Grid, Storage Readiness To Drive Next Phase Of RE Growth Says ICRA

Electricity grid and energy storage readiness will drive the next phase of renewable energy growth while the aggressive BESS bidding will keep a tab on project economics, rating agency ICRA said on Wednesday.

ICRA projects the share of generation from renewable energy (RE) capacity, including large hydro, to cross 35% by 2029-30 from 22% in 2024-25.

While the bidding activity has witnessed a slowdown amid challenges in the signing of the power purchase agreements (PPA) and power sale agreements (PSA), as well as delays in ramp-up of the transmission capacity, the renewable power pipeline remains healthy with more than 150 GW of projects under construction as on June 30, 2026, which are likely to drive the capacity additions in the near-to-medium term, an ICRA statement said.

As the transmission infrastructure has lagged the growth in generation capacity, there have been issues pertaining to curtailments, especially for projects running on temporary general network access (T-GNA).

Thus, timely completion of transmission projects and the scale-up of storage capacity remain critical to sustaining the pace of capacity addition.

Scaling up the share of generation from the RE capacity is contingent on the extent of implementation of the ongoing project pipeline (where the projects are bid out and the PPAs are signed), development of adequate transmission connectivity infrastructure and timely bidding for new RE projects, along with signing of the PPAs by central nodal agencies, it stated.

Following the award of a sizeable RE capacity of 40.6 GW in 2024-25, the bidding activity slumped with only 14.7 GW capacity awarded in 2025-26 and the same continued in the current year with 4.7 GW awards till August 10, 2026.

Further, the unsigned PPA capacity remained sizeable at 40-45 GW as of April 2026.

Girishkumar Kadam, Senior Vice President & Group Head - Corporate Ratings, ICRA, said, "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." Moreover, the latest tender by the Solar Energy Corporation of India (SECI) stands out, as it follows the trend of thermal power to deliver a demand-based supply.

The discovered tariff of ₹5.25/unit for this tender is lower than most of the new thermal plants (above ₹. 6.00/unit, exposed to fuel cost escalation), he added.

Further, the RE capacity addition is impacted by concerns over transmission connectivity infrastructure as increasing episodes of grid curtailments affect project returns, he noted.

Around 37% of the capacity at the impacted substations in North, West and South operates under T-GNA and faces curtailment of 30-50% during solar hours, he stated.

He stated that timely execution of intra-state and inter-state transmission infrastructure and enhancement of storage capacity will be critical to protect project economics and sustain the pace of capacity addition, as the share of renewables in the generation mix ramps up.

The ICRA believes that storage is likely to emerge as an important enabler for grid stability.

Decline in battery costs over the past decade has helped reduce the cost of energy storage, which coupled with the availability of viability gap funding and extended transmission charge waivers till June 2028, have given an impetus to battery energy storage system (BESS) adoption in India, it noted.

However, expectations of a further decline in battery prices have led to aggressive bidding activity in the standalone storage tenders, he noted. Nevertheless, the reversal in price trends coupled with rupee depreciation against the dollar impacted the economics of some of these projects.

ICRA’s outlook for the RE sector remains Stable, led by strong policy support, superior tariff competitiveness and sustainability initiatives by large commercial and industrial customers.