India is poised to expand its renewable energy (RE) capacity by 30 gigawatts (GW) from FY25 to FY26, driven by ongoing policy support, availability of financing, and robust growth plans from major corporate players. Other factors contributing to this growth include reduced equipment costs and the removal of interstate transmission system charges, according to industry analysts.
“The country’s power supply is expected to improve significantly as renewable capacity additions accelerate. However, the transition to renewable energy will rely heavily on the development of hybrid systems, energy storage solutions, and the expansion of evacuation infrastructure,” said Bhanu Patni, Associate Director at India Ratings.
As of November 2024, India’s total installed non-fossil fuel capacity reached 214 GW, reflecting an increase of more than 14% compared to the previous year’s 187.05 GW. Between April and November 2024, India added nearly 15 GW of renewable energy—almost double the 7.57 GW added during the same period in 2023. The country added 27 GW of renewable capacity in total for the calendar year 2024. Analysts predict that merchant market prices for electricity will stay within a range of ₹4.5-5 per unit during FY25-FY26, supported by an improved supply situation stemming from these capacity additions. The average exchange tariff fell to ₹4.35 per unit in the first eight months of FY24, largely due to a reduction in power demand following excess rainfall and improved power generation.
In addition to renewable energy, India is expected to add 4 GW each of nuclear and hydroelectric capacity over the next three years. However, analysts caution that these projects may face execution challenges due to their long gestation periods and technical complexities.
The country’s renewable energy transition will also depend on the progress of hybrid and energy storage projects, the expansion of renewable energy purchase obligations, and the strengthening of evacuation infrastructure.
On the manufacturing front, India’s domestic solar module production capacity is projected to grow from 67 GW to over 115 GW in the next two years. The government’s push for domestic content under schemes like the Central Public Sector Undertaking (CPSU) initiative, the PM Kusum Scheme, and solar rooftop programs is expected to stimulate further growth.
Additionally, the government is contemplating the introduction of an Approved List of Models and Manufacturers (ALMM) for solar cells to further boost domestic manufacturing. However, analysts warn that inflationary pressures, increased production costs for domestic cells and modules, and a high basic customs duty on imports could lead to pricing challenges for developers.
India Ratings also expects the plant load factor (PLF) of thermal power plants to remain stable at around 70% during FY25 and FY26. This is largely due to the continued high share of thermal power in India’s overall power generation mix, supported by a projected annual power demand growth of 5.5%-6%, increased domestic coal production, and sustained reliance on coal-based generation.
