Three key trends that will shape India's energy trajectory in 2026

India's energy sector in 2026 will be influenced by shifts in crude oil sourcing, the rising share of clean energy and the growing role of private capital in renewables, nuclear power and distribution

The development trajectory of the energy sector in India will be shaped by three key trends this year: The evolving nature of the oil import mix by sources and crude grades; the rising share of clean fuel in the energy mix; and the continued rise of private capital in capacity creation in crucial reform areas, including renewables, nuclear energy and power distribution. 

India will continue to rely heavily on crude oil imports in 2026, meeting  85-90 per cent of its domestic requirement through overseas purchases. While West Asian nations have traditionally been India’s primary suppliers of crude, import sources have shifted in recent years due to geopolitical disruptions and changing price dynamics. Following the Ukraine war, Russia emerged as India’s largest supplier, thanks to its deep discounts. However, as these discounts have narrowed, and logistical as well as geopolitical risks have increased, the lure of Russian crude has moderated, experts say. 

“India’s crude sourcing strategy in 2026 is being driven primarily by economic and energy-security considerations. Going into 2026, the country’s crude import basket is expected to rebalance. Imports from Saudi Arabia and the UAE, India’s long-standing West Asian partners, are expected to rise, supported by term contracts, proximity, and supply reliability. In parallel, the United States is emerging as a fast-growing source of crude, reflecting both competitive pricing and deeper energy ties,” said Vibhuti Garg, director for South Asia at the Institute for Energy Economics and Financial Analysis. 

Big spender 

India’s crude oil import levels are mainly a function of demand growth, domestic discoveries, the pace of development of evacuation infrastructure, and the extent to which alternative fuels substitute conventional petroleum products. In 2026, in the absence of any major additions to domestic crude supply, and demand remaining robust on the back of sustained gross domestic product growth, a volume-led reduction in oil imports appears unlikely. 

“Consequently, the trajectory of the oil import bill in 2026 will be influenced by currency dynamics. Exchange rate movements, in particular, will play a critical role. Recent volatility in the rupee underscores this sensitivity, and any strengthening of the rupee would directly reduce the import bill in rupee terms, even if crude import volumes remain unchanged,” Sanjay Sah, partner, Deloitte India, said. 

Over the longer term, however, many structural measures are expected to moderate the country’s dependence on imported crude and contribute to a sustainable reduction in the oil import bill, he added. These include enhanced exploration and production, expansion of compressed biogas, adoption of new and alternative fuels, coal gasification, accelerated deployment of renewables, and gradual development of a hydrogen ecosystem. 

That India is a big oil importer is well known; in fact, barring the pandemic years, the volume of crude oil imports has consistently hovered above 220 million tonnes, with the last few years seeing a rise. According to Shyamasis Das, fellow at the Centre for Social and Economic Progress, this is unlikely to change in 2026 or, for that matter, over the next decade, and any short-term rise or fall in volume and sourcing strategy will largely depend on evolving geopolitics and the negotiated price of crude. 

“Much of India’s recent petroleum buying spree is to build the country’s strategic reserves for hedging future supply disruptions and not just to meet current demand. Considering the current posturing of the US administration towards India and the bilateral trade deal at stake, one may predict that this year, particularly, India will likely lean towards buying more crude from the US or US-blessed markets. Will the import bill for India be the same is a million-dollar question. To find the answer, one can flip the question to ask whether the US crude price will be as cost competitive as Russian crude,” Das said. 

Green energy focus  

With more than 50 per cent of installed power capacity currently coming from non-fossil fuel sources, India has already achieved its 2030 non-fossil capacity target five years ahead of schedule. This milestone reflects the rapid scale-up of renewable energy, particularly solar, over the past few years. 

“That momentum is expected to continue through 2026, with solar remaining the dominant growth driver. Large, grid-scale utility projects will keep expanding, while the rooftop solar segment, especially in the residential sector, is witnessing a strong boom, supported by policy incentives, falling costs, and growing consumer awareness,” Garg said. 

