India needs $145 billion annual energy investment to align growth with climate goals: Wood Mackenzie

India will need to mobilise average annual investments of about $145 billion in its energy sector to bridge the gap between sustained economic growth and its net-zero ambitions, Wood Mackenzie said on Tuesday, outlining a critical pathway to maintain around 6 per cent GDP growth through 2035 while advancing the energy transition. Speaking at India Energy Week 2026, Joshua Ngu, Vice Chairman, Asia Pacific at Wood Mackenzie, said capital deployment must be strategically focused on power generation, energy storage and urgent grid modernisation to support India’s expanding economy and decarbonisation goals.

“India’s next decade is decisive,” Ngu said. “The challenge is a dual mandate: India must de-risk its immediate energy security while simultaneously building the low-carbon architecture required to support a top-tier global economy. Today’s investment choices will determine whether the country locks in carbon-intensive infrastructure or leads the world in low-carbon industrialisation.”Wood Mackenzie said the power sector, while remaining India’s largest source of emissions, is also the primary engine of the energy transition.  The sector has already undergone a structural shift, with non-fossil installed capacity now exceeding fossil capacity. Going forward, the transition will be driven by the scale-up of renewable energy, grid flexibility and storage, while coal additions are expected to be largely limited to reliability and peak-balancing needs rather than energy growth.However, the pace of decarbonisation is creating system integration challenges. Wood Mackenzie estimates USD 1.5 trillion in energy transition investment between 2026 and 2035, with a significant portion required for transmission and distribution infrastructure. “The USD 1.5 trillion investment between 2026 and 2035 for energy transition is not just about adding megawatts; it is about the wires,” said Rashika Gupta, Vice President, Power and Renewables Research at Wood Mackenzie. “Success hinges on the pace of market reforms, specifically the Electricity Amendment Bill to improve distribution competition and provide the transparent investment signals needed to unlock private capital for grid modernisation.”

Despite the acceleration of renewable energy, Wood Mackenzie said hydrocarbon fuels remain essential for near-term energy security. India is on track to meet its 1.5-billion-tonne coal production target by 2030, with growing emphasis on coal gasification to diversify the energy mix.

At the same time, dependence on crude oil imports is expected to rise, with import reliance projected to reach 87 per cent by 2035.“To mitigate this, India must revitalise its upstream sector,” Ngu said. “Attracting international oil companies (IOCs) back to Indian exploration and production (E&P) is no longer optional. It is a security imperative.”Natural gas presents both a challenge and an opportunity. National gas demand is projected to double from 72 billion cubic metres (bcm) in 2024 to more than 140 bcm by 2050, driven largely by industrial consumption. Industry is expected to account for over two-thirds of gas demand through 2030, remaining above 55 per cent until 2050.

Wood Mackenzie said India’s LNG imports are projected to grow at a 4.8 per cent compound annual growth rate, peaking at 90 million tonnes per annum (mtpa) by 2050, underpinned by a 2.6 per cent CAGR in overall demand and declining domestic supply. However, the shift to gas remains sensitive to pricing competitiveness against alternative fuels. India’s strategy to indigenise low-carbon supply chains remains central to reducing import dependence. While India is now the world’s second-largest solar module manufacturer, Wood Mackenzie highlighted gaps in vertical integration, particularly for cells and wafers.

Domestic content requirements for cells starting in June 2026 are expected to create short-term supply pressure until an estimated 24 GW of new capacity comes online later in the year.

The battery sector faces steeper challenges. Despite over 200 GWh of announced capacity plans, Wood Mackenzie forecasts that only around 100 GWh, about half of the target, is likely to be operational by 2030, citing execution risks and shortcomings in the Advanced Chemistry Cell (ACC) battery Production Linked Incentive (PLI) scheme, which it said requires a significant overhaul.

India’s target of 5 million tonnes per annum of green hydrogen by 2030 faces a widening gap between ambition and execution, with most projects still at early feasibility stages. Carbon capture, utilisation and storage (CCUS) deployment also remains nascent, with current efforts focused more on policy development than industrial-scale application.

“The 2026 launch of the Carbon Credit Trading Scheme (CCTS) marks a definitive shift in India’s climate policy,” said Hetal Gandhi, Lead - CCUS, Asia Pacific at Wood Mackenzie. “By imposing emissions limits, the framework will incentivise the decoupling of industrial growth from emissions intensity. Ultimately, this shift is the right first step to transform carbon compliance into a competitive differentiator and provides the regulatory certainty required to enable adoption of low-carbon technologies.”

Despite near-term challenges, Wood Mackenzie said India is well positioned to emerge as a credible large-scale alternative to China in global solar and battery supply chains, as international markets seek to diversify procurement.

“India is at a crossroads, but its long-term trajectory is undeniably bright,” Ngu said. “By scaling domestic manufacturing and maintaining policy momentum, India will not only hit its 500 GW target but emerge as a central pillar of the global renewable market. This decade of investment is the foundation for India to lead the new energy economy.”