Unlocking Capital for Solar Startups and Infrastructure in India

By Vasudha Madhavan

India’s ambition to become a global leader in renewable energy rests on a simple truth: without solving the financing puzzle, even the brightest solar innovations cannot scale. Policy frameworks have provided direction, and technology has made solar power more efficient and affordable, but it is the availability and structuring of capital that will ultimately determine whether India can harness its solar potential at the speed required.

The capital dilemma is not new. Conventional financing methods—designed for large, predictable infrastructure projects—struggle with the decentralized and rapidly evolving nature of solar startups. Banks, still cautious about unproven technologies or early-stage companies, apply rigid risk frameworks that often exclude precisely the kind of innovation India’s solar sector needs.

Venture capital has only recently begun to take an interest in climate tech and energy infrastructure. These tend to be selective equity investments at the early stage, leaving solar entrepreneurs stuck in a capital gap between proof of concept and scaling. This gap slows adoption, stifles experimentation, and leaves powerful, transformative solutions in a perpetual pilot mode.

Yet the demand signals are undeniable. India has targeted 500 GW of non-fossil fuel capacity by 2030, with solar expected to supply a significant portion of this. The demand will not come only from large solar parks, but also from distributed energy models—rooftops, community solar projects and microgrids—that bring affordable power closer to consumers. These models are often developed by startups armed with deep technology but shallow balance sheets. The mismatch between ambition and capital availability is where innovative financing becomes essential.

One way forward is to view solar innovation not only as infrastructure, but also as a technology play with distinctive capital needs. Blended finance structures—where concessional capital from development finance institutions is combined with commercial capital—can help de-risk private investments and give startups the runway they need. Similarly, revenue-based financing or pay-as-you-save models can align repayments with actual cash flows, lowering upfront costs for consumers and enabling adoption without traditional auctions. Moving beyond standard project financing can also attract a wider investor base, including not just impact funds but institutional equity investors seeking ESG-aligned assets.

Securitization is another critical mechanism. Currently, financing for rooftop and decentralized solar projects occurs through isolated, small-scale transactions that are too limited to draw institutional capital. If these assets are aggregated into investment-grade portfolios, the financial industry could create new products—such as solar-backed bonds or green asset-backed securities—that can catalyse large-scale capital flows. This would allow startups to tap structured debt markets once their project portfolios achieve scale, reducing their cost of capital and enabling faster replication of proven models.

But capital alone is not enough. Investors need confidence—and confidence is built on data, transparency, and trust. This is where fintech and digital platforms can transform solar finance. The time is ripe for systems that track installations in real time, link generation data to repayment schedules, and allow investors to monitor the impact of their capital with a click. Digitizing solar assets and standardizing data can reduce information asymmetry, strengthen global investor confidence, and create liquidity in markets that are currently fragmented.

India’s solar journey is not only about gigawatts; it is about millions of people gaining access to affordable, reliable energy. Financing models must reflect this human dimension. Inclusive financing—such as microloans for rural households or leasing options for SMEs—can help democratize solar adoption. Policymakers, banks, investors, and startups must work together to finance not just marquee projects but last-mile innovations that bring solar power to the communities that need it most.

If India succeeds in rewriting the rules of solar financing, it will not just meet its renewable energy targets—it will set a global benchmark. With its unique combination of scale, diversity and urgency, India is the ideal testbed for building a new financial architecture for clean energy. The sun may supply the photons, but it is capital—smartly structured, inclusively deployed, and digitally enabled—that will turn sunlight into lasting impact.

The author is the founder & CEO of Ostara Advisors.