India’s Green Energy Faces Grid Woes: Low-Cost Loans Explored

India is considering offering low-cost loans to renewable energy producers to compensate them for financial losses. These losses stem from inadequate transmission infrastructure limiting their power supply to the national grid.

The nation’s transmission network has struggled to keep pace with the rapid expansion of green energy, particularly solar power. This has led to significant curtailment of output and financial losses for developers across various states.

• Solar power accounts for about 162 gigawatts, nearly a third of India’s total power generation capacity.
• Renewable energy developers have lost approximately 45 billion rupees ($470.21 million) since February 2025.
• Infrastructure limitations have restricted the flow of clean power from states like Rajasthan and Gujarat to the national grid.
• In some cases, nearly 70%-80% of power from renewable projects could not be added to the grid.
• Between April and June, India curtailed 14%, or 8,133 gigawatt hours, of its solar power output.

Understanding the Proposed Loan Mechanism

The Power Ministry is actively discussing this plan with energy producers, focusing on verifying eligible projects for compensation. The initiative aims to mitigate the financial strain on developers facing infrastructure bottlenecks.

• The proposed loans would feature low interest rates.
• They are designed with long tenures, spanning seven to eight years.

Impact on Capital Costs and Future Capacity

Industry experts highlight that frequent, uncompensated curtailments increase the cost of capital for renewable projects. Lenders require confidence in future generation to accurately size debt, impacting financing decisions.

Rating agency ICRA estimates a significant portion of newly commissioned clean energy capacity relies on temporary transmission solutions. As of May 2026, about a third of India’s 54.8 GW new clean energy capacity was being evacuated this way.

This government consideration reflects an effort to stabilize the financial viability of India’s rapidly growing renewable energy sector amidst ongoing infrastructure challenges.