Author : Manini
As solar power drives India’s energy transition, the challenge is shifting from rapid capacity addition to ensuring grid stability, storage integration, and market readiness so that renewable growth translates into reliable and sustainable power
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Solar power is driving India’s energy transition. Over the past decade, competitive auctions have sharply reduced tariffs, making solar one of the cheapest renewable sources in the country. This cost advantage has accelerated adoption across both utility-scale and decentralised segments. Consequently, installed capacity has expanded from just 2.8 GW in 2014 to 140.6 GW, accounting for around 27 percent of total installed generation capacity as of January 31, 2026.
The more important question, though, is what happens when the sun is not shining. Storage is one solution. At the same time, the growing cost-competitiveness of solar-plus-storage projects points to a shift in capacity addition, as well as how power is produced and priced. However, sustaining this momentum and scaling further will depend on addressing gaps the sector still faces.
In calendar year (CY) 2025, India added 37.9 GW of solar capacity, including 28.6 GW of utility-scale capacity (up 54.6 percent year-on-year), 7.9 GW of rooftop solar (up 72 percent), and 1.35 GW of off-grid installations (down 8.8 percent). As a result, total solar capacity rose to 135.81 GW by December 2025, and further to around 143 GW by February 2026, within overall power generation capacity exceeding 524 GW. India’s current pipeline across wind, solar, hybrid, and storage projects is around 169 GW. Of this, about 68 GW is solar, with another 10 GW under bidding, likely to become operational over the next 4-5 years. This has positioned India as the world’s third-largest solar market, while domestic manufacturing capacity has increased to 173 GW of solar modules.
While solar capacity has expanded rapidly, it needs adequate storage to ensure generation is not lost and curtailment risks remain limited. However, battery energy storage systems (BESS) are still at an early stage in India. Between 2022 and May 2025, around 12.8 GWh of BESS capacity was auctioned across hybrid and standalone projects. However, operational capacity lagged far behind, with only 219 MWh active as of March 2024, owing to a large pipeline under construction. From an operational base of around 507 MWh at the end of 2025, storage capacity is projected to rise to nearly 5 GWh by the end of 2026, largely driven by projects already under execution.
For renewable energy (RE) to play a reliable role in the transition, cost remains a key factor. Over time, solar power in India has become significantly more competitive, driven mainly by competitive auctions and falling technology costs.
While storage increases costs compared to standalone solar, it also makes power dispatchable. At current price levels, it is increasingly competitive with coal-based power.
The levelised cost of energy for solar PV currently stands at around INR 3.5/kWh. Tariffs have fallen from nearly INR 15/kWh in the early 2010s to INR 2.44/kWh in 2017, and further to around INR 2/kWh in 2020, as seen in the Bhadla and Solar Energy Corporation of India auctions. More recently, tariffs have stabilised at around INR 2.86/kWh in 2025, reflecting changing cost conditions. Solar is now cheaper than the variable cost of coal-based power.
However, tariff-based comparisons alone do not capture intermittency. For solar to provide reliable power, storage costs also need to be considered. Solar-plus-storage projects are beginning to address this gap. A TERI study highlights that if standalone solar generation costs INR 2.5/kWh, adding BESS raises the cost to around INR 3.9-4.3/kWh, while solar plus pumped storage costs around INR 4.4-4.9/kWh. Even then, this remains lower than new thermal power, estimated at around INR 5.4–5.8/kWh.
This suggests that while storage increases costs compared to standalone solar, it also makes power dispatchable. At current price levels, it is increasingly competitive with coal-based power.
Achieving India’s 2030 targets will require a sustained scale-up in solar deployment. JMK Research projects about 42.5 GW of new solar capacity in CY 2026 alone. Looking further ahead, NITI Aayog estimates that solar could account for 46 percent of India’s total 856 GW power capacity by 2047 under its “India Energy Securities Scenarios 2047” framework.
At the same time, storage requirements are expected to rise. Reflecting the National Electricity Plan 2023, the Central Electricity Authority estimates BESS capacity of 236.2 GWh by 2031-32, alongside 175.2 GWh of pumped hydro storage.
To support the scale-up, the government has introduced a mix of measures across demand creation, manufacturing, grid integration, and storage:
Many de-risking initiatives, including competitive bidding guidelines and transparent e-auctions, have also helped push tariffs down. Project aggregation, standardised tenders, pre-bid consultations, and long-term contracts of at least 25 years have also improved investor confidence and reduced price volatility.
Beyond direct policy incentives, India’s institutional framework has also supported scale-up. Mechanisms like open access and captive procurement allow large consumers (with loads above 1 MW) to source power directly from generators, rather than relying solely on local DISCOMs. Supported by a unified national grid, this creates flexibility on the supply side by allowing clean power to be sourced across regions and transmitted where needed. Captive and group captive solar plants, set up in the open access market, also benefit from lower, more predictable energy costs and have lower exposure to DISCOM tariff hikes. Overall, this makes India’s market structure more flexible than in many advanced economies.
Many de-risking initiatives, including competitive bidding guidelines and transparent e-auctions, have also helped push tariffs down. Project aggregation, standardised tenders, pre-bid consultations, and long-term contracts of at least 25 years have also improved investor confidence and reduced price volatility.
Despite early investments, subsidies, and falling costs helping scale solar in India, many challenges continue to hinder growth.
Grid-related constraints remain a major concern. High integration costs (INR 5-20 lakhs/MW), transmission delays, and land acquisition hurdles continue to slow the expansion of solar-heavy grids. At the same time, manufacturing capacity is beginning to outpace demand. With 173 GW module capacity, utilisation levels remain low. Many factories built to exceed 125 GW capacity are only utilising 25 percent of it, raising the risk of oversupply, without a matching rise in domestic demand.
India’s solar expansion, from 2.8 GW in 2014 to more than 140 GW in 2026, reflects rapid scaling. However, meeting the 500 GW non-fossil fuel target will depend not only on installed capacity, but also on improving storage, grid integration, transmission and demand absorption.
Storage gaps further complicate the transition. Limited storage increases the risk of curtailment. Between May and December 2025, India reduced 2.3 TWh of solar generation to maintain grid stability. In parallel, RPO targets continue to see uneven compliance across states. DISCOM financial stress, uneven policy implementation, and slow rooftop adoption also continue to affect deployment. Although dependence on imported components, particularly from China, has reduced over time, supply-chain vulnerabilities remain relevant.
India’s solar expansion, from 2.8 GW in 2014 to more than 140 GW in 2026, reflects rapid scaling. However, meeting the 500 GW non-fossil fuel target will depend not only on installed capacity, but also on improving storage, grid integration, transmission and demand absorption.
While falling tariffs and policy support have made a difference, capacity addition alone does not always translate into usable power. For solar to lead India’s broader transition and support the Viksit Bharat vision, addressing these structural gaps will be essential.
Manini is a Research Assistant with the Centre for Economy and Growth at the Observer Research Foundation.
Manini is a Research Assistant at the Centre for Economy and Growth, ORF New Delhi. Her research focuses on the intersection of geopolitics with international …
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