The Indian renewable energy sector offers significant opportunities for Infrastructure Investment Trusts (InvITs) to deepen capital mobilisation in the space despite the limited existence of InvITs at present, according to a recent report by Knight Frank.

The adoption of InvITs for the renewable energy sector is still at an early stage despite India emerging as one of the world's largest renewable energy markets. The renewable energy assets possess many of the characteristics that make infrastructure assets suitable for InvIT structures, including long operational lives, stable contracted revenues, low operating expenditure, and predictable cash flow generation, the report states.  

As of June 2026, India has an installed renewable energy capacity of 291 GW (excluding large hydro). However, only about 3.6 GW of solar assets, equivalent to 2.7% of the operational utility-scale solar assets, have been monetised through InvIT structures, indicating considerable untapped potential. The report argues that the limited penetration of renewable InvITs does not reflect a lack of suitable assets; rather, it reflects the relatively recent maturation of renewable portfolios, evolving regulatory frameworks, and the continued preference of many developers to retain operational assets on their balance sheets.

The gradual evolution of renewable InvITs is therefore best viewed as a function of market maturity. During the initial phase of renewable energy development, developers prioritised rapid portfolio expansion supported by project finance and private equity capital. As these portfolios have matured, financing priorities have shifted towards balance sheet optimisation, deleveraging, and capital recycling, creating favourable conditions for increased adoption of InvIT structures.

As per the report, the existing renewable InvITs comprise utility-scale projects backed by long-term power purchase agreements (PPAs) with central government agencies such as SECI and NTPC, or with state distribution companies. The contracted nature of revenues, coupled with relatively low operating expenditure, makes operational renewable assets well suited for yield-oriented investment structures.

While Sustainable Energy Infra Trust is the only pure renewable energy InvIT in India, IndiGrid Infrastructure Trust, originally established as a power transmission InvITs has expanded its portfolio through acquisitions of operational solar assets alongside its transmission business, illustrating the growing convergence between transmission and renewable infrastructure. As of FY 2026, the trust's portfolio comprised 15% solar assets, reflecting investor appetite for diversified energy infrastructure platforms.

More recently, market interest in renewable infrastructure investment platforms has continued to strengthen. Strategic investors and existing InvITs have actively evaluated acquisitions of large operational renewable portfolios, indicating that competition for mature renewable assets is increasing as the operational asset base expands. This suggests that the market is gradually transitioning from isolated transactions towards a broader ecosystem of capital recycling through both InvITs and private infrastructure investment vehicles, the report says.

Reasons for limited renewable energy InvIT adoption

The first reason for limited adoption is the fragmented asset ownership structure that increases portfolio aggregation complexity. In sectors such as roads and power transmission, individual assets are typically large, generate predictable revenues and command high valuations, allowing InvITs to achieve the necessary scale with a relatively limited number of assets. Road InvITs, for instance, can be established with a portfolio of a few large toll or Hybrid Annuity Model (HAM) concessions, while transmission InvITs aggregate a modest number of regulated transmission Special Purpose Vehicles (SPVs) that benefit from stable, availability-based tariffs.

Renewable energy portfolios, however, are inherently more fragmented. Utility-scale solar and wind assets are generally developed as multiple project SPVs across different states, each varying in capacity, commissioning period, tariff structure, counterparty profile and resource characteristics. Although these assets generate predictable cash flows under long-term PPAs, their relatively smaller project sizes require the aggregation of a substantially larger number of operational assets to create an investment-grade portfolio of sufficient scale.

According to the report, beyond achieving scale, portfolio aggregation also plays a critical role in mitigating concentration risks. A diversified renewable portfolio reduces exposure to site-specific generation variability, single-offtaker risk, tariff concentration, technology-specific risks and asset performance fluctuations. Consequently, successful renewable InvITs are typically built around large, geographically diversified portfolios rather than a handful of individual projects. This structural requirement for greater portfolio aggregation partly explains why renewable energy InvITs have evolved more gradually than their counterparts in the roads and transmission sectors.

The second reason is that it requires greater complexity when renewable energy assets are valued. Renewable energy assets require considerably more granular valuation than many traditional infrastructure sectors. While projects generally operate under long-term PPAs, their enterprise value depends on several technical and commercial variables that differ from one project to another. For solar assets, valuation is influenced by factors including contracted tariff levels, remaining PPA tenure, off-taker credit quality, historical generation performance, capacity utilisation factors (CUFs), solar irradiation, module degradation and curtailment risks. Consequently, two projects with identical installed capacities may exhibit materially different cash flow profiles and valuations. For instance, two 100-MW solar projects may have similar installed capacities, but a project backed by a 25-year SECI PPA, operating at a CUF of 24–25%, with timely payment realisation is likely to command a higher valuation than a project selling power to a financially weaker state DISCOM under a lower tariff with prolonged receivable cycles. In comparison, road and transmission assets generally benefit from more standardised valuation methodologies.

Looking ahead, the report says that India's renewable energy sector is now moving towards a phase where efficient capital mobilisation will be as important as capacity creation. InvITs can emerge as an important enabler of this transition by transforming mature renewable assets into institutional-grade investment platforms. By providing developers with an avenue to monetise operational assets and reinvest capital into new generation capacity, storage and hybrid projects, InvITs can improve capital efficiency across the renewable ecosystem.