States hold the key to India’s energy transition

Amid the disruptions caused by the conflict in West Asia, and the accompanying risk of climate action being pushed down the global agenda, India has reaffirmed its commitment to climate goals by updating its Nationally Determined Contribution (NDC). On 25 March 2026, the Union Cabinet approved the NDC 3.0 for submission to the United Nations Framework Convention on Climate Change (UNFCCC) for the 2031–2035 period. 

The NDC 3.0’s targets include 47% reduction in the emissions intensity of India’s gross domestic product (GDP) and an expansion of its carbon sink to 3.5–4.0 billion tonnes of CO₂ equivalent from 2005 levels; as well as achieving 60% non-fossil fuel-based installed power capacity by 2035. These align with the country’s long-term net-zero goal for 2070 and its vision of self-reliance under Viksit Bharat 2047, with renewable energy at the core of it. Achieving these goals will require every Indian state to play a role, as most power procurement decisions are made at the state-level. 

From national targets to state action

India achieved the milestone of 50% non-fossil fuel-based installed capacity for the first time in October 2025, five years ahead of schedule, and has sustained it since. This progress was driven largely by Rajasthan, Gujarat, Maharashtra, Tamil Nadu, and Karnataka, which together account for about 66% of the total non-fossil fuel installed capacity as of February 2026. However, as India moves towards the more ambitious target of 60% non-fossil capacity, this concentration could become a bottleneck. Hence, expanding renewable energy capacity beyond early leader states will be necessary.

At the sub-national level, though, states differ in resource endowments, economic structures, rural-urban composition, fiscal conditions, and institutional capacity. The Indian States’ Electricity Transition (SET) 2026 report by the Institute for Energy Economics and Financial Analysis (IEEFA) and Ember highlights that while states have advanced on multiple fronts, the pace and depth of their progress vary significantly across several parameters.

For instance, SET 2026 highlights that some states recorded a higher share of renewable energy in their procurement mix in financial year (FY) 2024: Himachal Pradesh (65%), Uttarakhand (44%), Karnataka (37%), Rajasthan (25%), and Madhya Pradesh (23%). Meanwhile, Bihar (78%), Assam (46%), Jharkhand (33%) and Chhattisgarh (26%) have made appreciable progress in installing necessary infrastructure (smart meters) to enable solar-hour-aligned time-of-day (ToD) tariffs. However, states advancing in smart metering may not fully benefit from solar-hour-aligned ToD tariffs if solar procurement remains limited. Conversely, states with higher solar shares may struggle to operationalise such ToD tariffs without adequate smart metering infrastructure.

This underscores a key point: Renewable procurement, market design, and infrastructure readiness must progress together, as treating them in isolation risks underutilising clean energy investments.

Powering electrification with renewable energy 

Electrification across transport, industries, agriculture and buildings, combined with renewable energy procurement, can reduce dependence on imported fossil fuels and strengthen local energy systems.

In the SET 2026 report, Karnataka provided an example of this. The state saw an electric vehicle (EV) adoption rate of 9.4% in FY2025 and a renewable energy share of around 37% in its power procurement mix, indicating a degree of alignment between electrification and clean power supply. In contrast, Himachal Pradesh recorded a renewable energy share of around 65.4% in its procurement mix, but EV adoption in the state was just about 1.3%. Meanwhile, Kerala and Uttar Pradesh, despite higher EV adoption rate of 10.5% and 10%, respectively, showed scope to further decarbonise their transport sector by increasing the share of renewables in their power procurement mix, which stood at 21.1% and 18.6%, respectively. 

This gap presents an opportunity. Greater electrification across sectors, alongside increased renewable energy procurement, can drive decarbonisation and reduce reliance on fossil fuels.

States integrating storage for a reliable renewable future

With the release of its updated Renewable Energy and Energy Storage Policy, Maharashtra shows how states are starting to look beyond capacity addition and addressing system-level challenges. The state has set a target of meeting 65% of its electricity demand from renewable energy and mandated distribution companies to procure energy storage capacity equivalent to at least 10% of their demand by FY2036. The policy provides a useful reference point for other states seeking to strengthen system reliability while increasing renewable energy penetration.

States like Bihar, Kerala, Odisha, Telangana, and Uttar Pradesh are yet to accelerate renewable capacity deployment. Encouragingly, though, they have begun adding energy storage and preparing their grids for higher renewable penetration. For example, in July 2025, Bihar State Power Generation Company Limited (BSPGCL) concluded 125-megawatt (MW)/500 megawatt-hour (MWh) battery energy storage systems (BESS) auctions. Also, Solar Energy Corporation of India Limited (SECI), on behalf of Kerala and Odisha, has concluded auctions for 125MW/500MWh standalone BESS projects each. Uttar Pradesh Power Corporation (UPPCL) has concluded auctions for 375MW/1,500MWh BESS. Telangana Power Generation Corporation (TGGENCO), too, has invited bids for 375MW/1,500MWh BESS project.

State budgets bringing renewable energy to the forefront

As India’s electricity demand continues to rise, with peak demand expected to reach around 270 gigawatts (GW) in 2026, the pressure on state power systems is set to intensify. In this context, the next phase of India’s transition will depend less on setting new targets and more on how states reorganise decision-making around the power system itself.

Multiple states’ FY2027 budgets signal a clear shift towards strengthening power systems through renewable integration and grid modernisation. Maharashtra positions energy as central to economic growth, backing solarisation of agricultural demand, scaling up renewable capacity, and pushing for pumped storage projects to manage intermittency and improve grid flexibility. Karnataka’s budget stands out for its direct USD0.36 billion (INR3,400 crore) allocation for BESS to enable renewable grid balancing and flexibility. Uttar Pradesh’s budget allocates USD7 billion (INR65,926 crore) to the energy sector with significant investments in generation, transmission and distribution infrastructure, smart metering, Revamped Distribution Sector Scheme (RDSS)-driven reforms, and Green Energy Corridor-II. Delhi’s FY2027 “Green Budget” includes power sector allocations and a broader policy thrust toward clean energy transition. Similarly, Odisha, in its FY2027 budget, allocates USD0.54 billion (INR4,505 crore) to the energy sector. A key highlight for the state is the USD60 million (INR495 crore) allocation to support rooftop solar projects and USD24 million (INR200 crore) for green hydrogen and green ammonia projects, signalling significant steps toward building a clean fuels ecosystem.

Collectively, these budgets indicate a growing focus on forward-looking power sector planning, one that moves beyond siloed planning and towards integrated resource planning that aligns renewable procurement with demand growth and flexibility needs.

This article was first published in Mongabay.