Fossil fuel disruptions strengthen India’s case for boosting renewable energy investments

The ongoing conflict in West Asia and the near-shutdown of the Strait of Hormuz have disrupted roughly 25% of globalseaborne oil and significant liquefied natural gas (LNG) volumes. As the world’s third-largest oil consumer and importer, India has been severely affected. Brent crude has surged more than 35% above pre-crisis levels, closing at USD98 on 16 April 2026, while gas prices are up almost 31% since late February. The MSCI emerging market equities index lost over USD1 trillion in market capitalisation, central banks face pressure to raise interest rates, and currency depreciation is making imported clean energy components more expensive.

Yet, counterintuitively, the crisis reinforces rather than weakens the investment case for renewable energy. The disruption is accelerating end-use electrification, exposing fossil fuel supply chain fragility, and repricing risk in ways that structurally favour clean energy assets.

What the crisis is changing

While India’s clean energy transition was already underway, the crisis has introduced distinct new catalysts. Liquefied petroleum gas (LPG) prices surged by 7% per cylinder in March 2026, triggering a sharp increase in purchases of electric induction cooktops. The Indian Energy Exchange (IEX) recorded its highest-ever monthly traded volume of 13.9 billion units in March 2026. These crisis-driven shifts in end-use demand towards electrification are distinct from the longer-term trajectory of electric vehicle (EV) adoption, which saw retail sales surge 24.6% to 2.45 million units in financial year (FY) 2026.

Coal supply chains have also been affected. Key inputs such as ammonium nitrate and industrial diesel, critical for mining, have seen price increases of 44% and 54% respectively compared to pre-conflict levels. Coal India Limited is absorbing these costs, protecting consumers but reducing profitability.

Why fossil fuel disruption favours clean energy investment

The financial headwinds (higher interest rates, capital flight, currency depreciation) are real. However, renewable projects with signed power purchase agreements (PPAs) are not exposed to fuel cost pass-through, offering predictable cash flows precisely when fossil fuel revenues are volatile. Renewable assets have structurally outperformed thermal generation on margins in India and have attracted longer-tenor debt. India’s updated nationally determined contributions (NDCs) reinforce this direction, raising targets to 60% non-fossil installed capacity by 2035.

Clean energy economics further strengthen the case. Solar panel prices have fallen by around 80% over the past decade and battery prices by 36% since 2022. In India, renewables accounted for 84% of capacity additions in the third quarter of FY2026, and recent bids show fully dispatchable renewable power with battery energy storage systems (BESS) falling to roughly INR4.5 per watt peak.

Unlike coal, domestic solar and wind generation carries no fuel import risk, and India’s growing manufacturing base for solar modules and cells is reducing the import dependence that once made renewables vulnerable to the same currency pressures as fossil fuels. As global capital reprices fossil fuel risks in light of ongoing disruptions, it is likely to favour renewable assets that are not exposed to fuel price volatility and offer diversification from both climate and geopolitical risks.

Private sector as capital mobiliser

Indian corporates, accounting for 71.8% of the country’s installed renewable energy capacity, are better positioned than state utilities to mobilise global capital during macroeconomic stress. This is evident across the value chain: JSW Energy’s 1,000 megawatt-hour (MWh) BESS and Adani Group’s 3,530MWh project (the largest BESS asset in India) signal serious private commitment to dispatchable renewable power, while companies including Borosil Renewables and Tata Power are strengthening domestic manufacturing.

Crucially, large corporates are channelling global long-term capital into Indian clean energy infrastructure. India’s cumulative green bond issuance reached close to USD25bn as of March 2026, driven primarily by the private sector. Companies have also tapped international banks, for instance. Adani Green secured a USD3bn facility from eight global lenders (that have returned across three rounds of financing since 2021), and multilateral development banks with ReNew Power’s USD331mn debt raise from the Asian Development Bank (ADB). This is patient, long-term investment and it also helps insulate developers from domestic interest rate increases.

Risks that could dampen the momentum

Several risks could influence how global capital providers assess the bankability of Indian clean energy assets. BESS tenders surged from 24 gigawatt-hours (GWh) in 2024 to 60GWh in 2025, but actual deployment remains at approximately 0.5GWh, raising execution concerns among international lenders.

Approximately 45 gigawatts (GW) of renewable capacity remains without signed power sale agreements (PSAs), threatening the revenue visibility that underpins project finance.

 And while distribution companies (discoms) reported a profit of INR27bn (USD300mn) in FY2025 compared to a loss of INR255bn (USD2.8bn) in FY2024, sustaining this improvement remains critical for investor confidence. Navigating these risks will ensure that India’s power sector transformation remains both sustainable and investable by global capital providers.

The West Asia crisis has laid bare the costs of India’s fossil fuel dependence while demonstrating that end-use electrification is accelerating organically. What was earlier an economically compelling clean energy transition has now become an imperative for energy security, fiscal resilience, and long-term economic stability.

This article was first published in illuminem