Geopolitical Complications and Power Investment: India’s Strategic Challenges and Opportunities

India’s pursuit of energy security and sustainable power infrastructure unfolds against a backdrop of intensifying geopolitical rivalries, regional instability, and global economic fragmentation. As the world’s third-largest energy consumer, India faces a dual challenge: meeting soaring domestic demand while navigating a complex web of international alliances, trade tensions, and security threats. This report examines how geopolitical complications shape India’s power investment landscape, analyzing its nuclear ambitions, renewable energy transition, cross-border partnerships, and strategic responses to great-power competition.

Geopolitical Landscape and Energy Investment Dynamics

The Nexus of Energy Security and Geopolitical Risk

Energy infrastructure investments are inherently geopolitical, as they require long-term stability, cross-border collaboration, and access to critical resources. For India, which imports over 80% of its oil and 45% of its natural gas, global price volatility and supply chain disruptions pose existential risks. The Ukraine conflict underscored the vulnerability of import-dependent nations, accelerating India’s push for diversified energy partnerships and domestic manufacturing. However, this shift occurs amid U.S.-China decoupling, which has bifurcated clean technology supply chains and raised costs for solar panels and batteries.

India’s historical non-alignment strategy complicates its positioning. While avoiding formal alliances preserves strategic autonomy, it limits access to security guarantees that could shield energy projects from regional conflicts. For instance, China’s territorial claims in Arunachal Pradesh and naval expansion in the Indian Ocean threaten infrastructure like the Sikkim-Bengal hydropower corridor and offshore wind farms.

India’s Energy Security Challenges in a Contested World

Fossil Fuel Dependency and Import Vulnerabilities

Despite renewable energy growth, fossil fuels dominate India’s energy mix, with coal constituting 70% of electricity generation. Rising domestic demand—projected to grow 6% annually through 2033—exacerbates reliance on imported oil and gas, primarily from the Middle East. This dependency creates dual exposure:

1.     Price Volatility: Brent crude fluctuations directly impact fiscal deficits and inflation.

2.     Chokepoint Risks: Over 60% of India’s oil imports transit the Strait of Hormuz and Malacca Strait, making them susceptible to blockades during U.S.-Iran or China-Taiwan crises.

The government’s response includes strategic petroleum reserves (SPRs) and LNG terminal expansions, but SPR capacity covers only 9.5 days of consumption, far below the 90-day International Energy Agency benchmark.

Nuclear Energy: Liability Reforms and Private Investment

In February 2025, India announced plans to amend its 2010 Civil Liability for Nuclear Damage Act, aiming to attract private capital into nuclear energy. The original law’s Section 17(b)—which allowed operators to seek recourse from equipment suppliers—deterred foreign firms like Westinghouse and GE-Hitachi. Proposed reforms would limit supplier liability, aligning India with international conventions like the CSC.

Concurrently, a $2.3 billion investment in small modular reactors (SMRs) signals a shift toward decentralized nuclear power. However, historical precedents loom large: the Bhopal gas tragedy (1984) entrenched public skepticism about corporate accountability, complicating efforts to privatize high-risk sectors. Russia remains India’s primary nuclear partner, constructing six VVER-1200 reactors at Kudankulam, while U.S. and French firms hesitate due to liability concerns.

Renewable Energy Transition Amid Great-Power Competition

Solar Manufacturing and the China Dilemma

India’s solar ambitions collide with geopolitical realities. Although the nation added 13.5 GW of solar capacity in 2024, over 70% of panels are imported from China, leveraging Beijing’s $130 billion annual renewables subsidies. To reduce dependency, India imposed a 40% customs duty on Chinese modules in 2022 and launched the Production-Linked Incentive (PLI) scheme for domestic manufacturing.

This protectionist shift mirrors global trends but risks slowing decarbonization. Domestic solar modules cost ₹24/watt versus ₹14/watt for Chinese imports, raising project costs by 15-20%. The U.S. Inflation Reduction Act’s local content requirements further strain India’s access to Western markets, forcing tough choices between self-reliance and integration into global clean-tech chains.

