The impact of financial performance on renewable energy production capacity: a study of Indian renewable firms

Ngoh, Min Yee (2025) The impact of financial performance on renewable energy production capacity: a study of Indian renewable firms. Final Year Project, UTAR.

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Abstract

India has established ambitious climate commitments, aiming for 500 GW of non-fossil fuel power capacity by 2030 and net-zero emissions by 2070. While national frameworks set the strategic direction, the practical expansion of infrastructure depends on the internal financial health and investment decisions of individual firms. This study investigates the impact of firm-level financial performance, which measured through revenue, ROA, ROE, leverage, and firm size on total installed renewable energy capacity in India. Employing a panel data regression analysis by Random Effects Model on a sample of 30 Indian renewable energy firms over the period 2020–2024, the research evaluates how internal financial factors drive or constrain capacity expansion. The conceptual framework integrates the Pecking Order and Trade-Off theories to understand these financing dynamics. Empirical findings reveal that total revenue and firm size have a significant positive impact on renewable energy development. Conversely, ROA and ROE exhibit a significant negative relationship with installed capacity. Furthermore, leverage was found to be statistically insignificant, reflecting the sector’s reliance on specialized financing structures. The results highlight that while revenue strength and scale drive progress, persistent pressure on profitability may undermine long-term financial sustainability. The study concludes by recommending policy shifts toward performance-linked incentives and strengthened financial resilience to ensure firms can sustain the investment levels required to meet India’s climate targets.

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