Hybrid Projects Backed by Storage to Dominate India’s RE Capacity Additions by FY27: Crisil

India is set to witness a renewable energy (RE) capacity addition of 75 GW by financial year (FY) 2027, with hybrid projects—including those backed by storage—expected to dominate the additions, accounting for around 37% of the new capacity, Crisil Ratings said on Monday.

With these additions over this fiscal and the next, the country’s overall RE capacity is projected to rise to 233 GW by March 2027.

Addressing a media briefing, the rating agency noted that while the upcoming RE projects would require a step-up in capital investment, the financing environment remains favourable. “What can pose a risk, however, is the delay in execution of transmission infrastructure, which may remain a watchpoint for the sector,” said Krishnan Sitaraman, Chief Ratings Officer at Crisil Ratings.

The key drivers for this projected growth include a strong executable pipeline of nearly 88 GW as of March 2025, based on a strong pipeline of projects awarded over the last two years.

Hybrid projects, which are expected to lead future capacity additions in FY26 and FY27, comprised only 14% of capacity additions over the past two fiscals.

Crisil further pointed out that the growing share of hybrid projects is essential due to the intermittent nature of renewable power—solar generation occurs during the day, while wind power is seasonal. The rising share of renewables in the overall power mix has the potential to destabilise grid operations. “Hybrid projects with or without battery storage provide an optimal solution to support round-the-clock power generation,” Sitaraman added.

Since the majority of these projects have been awarded only in the last one to two years, progress on Power Purchase Agreement (PPA) closures has been relatively slow, with only 50% of such PPAs finalised as of March 2025. However, improvement is expected, given the rising demand for power and increasing renewable purchase obligations (RPOs) for distribution companies (DISCOMs), while additions to thermal capacity will take longer. Overall, the current pipeline is projected to contribute 80% of the capacity addition.

In terms of capital outlay, the renewable energy sector is expected to witness an expenditure of around ₹3.8 lakh crore during FY26 and FY27 for generation alone. This represents a 55% increase compared to capital investments made in the past two fiscal years. The increase is driven by sustained momentum and a higher share of hybrid projects, which require greater capital investment due to the need for increased energy generation. Crisil also noted that timely financing—both equity and debt—is expected to be available for these projects.

However, the sector must navigate key risks to achieve this projected growth. The most significant challenge lies in the timely commissioning of sufficient transmission capacity to match the pace of renewable additions.

“Recognising the need to augment transmission capacity in line with growing renewable capacity, the awarding of transmission projects has ramped up significantly,” Sitaraman noted. He added that this sets the foundation for increased capital expenditure in the sector, with a pipeline that supports transmission connectivity for 60 GW of renewable energy by FY27—adequate for the anticipated 55 to 58 GW of Inter-State Transmission System (ISTS) renewable additions by FY27. However, the risk of shortfalls remains if there are delays in execution, especially as the country attempts to implement a much larger base of transmission projects than in the past.

Since the yearly execution target for FY26 and FY27 is expected to be double that of the last two years, the risk of delays looms large—particularly due to the need for a significant ramp-up in the supply of critical equipment such as transformers and other components.