THEBUSINESSBYTES BUREAU
NEW DELHI, AUGUST 19, 2026
India’s renewable energy story is entering a decisive new
phase, with the strength of the power grid and the rapid build-out of energy
storage emerging as the twin pillars that will determine how far and how fast
the country can scale clean power. Rating agency ICRA has cautioned that while
a massive project pipeline provides strong momentum, transmission bottlenecks,
grid curtailments and aggressive bidding in battery energy storage systems
(BESS) could increasingly test project economics.
ICRA expects renewable energy, including large hydro, to
account for more than 35 per cent of India’s total electricity generation by
2029-30, up sharply from 22 per cent in 2024-25. The projection underscores the
growing role of renewables in the country’s power mix even as the sector
navigates challenges around transmission readiness, project execution and the
signing of power purchase agreements (PPAs) and power sale agreements (PSAs).
Despite a slowdown in fresh bidding, India’s renewable energy
project pipeline remains robust. More than 150 GW of renewable energy projects
were under construction as of June 30, 2026, providing a substantial base for
capacity additions over the near to medium term, ICRA said.
However, the mismatch between the rapid expansion of
generation capacity and the pace of transmission infrastructure development has
emerged as a key concern. Projects operating under temporary general network
access (T-GNA) have faced episodes of significant grid curtailment,
particularly during solar generation hours. Around 37 per cent of the capacity
at impacted substations across the northern, western and southern regions
operates under T-GNA and has faced curtailment of 30-50 per cent during solar
hours, according to ICRA.
“While the bidding
activity has moderated, a notable feature is a decline in the bids for normal
solar and wind and more focus on firm and dispatchable renewable energy (FDRE)
and round-the-clock (RTC) power,” said Girishkumar Kadam, Senior Vice President
and Group Head – Corporate Ratings, ICRA.
The shift towards firm and dispatchable renewable power
reflects an evolving market where reliability and demand-matched supply are
becoming increasingly important alongside the sheer addition of generation
capacity. The latest tender by the Solar Energy Corporation of India (SECI),
Kadam noted, is particularly significant as it mirrors the demand-based supply
approach traditionally associated with thermal power.
The tender’s discovered tariff of ₹5.25
per unit is lower than that of most new thermal power plants, which are priced
above ₹6 per unit and remain exposed to fuel-cost
escalation, he said.
The pace of renewable energy bidding, however, has weakened
considerably. After a sizeable 40.6 GW of renewable capacity was awarded in
2024-25, awards fell to 14.7 GW in 2025-26. The slowdown has continued into the
current financial year, with only 4.7 GW awarded as of August 10, 2026. At the
same time, unsigned PPA capacity remained substantial at around 40-45 GW as of
April 2026.
Against this backdrop, ICRA believes that the timely
execution of both intra-state and inter-state transmission projects will be
critical to unlocking the full potential of the renewable energy pipeline.
Strengthening transmission connectivity, reducing curtailment risks and
ensuring adequate grid access will be essential to protecting investor returns
as renewable penetration rises.
Energy storage is expected to play an equally crucial role.
ICRA sees battery energy storage systems as an increasingly important enabler
of grid stability, particularly as intermittent solar and wind power account
for a larger share of electricity generation.
Falling battery costs over the past decade have improved the
economics of energy storage. In addition, viability gap funding and the
extension of transmission charge waivers until June 2028 have provided further
momentum to BESS adoption in India.
Yet the rapid expansion of standalone storage tenders has
also brought new risks. Expectations of further declines in battery prices have
encouraged aggressive bidding, potentially putting pressure on project returns.
A reversal in battery price trends, combined with rupee depreciation against
the US dollar, has already affected the economics of some projects, ICRA noted.
The agency said the next phase of India’s renewable energy expansion will therefore depend not merely on adding more solar and wind capacity, but on building the infrastructure needed to deliver that power reliably and economically. Successful implementation of the existing project pipeline, adequate transmission connectivity, timely bidding for new projects and faster execution of PPAs by central nodal agencies will remain critical to sustaining the sector’s growth.
ICRA’s overall outlook for the renewable energy sector remains Stable, supported by strong government policy backing, competitive tariffs and rising sustainability commitments among large commercial and industrial consumers. But as renewable capacity moves deeper into the country’s power mix, the agency’s assessment makes one point increasingly clear: India’s clean-energy ambitions will ultimately be measured not only by how much renewable capacity it builds, but by how effectively the grid and storage ecosystem can put that power to work.
