By Shilpashree Venkatesh, Vice President – Research, Knight Frank (India)
India’s energy sector has undergone a significant transformation over the past decade. Non-fossil-fuel capacity has increased roughly fivefold, from 59 GW in 2016 to currently over 300 GW. This expansion has been led by solar, with an existing installed capacity of about 168 GW, more than half of India’s non-fossil-fuel capacity. While the scale of this transition is significant, sustaining this momentum and achieving India’s clean energy targets over the long term will require a financing architecture capable of supporting investments at a substantially higher scale.
India’s target of 500 GW of non-fossil-fuel capacity by 2030 requires the addition of nearly 200 GW over the next four years, implying annual capacity additions of around 50 GW. To achieve this scale, the annual investment requirement is about $48 billion-$54 billion, much higher than the current average annual investment of $13 billion-$18 billion, implying a gap of around $35 billion. The scale of this gap makes it necessary to look beyond incremental debt and equity and examine mechanisms that can unlock capital already invested in operational infrastructure.
Infrastructure investment trusts (InvITs) can play a strategic role in unlocking capital from existing operational renewable assets. An InvIT enables a developer to transfer mature, operational assets into a pooled investment structure and monetise part of the capital embedded in those assets. Investors, in turn, gain exposure to operating infrastructure and its underlying cash flows. The capital released to the developer can then be redeployed into new generation capacity, energy storage, transmission or other infrastructure. The objective is, therefore, not simply to finance an existing asset, but to create a cycle in which capital invested in one generation of infrastructure can be recycled into the next.
India’s road sector provides an important domestic precedent. By leveraging InvITs alongside other monetisation strategies, the National Highways Authority of India (NHAI) successfully unlocked value from its operational highways to attract long-term institutional capital. As of early 2026, the cumulative asset monetisation through the National Highways Infra Trust reached Rs 498.58 billion, complemented by approximately Rs 430 billion raised across four rounds of private InvITs in 2025. This recycled capital was strategically deployed to accelerate highway development and deleverage NHAI’s balance sheet, proving that operational infrastructure can serve as a dynamic engine for fresh capital rather than remaining locked as fixed assets.
The renewable energy sector, however, remains at an earlier stage of this evolution. Despite the rapid expansion of renewable capacity, less than 2 per cent of operational renewable energy capacity has been monetised through InvITs. Solar clearly illustrates the scale of the opportunity in particular. India has around 168 GW of installed solar capacity (including ground-mounted, rooftop, hybrid and offgrid projects, as of August 31, 2026), but only about 3 GW or about 2.3 per cent of the operational utility-scale solar assets, has been monetised through InvITs. As per Knight Frank estimates, operational utility-scale solar assets worth around Rs 3.1 trillion could potentially qualify for InvIT structures.
This represents a significant pool of assets that could potentially be brought into the capital-recycling cycle. However, asset eligibility will depend on factors including the quality and tenor of power purchase agreements (PPAs), counterparty strength, operating performance, leverage, remaining asset life and investor appetite. The focus, therefore, should be on creating conditions under which suitable operational assets can be efficiently identified, valued and transferred, rather than pursuing monetisation as an end in itself.
Operational renewable projects backed by long-term PPAs can provide relatively predictable cash flows over extended periods, making them potentially suitable for institutional investors seeking long-duration infrastructure exposure. Existing renewable InvIT platforms have delivered cash distribution yields of around 10-10.5 per cent, creating the possibility of attracting a wider pool of capital, including from insurers, pension funds, infrastructure funds and other long-term investors.
Solar is likely to provide the first significant scale for this model because of the size of its operational asset base and the relatively standardised nature of utility-scale projects. As the renewable ecosystem matures, the opportunity can extend to wind, hybrid projects, battery energy storage systems (BESSs), pumped storage and transmission. This is particularly relevant because the next phase of India’s energy transition will require investment not only in generation but also in the infrastructure needed to integrate and transmit that energy.
For this potential to translate into meaningful capital recycling, the renewable energy sector will need a more systematic approach to asset monetisation. One of the first requirements is to improve the visibility and standardisation of the operational asset pool. Unlike listed securities, renewable infrastructure assets are heterogeneous in terms of PPA structures, offtaker quality, tariff levels, generation performance, debt obligations and remaining operating life. This can make asset-level due diligence and valuation time-intensive, particularly when portfolios comprise projects developed at different points in the energy transition. A standardised asset analysis capturing key technical, financial and contractual parameters could help address this information gap. Such a framework could enable developers and investors to assess asset quality more efficiently, improve comparability across projects and build portfolios that meet defined investment criteria. Over time, a more transparent and standardised asset pool could reduce transaction costs and make renewable asset monetisation more scalable.
Aggregation can further expand the universe of assets that can participate in this market. A significant share of India’s renewable capacity is held across projects of varying sizes, which may individually be too small or operationally diverse to attract institutional capital through a stand-alone InvIT. Pooling assets across projects, developers or even technologies could create portfolios with greater scale, diversification and more predictable cash flows. For developers, this could provide an avenue to monetise assets that may not independently meet the scale or investment requirements of large institutional investors, while for investors it could reduce the concentration risk. Over time, portfolio-based aggregation could help create a deeper and more diversified pipeline of operational renewable assets available for capital recycling.
Deepening the institutional investor base will be equally important to sustain this cycle. While existing renewable InvITs have demonstrated investor appetite for operational renewable assets, scaling the market will require participation from a broader set of long-duration investors, including insurance companies, pension funds, provident funds and global infrastructure funds. The regulatory framework already provides a route for institutional participation. Mutual funds can invest up to 10 per cent of their net asset value in InvITs, subject to a 5 per cent limit for any single InvIT, while the Securities and Exchange Board of India has also expanded the universe of strategic investors to include eligible provident and pension funds. However, greater participation will depend not only on distribution yields but also on the predictability of cash flows, asset quality, governance standards and liquidity of the underlying investment. Thus, greater clarity on valuation, portfolio disclosure and risk classification could, therefore, help investors assess renewable InvITs within their existing infrastructure allocation frameworks. As the operational renewable asset base expands, a deeper institutional investor pool could enable InvITs to absorb larger portfolios and provide developers with a more reliable route for recycling capital into the next generation of renewable capacity.
As the market matures, InvITs could consequently evolve beyond vehicles focused primarily on monetising standalone solar and wind assets to support the broader infrastructure ecosystem required for a renewable-led power system. Hybrid renewable projects, BESSs, pumped storage and transmission assets are likely to become increasingly important as the share of variable renewable generation rises. Capital released from mature generation projects could be redeployed into these complementary assets, helping address the infrastructure requirements associated with integrating additional renewable capacity into the grid. This would allow InvITs to support a wider investment cycle across generation, storage and transmission, creating an ecosystem in which operational assets continuously release capital for the next phase of India’s energy transition.
