How Domestic Political Stability Affects Renewable Energy Projects and Investments | Arif Aga | Director | SgurrEnergy India

Arif AgaDomestic political stability or lack of it can have considerable impact on development of renewable energy projects and investment in the sector. A stable government is always considered as a growth enabler whereas unstable political landscape can derail the growth engine. With political stability India now India forges ahead towards ambitious renewable energy ambitions.

Recently, the issues surrounding climate financing and global emissions were once again at the forefront of the 29th Conference of Parties (COP29) in Baku. The Indian government was in a strong position to challenge developed nations on climate change, carbon emissions, and green energy investment because of political stability and notable advancements in renewable energy generation.

For any nation, socio-economic development depends on political stability which plays a role of catalyst. Especially for developing countries like India, where renewable energy projects demand huge investments, a stable government is much needed. Political stability provides the long-term vision and policy continuity needed for large-scale renewable projects with long gestation periods. Political stability provides consistent policy and regulatory frameworks that favours and incentivize both domestic and international stakeholders to invest without a fear of abrupt of policy changes.

With a decadal political stability and policy push, India has made significant progress and achieved a milestone of 200 gigawatts (GW) in non-fossil fuel capacity. However, it still faces gaps to meet the ambitious targets it has set for 2030: 319 GW in solar power and 110 GW in wind energy. As of October 2024, India’s installed solar capacity stands at only 90.76 GW, and wind capacity at 47.36 GW, highlighting a gap of over 200 GW that must be addressed within the next six years. Meeting these targets requires political stability to ensure consistent policies, reliable financing, and sustained foreign investments to fuel India’s renewable ambitions.

Since the Modi government took office in 2014, India introduced ambitious targets and policies aimed at expanding renewable energy capacity. Key initiatives include the National Solar Mission, which set the stage for India’s solar capacity expansion, and the Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM), promoting solar energy adoption in rural areas. The Production Linked Incentive (PLI) Scheme incentivized domestic manufacturing of solar panels and batteries, reducing reliance on imports and creating jobs. Additionally, the government’s commitment to phasing down coal and setting a target of 500 GW of non-fossil fuel capacity by 2030 reflects a strategic shift towards a sustainable energy mix, reinforcing investor confidence and cementing India’s role in the global renewable energy transition.

Investors’ confidence is the key. A stable government can attract foreign investments by creating a transparent, reliable business environment with minimal bureaucratic red tape. In contrast, political instability or uncertainty can lead to a fluctuating exchange rate, deter foreign direct investment (FDI), and increase project costs. India’s Nationally Determined Contributions (NDCs) and renewable energy targets could be delayed if there are abrupt shifts in political agendas. Delays or changes in policy can lead to project uncertainty, forcing investors to reassess risks and potentially redirect funds to more stable markets. Indian states’ thrust on renewable energy needs to be in sync with the Centre’s policies and priorities. States with stable governments and favorable renewable policies attract more investments, while politically volatile states face challenges in attracting projects due to higher risks. Rajasthan, Gujarat, Karnataka, Tamil Nadu, Andhra Pradesh, Madhya Pradesh, Madhya Pradesh, and Maharashtra are leading states in Renewable Energy sector and these states made significant progress with policy consistency.

With political stability at both national and state levels, India is expected to close the gap in its renewable energy targets soon and contribute meaningfully to global climate goals. In the backdrop of COP29 Meet and with political stability, further policy reforms and robust regulatory framework would push both domestic and foreign investments in the sector. Hopefully, the country is all set to achieve its renewable energy ambitions and contribute to the global effort against climate change.