Rating agency ICRA estimates that renewable energy, including large hydropower, will account for more than 35% of India’s total electricity generation by 2029-30, up from 22% in 2024-25.
The renewable energy project 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.
However, ICRA said that scaling up the share of generation from the RE capacity is contingent on the 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.
Transmission infrastructure has lagged the growth in generation capacity, resulting in curtailment concerns, particularly for projects operating under temporary general network access (T-GNA).
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.
“RE capacity addition is impacted by concerns over transmission connectivity infrastructure as increasing episodes of grid curtailments affect project returns. 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,” said Girishkumar Kadam, senior vice president & group head – Corporate Ratings, ICRA. “Hence, 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 ramp up in the share of renewables in the generation mix.”
Storage is likely to emerge as an important enabler for grid stability as the share of RE rises. 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.
ICRA said BESS project awards have increased significantly over the past 12 to 18 months. Total awarded BESS capacity, including projects under construction and operational projects, stood at around 90 GWh as of June 2026.
Based on prevailing battery costs, ICRA estimates the levelized cost of storage for two- to four-hour BESS projects at INR 4/kWh to INR 7/kWh, compared with around INR 5/kWh for pumped storage hydropower projects. While BESS costs for four hours of storage remain higher than pumped storage projects, the execution risks and gestation period for the BESS projects are relatively lower.
However, aggressive bidding in standalone BESS tenders could put project economics under check, according to ICRA.
“The viability of the BESS projects remains critically linked to their capital cost. Based on the average battery cost of $70-75/kWh seen in the recent past, along with associated taxes/duties and cost of the balance of plant, the capital cost is estimated in the range of $110-130/kWh,” said Kadam. “However, expectations of a further decline in battery prices has led to aggressive bidding activity in the standalone storage tenders. Nevertheless, the reversal in price trends coupled with rupee depreciation against the dollar impacted the economics of some of these projects.”
Kadam said that at prevailing capital costs and interest rates, the cumulative debt service coverage ratio (DSCR) for some of the previously bid standalone BESS projects appears to be under pressure, with values in the range of 0.80-1.20 times. “While there has been some restoration of pricing power in the recent tenders, the ability of BESS projects to adhere to performance parameters such as availability, round trip efficiency, depth of discharge and degradation remain key monitorables, given the limited track record,” he added.
This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: [email protected].
Comments
Please login to comment
The new issue of pv magazine Global is out now!
Available in print and digital – get your copy today!
Entries open in seven categories: Modules, Inverters, BoS, BESS, Manufacturing, Sustainability, Projects.
April 01 – August 31, 2026
Tuesday, August 25, 2026
10:00 am – 11:00 am CEST, Berlin, Paris, Madrid
Thursday, October 7, 2026
11:00 am – 12:30 pm CEST, Berlin, Paris, Madrid
You have no items in your basket.
