Rating agency ICRA has highlighted the urgent need for large-scale storage solutions and timely transmission infrastructure upgrades to support India’s accelerating renewable energy (RE) adoption. The agency estimates that the share of RE generation—including large hydro—will rise to over 35% by FY2030, up from 22.1% in FY2025, supported by an expected 200 GW of incremental RE capacity addition over the next five years.
However, ICRA warned that this projection depends heavily on the execution of existing project pipelines, signing of power purchase agreements (PPAs), and adequate transmission connectivity.
Sharp Slowdown in RE Bidding Activity
After significant progress in FY2024 (47.3 GW awarded) and FY2025 (40.6 GW), the ongoing fiscal has seen a steep decline, with just 5.8 GW awarded in the first eight months of FY2026. Industry sources estimate 40–45 GW of RE capacity still awaiting signed PPAs.
Girishkumar Kadam, Senior Vice President & Group Head – Corporate Ratings, ICRA, said the slowdown reflects growing concerns around transmission constraints.
“The decline in new project bids and delays in signing PPAs clearly reflect execution challenges related to available transmission connectivity. Reported grid curtailments in Rajasthan during peak solar hours further highlight stability concerns, particularly in the absence of compensation clauses in PPAs.”
He stressed that state and inter-state grid strengthening, along with significant storage capacity addition, must be prioritised to maintain grid stability as renewables gain a larger share of the energy mix.
BESS Emerges as Key Stability Enabler
With variable renewable generation straining grid operations, Battery Energy Storage Systems (BESS) are becoming a pivotal part of India’s energy transition.
Government measures aiding adoption include:
-Viability gap funding for BESS
-Transmission charge waivers for storage projects until 2028
Between April 2024 and October 2025, central agencies and state discoms awarded over 20 GWh of standalone BESS projects. Additionally, RTC (round-the-clock), FDRE (firm and dispatchable renewable energy), and solar-plus-storage projects accounted for ~90% of RE capacity awarded in the first eight months of FY2026.
Costs Declining, Competitiveness Improving
ICRA noted a sharp decline in global battery prices over the past decade, reducing storage costs significantly.
-Current levelized cost of BESS for 2–4 hours of storage: ₹4.0–₹7.0 per unit
-Pumped storage hydropower (PSP): ~₹5.0 per unit
-2022 BESS storage cost: ₹8.0–₹9.0 per unit
Despite BESS being costlier than PSP, shorter gestation periods and easier execution improve their bankability.
Kadam added:
“Although BESS requires replacement capex and has a shorter lifespan, sustained battery price reductions will drive higher adoption. Viability remains closely tied to capital costs.”
ICRA estimates average battery costs of ~USD 70/kWh in 2025, placing total project capex at USD 120–150/kWh. At these levels, standalone BESS projects achieve a cumulative debt service coverage ratio of 1.15–1.25x, assuming performance parameters such as efficiency and degradation remain within norms.
Sector Outlook: Stable, but Execution Risks Persist
ICRA maintains a Stable outlook for India’s renewable energy sector, driven by:
-Strong policy support
-Competitive tariffs
-Increased sustainability commitments from commercial and industrial consumers
However, persistent challenges include:
-Land acquisition hurdles
-Transmission bottlenecks
-Delays in PPA signing
-Volatile equipment costs
-Weakened financials of distribution companies
Rating Trends: More Upgrades Than Downgrades
The RE sector continues to see a favourable rating environment:
-FY2025: 29 upgrades, 6 downgrades
-H1 FY2026: 49 upgrades, 13 downgrades
Upgrades were driven by successful commissioning, strong performance, and improved parent credit profiles. Downgrades were mainly linked to underperformance, commissioning delays, and increased leverage.
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