She said that with the increasing penetration of renewables in the grid, the country’s power system is entering a new phase where energy storage becomes critical. Until now, India has managed rising renewable generation with relatively limited storage, but a higher share of variable solar and wind energy will require much greater flexibility to ensure grid stability. As a result, battery energy storage deployment is set to accelerate in 2026. 

“While lithium-ion batteries will continue to dominate in the near term, India is also likely to see greater diversification in storage technologies. Emerging options such as sodium-ion batteries and flow batteries are gaining traction due to their potential cost advantages, improved safety, and suitability for long-duration storage. Together, the continued solar boom and rapid scale-up of storage will define the next phase of India’s clean energy transition in 2026,” Garg noted. 

Other experts too agree that a large share of renewable energy capacity will be complemented by energy storage systems (ESS) – last year saw tendering of 102 gigawatt hours of ESS, and 2026 will likely see a much higher figure. 

“However, the mood of the market will depend on the success rate of offtake agreement signing, which is a matter of concern as many winning developers are still waiting to close the deals. To put this into perspective, out of 33.7 GWh of auctioned ESS capacity, only 5.7 GWh was executed last year. Battery ESS tenders, in particular, saw very aggressive bidding from interested developers that drove down the battery energy storage system (BESS) discovered price,” Das pointed out.  

On the thermal or coal power side, data shows that its share in electricity generation, which stood at 73 per cent in the April–November 2024 period, fell to 69 per cent in April–November 2025. “On the capacity addition front as well, we have added 44.51 gigawatts (of renewables) in 11 months of calendar year 2025 (until November 2025), which is nearly double of what was added in the same period the previous year. With increased domestic manufacturing capabilities in the solar energy value chain, the pace of renewable energy capacity addition is set to see further acceleration in 2026 and the next few years,” said Anujesh Dwivedi, partner at Deloitte India. 

Private play 

India’s renewable energy growth story has largely been led by the private sector, especially in its early years when investments were both capital-intensive and perceived as high-risk. Garg pointed out that around 15 years ago, uncertainties around technology performance, offtake risk, and policy stability made large-scale deployment challenging, but private developers stepped in despite these risks, and over time, supportive government policies enabled the sector to scale rapidly and attract lower-cost capital. 

“In the power distribution segment, the experience has been different. Many state-owned distribution companies have struggled financially due to subsidised tariffs, cross-subsidisation, and free or low-cost power for agricultural and residential consumers, leading to persistent losses and efficiency challenges. Where distribution has been opened up to private participation, it has helped improve operational efficiency, reduce losses, strengthen billing and collection, and in some cases restore profitability,” she said. 

Electricity distribution in India remains predominantly state-owned, and any shift towards private participation is likely to be gradual and uneven across states. Experts believe that while selective privatisation or public-private models may expand in certain regions, the transition will not be as rapid or widespread as seen in newer segments such as RE, energy storage, or green hydrogen, where private capital and innovation are playing a far more dominant role. 

Experts said the Electricity Act enacted in 2003 and the reforms that followed it have substantially transformed India’s power sector. Private sector participation has seen a major thrust over the years, especially on the generation side. “While 33 per cent of India’s thermal generation installed capacity is under private sector ownership as of November 2025, more than 94 per cent of renewable energy capacity, excluding hydro, is owned by the private sector, which clearly demonstrates the increasingly dominant role of the private sector in newer technologies,” said Deloitte’s Dwivedi. 

He said the SHANTI (Sustainable Harnessing and Advancement of Nuclear Energy) Act, passed by Parliament last month, is likely to eventually bring in a similar shift in nuclear energy capacity addition in the longer run. The Act has opened up crucial areas of the nuclear energy sector for private participation. On the power distribution side, private sector participation has seen slow adoption in the country. But given that several state distribution companies (discoms) continue to face financial and operational challenges, there is a possibility that some of these governments may explore balance sheet restructuring and privatisation of discoms, according to Dwivedi.