Cross-Border Hydropower and Regional Politics

Hydropower exemplifies how energy investments intersect with regional geopolitics. India’s 1,020 MW Tala hydropower project in Bhutan provides 70% of the latter’s revenue, cementing bilateral ties. Conversely, China’s Belt and Road Initiative (BRI) has funded Nepal’s 1,200 MW Budhi Gandaki Dam, challenging India’s traditional influence.

New Delhi counters with the “Neighborhood First” policy, offering concessional financing for projects like Nepal’s 900 MW Arun III Dam, which exports 90% of its output to India. These ventures stabilize regional relationships but face opposition from local communities and environmental groups, as seen in protests against the 2,000 MW Subansiri Dam on the India-China border.

Strategic Autonomy vs. Alliance Politics

Balancing U.S. and Russia in Energy Partnerships

India’s refusal to sanction Russian energy imports post-Ukraine invasion illustrates its commitment to strategic autonomy. Russian oil now constitutes 35% of India’s imports, up from 2% in 2021, saving $5 billion annually through discounted Urals crude. However, this complicates ties with the U.S., which seeks to cap Russian oil prices.

In nuclear energy, reliance on Russian technology persists despite Western sanctions. The Kudankulam reactors use Russian fuel, and a 2024 agreement grants Rosatom exploration rights in Indian uranium mines. This dependency risks secondary sanctions but reflects India’s calculus that Moscow remains a more reliable partner than Washington in high-tech transfers.

The Quad and Clean Energy Collaboration

The Quadrilateral Security Dialogue (U.S., India, Japan, Australia) has emerged as a platform for countering China’s clean energy dominance. Initiatives like the Quad Clean Energy Supply Chain Agreement aim to diversify rare earth mineral processing and battery production away from China. For India, this offers opportunities to attract semiconductor and EV battery investments, albeit with strings attached.

Tesla’s 2025 entry into India—facilitated by reduced tariffs—aligns with Quad objectives but underscores tensions between economic liberalization and protectionism. Domestic manufacturers like Tata Motors oppose further concessions, fearing market dominance by foreign firms.

Future Pathways: Resilience Through Diversification

Offshore Wind and Blue Economy Strategies

To mitigate land acquisition challenges and geopolitical risks, India is developing offshore wind projects in the Arabian Sea and Bay of Bengal. The 2024 National Offshore Wind Energy Policy targets 30 GW by 2030, leveraging partnerships with Denmark’s Ørsted and Japan’s JERA. These projects enhance energy security but require naval cooperation to protect infrastructure from piracy and state-sponsored sabotage.

Green Hydrogen and the Middle East Corridor

India’s National Green Hydrogen Mission (2023) envisions $17 billion in investments to produce 5 MMT/year by 2030. Strategic partnerships with Saudi Arabia and the UAE under the India-Middle East-Europe Economic Corridor (IMEC) aim to create a green hydrogen trade route bypassing China’s Maritime Silk Road. However, IMEC’s success hinges on stabilizing Israel-Gulf relations and securing EU funding amidst budget cuts.

Conclusion: Navigating the New Energy World Order

India’s energy trajectory will be shaped by its ability to reconcile four competing imperatives:

1.     Diversification: Reducing fossil fuel imports through renewables, nuclear, and biofuels.

2.     Localization: Building domestic manufacturing while avoiding costly protectionism.

3.     Regional Integration: Strengthening cross-border grids with Bangladesh, Nepal, and Sri Lanka.

4.     Strategic Balancing: Engaging rival powers without triggering retaliatory measures.

The path forward requires nuanced diplomacy, agile policy frameworks, and sustained investment in R&D. By leveraging its demographic dividend and renewable potential, India can transform geopolitical complications into opportunities for leadership in the emerging multipolar energy order.