India’s green investment story is a success by several measures. In 2024, 83% of all investment in its power sector went into clean energy, according to the International Energy Agency. Renewable capacity is expanding rapidly and the country is building domestic manufacturing capabilities in batteries and other clean-energy technologies. But the success has hidden a weakness.
India is getting better at financing the deployment of proven green technologies. It is much less adept at financing the technologies it will need for the next stage of its transition to a low-carbon economy.
A solar park can obtain credit because lenders understand the technology, output and revenue model. A new battery chemistry, long-duration storage system or low-carbon industrial process faces a much harder journey. It may need years of research, pilots, certification and demonstration before it can generate dependable revenue.
That makes it too risky for a bank, while the capital required to build physical assets can make it unattractive to conventional venture capital.
This is India’s climate-tech bankability gap. It is not the same as the broader problem of financing innovative startups. Every technology company faces a difficult journey from idea to commercial scale. Climate technologies have an additional burden. They often need to build factories, plants or physical infrastructure before the business can prove its revenues. And even a successful technology may fail to scale if no customer is willing to be the first buyer.
The result is a mismatch between the capital India has available and the technologies it needs. A recent framework from The Energy and Resources Institute (Teri) identifies the problem clearly. India’s climate-finance challenge is not merely about mobilizing more money.
Commercial finance is held back by lending products unsuited to climate investments, uncertain revenues, mismatches between the long life of climate assets and the shorter maturity of bank funding, and inadequate mechanisms for sharing risk.
The two should not be mixed up. India can pour more money into green projects and still fail to finance the technologies that matter most for its future. Battery storage will become increasingly important as renewable power generation expands. Industrial decarbonization will require cleaner ways of making steel, cement and chemicals. Rising temperatures will create demand for more efficient cooling. Water stress and erratic weather will increase the value of climate-smart agriculture.
Climate Policy Initiative, a think-tank, identifies opportunities across all these areas, but also points to technological barriers, execution risks, uncertain offtake and the need for patient sector-specific finance.
These technologies do not lack potential, but India often expects the same financial system to fund both a mature solar project and a first-of-a-kind industrial technology.
That is asking too much of the market. Banks want predictable cash flows. Venture capitalists want rapid growth and plausible exits. A first-of-a-kind climate technology may have neither for years. It falls between the two. This is where public policy matters. Even if the government cannot finance every risky idea, some risks must be shared before private capital will enter.
India has begun to recognize the wider innovation problem. The government’s ₹1 trillion Research, Development and Innovation Fund is designed to support private sector investment in research-led technologies and includes energy transition and climate action among its priority areas. But these must compete with other strategic fields, including artificial intelligence, biotechnology, healthcare, space and parts of the digital economy.
That fund was never meant to be a climate-tech rescue scheme. Nor should it become one. It cannot resolve India’s climate-tech constraints by itself. Financing the development of a better battery is not the same as creating a market for it. A fund can support a new industrial technology, but it cannot guarantee that a factory will buy it. That requires a different approach.
First, India should use public money more deliberately to absorb risks that private finance cannot. Guarantees, concessional capital and first-loss structures can make new technologies investable without the government paying for the entire project.
Second, India needs first customers. Government departments, public sector companies and large corporations can help technologies cross the valley between demonstration and commercial deployment through pilot contracts, advance purchases and long-term offtake agreements. For a startup, a credible customer can sometimes be more valuable than another round of grant funding.
Third, climate policy and financial policy need to work together. Investors see one project. The government often has separate programmes for innovation, energy, industry and finance. A frontier technology encounters all four at once.
The big risk we face is that the country could spend billions of dollars deploying mature technologies while remaining dependent on innovations developed elsewhere to solve harder problems to come. India has proven that it can finance the green technologies of today. The more difficult test, however, is whether the country can build a financial system capable of backing the technologies of tomorrow.
The author is an independent expert based in New Delhi, Kolkata and Odisha. Twitter: @scurve Instagram: @soumya.scurve.