its Nationally Determined Contribution target of sourcing 50 per cent of installed power generation capacity from non-fossil fuel sources, five years ahead of schedule. The achievement was supported by a sharp rise in solar investment, which reached USD 20 billion.

Investment in coal-fired power generation has meanwhile fallen to around 40 per cent of its 2010 peak. India is now investing three dollars in renewables and nuclear power for every dollar spent on fossil fuel-based generation, compared with 1.5 dollars five years ago.

The country is also increasing spending on grid modernisation, battery storage and dispatchable power generation to support higher renewable energy capacity.

Solar and wind energy now account for more than half of India’s installed generation capacity. According to the report, the growth in renewable energy has increased the need for transmission upgrades, storage systems and dispatchable generation to avoid renewable curtailment and manage intermittency.

“Energy investment in India has grown 11 per cent annually on average in the past five years and is set to reach USD 170 billion in 2026. Investment in solar PV grew annually by 25 per cent in this period, and oil refining by 23 per cent. Together, these two sectors contributed to one-fourth of India’s energy investment growth,” the report said.

“The increase in variable renewable electricity from these two sources has necessitated power sector infrastructure upgrades to avoid curtailment. These include grid upgrades to evacuate electricity from renewable sources; energy storage capacity additions; and the development of dispatchable electricity generation in line with India’s ambition of installing 500 GW of non-fossil-fuel capacity by 2030,” it added.

The IEA said investments in hydropower and nuclear energy have tripled since 2020 as new projects are being developed.

India is targeting 100 GW of nuclear capacity by 2047, up from 9 GW currently. To support investment, the government introduced reforms in 2025 ending the state monopoly in nuclear power generation, allowing private companies with up to 49 per cent foreign equity to build and operate reactors and small modular reactors (SMRs).

India is also promoting energy storage through both standalone energy storage systems (ESS) and wind-solar hybrid (WSH) projects.

The report said the government has launched a viability-gap funding programme backed by the Power System Development Fund to support battery storage expansion, provided projects meet the 20 per cent local content requirement.

In 2025, ESS project tenders crossed 100 GWh, more than double the previous year’s level and over ten times higher than in 2023. Battery storage tenders accounted for 60 GWh.

WSH tenders also increased sharply and accounted for more than half of the 63 GW capacity awarded in 2024.

The report, however, said challenges remain, including under-subscription and cancellation of some tendered projects.

Battery storage tariffs also declined sharply as project scale increased. According to the IEA, discovered storage tariffs fell from USD 14,700/MW/month in 2023 to less than USD 3,000/MW/month in 2025.

Apart from battery storage, the Central Electricity Authority (CEA) has introduced a roadmap targeting 100 GW of pumped storage capacity by 2035-36.

Transmission and distribution investment is expected to reach USD 26 billion in 2026 after growing at an annual rate of 15 per cent over the past five years.

The report said supportive policies have been introduced to strengthen grid investment, including the Green Energy Corridor project aimed at integrating large volumes of solar and wind power into national and state grids.

The first phase of the programme has already been completed, adding more than 3,000 km of transmission lines funded through 30 per cent equity and 70 per cent debt from multilateral development banks and commercial loans. Additional phases of the project are currently under development.

The IEA also said end-use energy investment has been led by efficiency spending, which has increased more than 10 per cent annually to USD 18 billion.

Electric vehicle investment, although growing rapidly, remains relatively small at USD 2 billion and currently accounts for around 5 per cent of total vehicle sales, the report added.