The country's renewable energy capacity (including large hydro) has already grown to 201 GW as of September 2024. The capacity addition is estimated to exceed 26 GW in FY2025 and further increase to 32 GW in FY2026, driven by the large project pipeline of over 80 GW, following the significant improvement in tendering activity in FY2024, says Girishkumar Kadam, senior Vice President & Co-Group Head - Corporate Ratings, ICRA.
“The healthy renewable project pipeline and the favourable solar PV cell and module prices are expected to improve the RE capacity addition to over 26 GW in FY2025 from 19 GW in FY2024. This will further scale up to 32 GW in FY2026, mainly driven by the solar power segment, and given the impending expiry of the waiver on inter-state transmission system (ISTS) charges in June 2025,'' says Girishkumar Kadam.
Another factor is that the tendering activity remained high in the current fiscal, in line with the 50 GW annual bidding trajectory announced by the Government of India in March 2023. Apart from the utility segment, ICRA expects the rooftop solar segment and the commercial & industrial (C&I) segments to contribute significantly to the capacity addition. The rise in the RE capacity over the next five years is estimated to enhance the share of RE plus large hydro in the all-India electricity generation from 21% in FY2024 to over 35% in FY2030.
Kadam notes that the development of adequate energy storage projects remains important to integrate the growing share of RE with the grid, given their intermittent generation. ICRA expects the energy storage capacity requirement at 50 GW by 2030, which will be met through a mix of battery energy storage systems (BESS) and pumped storage hydro projects (PSP). The significant decline seen in the tariffs for BESS projects over the past eight months, driven by the sharp decline in battery prices, is expected to improve the adoption of the storage projects.
Further, there is an increased focus by the Central nodal agencies on awarding RE projects offering round-the-clock (RTC) and firm & dispatchable supply (FDRE), which can mitigate the intermittency risk associated with RE. This can be made possible through the use of hybrid RE projects complemented with energy storage systems. The Central nodal agencies along with railways have completed auctions for close to 14 GW of RTC / FDRE projects. The tariffs discovered in these tenders remain competitive against the conventional sources, with bid tariffs in the range of ₹4.0-5.0 per unit, against more than ₹6.0 per unit discovered in the recent medium-term bids for supply from coal-based projects. Apart from the capital cost and plant load factors (PLFs), ICRA says that these projects will be exposed to merchant market tariffs, given the surplus power generation expected from the projects owing to the oversizing of the capacity.
ICRA cautions that challenges remain on the execution front concerning delays in land acquisition and transmission connectivity, which, if sustained, could hamper the sector’s prospects.
