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India will need to attract average annual investments of nearly USD 145 billion in its energy sector to sustain economic growth while progressing towards its net-zero commitments, global energy consultancy Wood Mackenzie said on Tuesday.

Speaking at India Energy Week 2026, Joshua Ngu, Vice Chairman (Asia Pacific) at Wood Mackenzie, said the coming decade will be critical for India as it attempts to balance energy security with climate responsibility. According to the firm, this level of investment is necessary to support roughly 6 per cent GDP growth until 2035, while simultaneously accelerating the transition to a lower-carbon economy.

“India faces a twin challenge,” Ngu said. “It must safeguard near-term energy security while laying the foundation for a low-carbon system capable of supporting a globally competitive economy. Decisions taken today will either entrench carbon-heavy assets or position India as a leader in clean industrialisation.”

Wood Mackenzie noted that the power sector, currently the largest contributor to India’s emissions, is also at the heart of the energy transition. A major structural shift has already taken place, with non-fossil fuel capacity now exceeding fossil-based capacity in the country.

Going forward, renewable energy expansion, enhanced grid flexibility and large-scale storage solutions will drive decarbonisation. New coal capacity, the report said, is likely to be added primarily to ensure system reliability and manage peak demand rather than to fuel growth.

However, integrating large volumes of renewable energy into the system is creating significant operational challenges. The consultancy estimates that USD 1.5 trillion will be required between 2026 and 2035 for India’s energy transition, with transmission and distribution infrastructure accounting for a substantial share of the investment.

“This transition is not just about generation capacity—it is fundamentally about strengthening the grid,” said Rashika Gupta, Vice President, Power and Renewables Research at Wood Mackenzie. She added that reforms such as the Electricity Amendment Bill would be crucial to improve competition in distribution and attract private capital into grid modernisation.

Despite the rapid growth of renewables, hydrocarbon fuels will continue to play a vital role in India’s energy mix in the near term. India remains on course to achieve its target of producing 1.5 billion tonnes of coal by 2030, with coal gasification expected to play a larger role in diversifying usage.

At the same time, dependence on imported crude oil is projected to increase, with import reliance estimated to touch 87 per cent by 2035.

“To manage this risk, India must reinvigorate its upstream oil and gas sector,” Ngu said. “Bringing international oil companies back into Indian exploration and production is not optional—it is essential for energy security.”

Natural gas demand is expected to grow sharply, doubling from 72 billion cubic metres (bcm) in 2024 to more than 140 bcm by 2050, driven mainly by industrial consumption. Industry is forecast to account for over two-thirds of gas demand until 2030 and remain above 55 per cent through mid-century.

Liquefied natural gas (LNG) imports are projected to rise at a compound annual growth rate of 4.8 per cent, reaching a peak of 90 million tonnes per annum by 2050, supported by rising demand and declining domestic production. However, Wood Mackenzie cautioned that gas adoption remains sensitive to price competitiveness against alternative fuels.

On domestic manufacturing, the consultancy said India has made progress in clean energy supply chains, emerging as the world’s second-largest solar module manufacturer. Still, gaps remain in vertical integration, particularly in solar cells and wafers.

The introduction of domestic content requirements for solar cells from June 2026 may create temporary supply constraints until about 24 GW of additional capacity becomes operational later in the year.

The battery manufacturing ecosystem faces even greater hurdles. While over 200 GWh of battery capacity has been announced, Wood Mackenzie expects only around 100 GWh to be operational by 2030, citing execution risks and limitations in the current Advanced Chemistry Cell (ACC) PLI scheme, which it said needs major restructuring.

India’s ambition to produce 5 million tonnes per annum of green hydrogen by 2030 is also facing delays, with most projects still in preliminary stages. Similarly, carbon capture, utilisation and storage (CCUS) remains at an early phase, focused more on policy development than large-scale deployment.

“The rollout of the Carbon Credit Trading Scheme (CCTS) in 2026 marks a significant evolution in India’s climate policy,” said Hetal Gandhi, Lead – CCUS, Asia Pacific at Wood Mackenzie. “By setting emissions limits, it creates incentives to decouple growth from carbon intensity and offers the regulatory clarity needed for low-carbon technologies to scale.”

Despite execution challenges, Wood Mackenzie believes India is well placed to emerge as a credible alternative to China in global solar and battery supply chains as countries seek to diversify sourcing.

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“India stands at a pivotal moment,” Ngu said. “With sustained policy momentum and scaled domestic manufacturing, the country can not only meet its 500 GW renewable energy target but also establish itself as a cornerstone of the global clean energy economy.”