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India needs $540 billion of investment between 2020 and 2029 to meet its ambitious targets for electricity generation from renewable sources, S&P Global Ratings said on Thursday as it saw private-sector-led energy transition entering a new phase.

India is targeting to cut its emissions to net zero by 2070. In the transition to that, it is targeting 500 gigawatts (GW) of non-fossil electricity capacity, half of the energy from renewables, a reduction of emissions by one billion tonnes, and an emissions intensity of the GDP by 45% by 2030.

“Meeting India’s renewables target of 500 GW by 2030 requires more than 40 GW of new capacity additions annually (compared to 10-15 GW actual),” it said.

In its report ‘Asia-Pacific’s Different Pathways To Energy Transition’, S&P Global Ratings said the addition of renewables capacity in India is outpacing coal, but demand growth and intermittency issues are leading to greater coal usage and new coal plants.

“Policies are creating an enabling environment while private sector investments will lead the energy transition,” it said, adding investments of $540 billion are required from 2020 to 2029 to meet India’s renewables target.

Half of these investments will be in renewables and batteries, and another third in strengthening the grid.

“Private sector will lead generation capex while public sector utilities will likely lead grid investments,” it said. “Domestic long-term bank funding is available against projects and cash flows.”

There is, however, limited appetite for unsecured holding company funding.

India is the world’s fourth biggest emitter of carbon dioxide after China, the US, and the EU. But its emissions per capita are much lower than other major world economies. India emitted 1.9 tonnes of CO2 per head of population in 2019, compared to 15.5 tonnes for the US and 12.5 tonnes for Russia that year.

Net zero, or becoming carbon neutral, means not adding to the amount of greenhouse gases in the atmosphere.

Energy transition refers to the shift from fossil-based systems of energy production and consumption—including oil, natural gas and coal—to renewable energy sources like wind and solar, as well as lithium-ion batteries.

S&P said renewables face increasing intermittency issues, necessitating grid flexibility/energy storage solutions.

As much as 12.1 GW of energy storage is likely to be added from now till 2030 against a target of 27 GW of battery and 10 GW of pumped storage by 2030, it said, adding a 20% tariff on Chinese batteries and subsidies for domestic production aims to develop the ecosystem.

In the report, S&P said the countries of Asia-Pacific still have a long way to go before they can meet their ambitious energy targets.

“Policies are still evolving and some key countries such as China and India have no specific timeline to phase out coal,” said S&P Global Ratings credit analyst Abhishek Dangra.

“Access and affordability will trump long-term energy-transition goals while energy security considerations may delay transition for some.”

India’s transition is progressing, led by the private sector.

“India is entering into the next stage—Renewables 3.0—with industry diversification into hybrid, pumped storage, round-the-clock projects, etc. It is moving away from feed-in-tariff (1.0) and highly competitive bidding (2.0). Execution risks and return profiles can significantly diverge,” Dangra said.

Energy security considerations will affect the policy direction and pace of the energy transition; not always delaying the transition. “Economics (India) and policies (China) will lead to growth in renewables. Countries with ambiguous policies (Vietnam) or cheaper fossil fuels (Indonesia) face a more difficult transition,” it said.