The share of electricity generation from renewable energy (RE), including large hydro, is expected to cross 35% by 2029-30, up from 22% in 2024-25, according to rating agency ICRA.
ICRA said India’s renewable energy pipeline remains healthy despite a slowdown in bidding activity amid challenges related to power purchase agreement (PPA) and power sale agreement (PSA) signing, as well as delays in transmission capacity ramp-up. More than 150 GW of renewable energy projects were under construction as of June 30, 2026, which is expected to support capacity additions over the near to medium term.
Transmission Constraints Impact Renewable Projects
ICRA highlighted transmission infrastructure as a key challenge for the continued expansion of renewable capacity. The growth in transmission infrastructure has lagged the pace of generation capacity addition, resulting in grid curtailment issues, particularly for projects operating under temporary General Network Access (T-GNA).
Around 37% of the capacity at impacted substations across the northern, western and southern regions operates under T-GNA and faces curtailment of 30-50% during solar generation hours, according to ICRA.
The agency said timely completion of intra-state and inter-state transmission projects, along with increased energy storage capacity, will be critical to protecting project economics and sustaining the pace of renewable capacity additions.
Renewable Energy Bidding Activity Slows
Following the award of 40.6 GW of renewable energy capacity in 2024-25, bidding activity declined to 14.7 GW in 2025-26. In the current financial year, only 4.7 GW of capacity had been awarded as of August 10, 2026.
The unsigned PPA capacity also remained significant at around 40-45 GW as of April 2026, highlighting the need for faster execution of project awards and PPA signing.
ICRA said the recent bidding trend has shifted away from conventional standalone solar and wind projects towards firm and dispatchable renewable energy (FDRE) and round-the-clock (RTC) power projects.
Girishkumar Kadam, Senior Vice President and Group Head – Corporate Ratings, ICRA, said the latest tender by the Solar Energy Corporation of India (SECI) is notable for adopting a demand-based supply approach similar to thermal power. The discovered tariff of ₹5.25 per unit was lower than the tariff of more than ₹6 per unit for most new thermal plants, which remain exposed to fuel cost escalation.
Storage Emerging as Key Grid Enabler
ICRA expects energy storage to play an increasingly important role in supporting grid stability as renewable penetration rises.
Falling battery costs, viability gap funding and the extension of transmission charge waivers for eligible projects until June 2028 have supported the adoption of battery energy storage systems (BESS) in India.
The total awarded BESS capacity, including projects under construction and operational projects, stood at around 90 GWh as of June 2026, following a significant increase in project awards over the preceding 12-18 months.
ICRA estimates the levelised cost of storage using BESS for two to four hours to be around ₹4-7 per unit, compared with approximately ₹5 per unit for pumped storage hydropower (PSP) projects.
While four-hour BESS remains relatively more expensive than PSP, ICRA noted that BESS projects have comparatively lower execution risks and shorter gestation periods.
BESS Project Economics Under Pressure
ICRA cautioned that the viability of standalone BESS projects remains closely linked to capital costs. Based on recent battery costs of around $70-75/kWh, including associated taxes, duties and balance-of-plant costs, the estimated capital cost is around $110-130/kWh.
Expectations of further declines in battery prices have encouraged aggressive bidding in standalone storage tenders. However, a reversal in battery price trends and rupee depreciation against the US dollar have affected the economics of some previously awarded projects.
At prevailing capital costs and interest rates, the cumulative debt service coverage ratio (DSCR) for some previously bid standalone BESS projects is under pressure, with values estimated at 0.80-1.20 times.
ICRA said the ability of BESS projects to meet performance parameters such as availability, round-trip efficiency, depth of discharge and degradation will remain key monitorables, particularly given the sector’s limited operating track record.
ICRA Maintains Stable Outlook for Renewable Energy
ICRA’s outlook for India’s renewable energy sector remains Stable, supported by strong policy backing, competitive tariffs and sustainability initiatives among large commercial and industrial customers.
The rating agency expects new tenders focused on firm, round-the-clock renewable power to help address the intermittency associated with standalone solar and wind projects.
However, execution risks remain, including land acquisition, availability of transmission infrastructure, delays in PPA signing and the financial health of distribution utilities.
Credit quality in the renewable energy sector has also remained supportive. During FY2025-26, ICRA recorded 72 rating upgrades against 21 downgrades in the sector. In Q1 FY2026-27, the sector recorded four upgrades and no downgrades.
The upgrades were primarily driven by successful project commissioning, sustained generation performance, favourable ownership changes and stronger parent-company credit profiles. Downgrades were mainly associated with weaker-than-expected generation, project commissioning delays and higher leverage at holding companies funding their equity commitments.
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