High tension in India as banks, utilities resist solar shift - South China Morning Post
Published February 18, 2026
High Tension in India as Banks and Utilities Resist Solar Shift
In India, the transition to solar energy is facing significant challenges as banks and utility companies express resistance to this shift. Despite the country's ambitious goals for renewable energy, financial institutions and power providers are grappling with the implications of moving away from traditional energy sources.
India has set a target to achieve 500 gigawatts (GW) of renewable energy capacity by 2030, with solar power playing a pivotal role in this ambition. The government has invested heavily in solar infrastructure, with plans to generate 280 GW from solar energy alone. However, the resistance from banks and utilities could jeopardize these objectives.
One of the primary concerns for banks is the financial viability of solar projects. Many financial institutions have historically favored coal and other fossil fuels, which have established revenue streams. As a result, they are hesitant to finance solar initiatives, which, while increasingly cost-effective, still carry perceived risks associated with technology and market fluctuations.
According to a report by the International Renewable Energy Agency (IRENA), the cost of solar energy has dropped by 89% since 2009, making it one of the most affordable energy sources globally. However, despite these declining costs, banks remain cautious. For instance, a recent survey indicated that only 20% of banks in India are willing to finance solar projects, while the majority prefer to invest in more traditional energy sectors.
Utilities are also expressing concerns regarding the integration of solar power into the existing grid. The Indian power grid was primarily designed for centralized fossil fuel-based generation, and adapting it to accommodate decentralized solar energy poses significant technical challenges. Utilities fear that a rapid transition to solar could lead to instability in the grid, resulting in potential blackouts and service interruptions.
Additionally, the shift to solar energy could disrupt existing business models for utilities. Many utilities rely on fixed revenue from coal and gas plants, and the transition to solar could undermine their financial stability. As a result, some utilities are lobbying for regulatory changes to slow down the adoption of solar energy, arguing that a more gradual transition would be more manageable.
The Indian government is aware of these challenges and has implemented various policies to encourage solar adoption. Initiatives such as the Solar Park Scheme and the National Solar Mission aim to streamline the process of developing solar projects and provide financial incentives to investors. However, the effectiveness of these policies is often undermined by the reluctance of banks and utilities to fully embrace solar energy.
Despite these hurdles, there are signs of progress in the solar sector. Several states have successfully implemented solar projects, and private sector investment in solar energy is on the rise. For example, in 2021, India added over 10 GW of solar capacity, bringing the total installed solar capacity to approximately 45 GW. This growth is largely driven by private developers who are willing to take on the risks associated with solar projects.
Moreover, the Indian government has set a target for 40% of its energy capacity to come from non-fossil fuel sources by 2030. This ambitious goal reflects a commitment to reducing greenhouse gas emissions and addressing climate change. However, achieving this target will require overcoming the resistance from banks and utilities, as well as enhancing the infrastructure needed to support solar energy.
One innovative solution being explored is the development of hybrid energy systems that combine solar power with other renewable sources, such as wind and hydropower. These hybrid systems can provide a more stable and reliable energy supply, addressing some of the concerns raised by utilities regarding grid stability.
Furthermore, advancements in energy storage technologies are also playing a crucial role in facilitating the transition to solar energy. By storing excess solar energy generated during the day, these systems can provide power during peak demand periods, reducing the strain on the grid and enhancing reliability. As battery technologies continue to improve and costs decrease, the integration of energy storage into solar projects is expected to become more commonplace.
In conclusion, while India is making strides toward its solar energy goals, the resistance from banks and utilities poses significant challenges. The financial sector's reluctance to invest in solar projects and the utilities' concerns about grid stability must be addressed to ensure a successful transition to renewable energy. With continued government support, private sector innovation, and advancements in technology, there is potential for India to overcome these hurdles and achieve its ambitious renewable energy targets.
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