India’s renewable energy sector is undergoing a transformation, driven by ambitious government policies, significant investments and technological advancements. As the world’s third-largest energy consumer, India’s shift towards clean energy is crucial for global climate action.
This article provides a comprehensive overview of the country’s renewable energy landscape, highlighting recent developments, challenges and future prospects across various segments…
Solar power
Solar energy continues to dominate India’s renewable energy landscape, showcasing remarkable growth and technological advancements. As of August 31, 2024, the total solar power capacity in India stood at an impressive 89.43 GW, comprising 69.19 GW from utility-scale solar PV, 13.89 GW from grid-connected solar rooftop projects, 2.59 GW from hybrid projects (solar component) and 3.76 GW from off-grid solar.
Solar power has maintained its position as the fastest growing renewable energy segment in India. Between April 1, 2024 and August 31, 2024 alone, the country added 7,618.36 MW of solar installations, underscoring the rapid pace of growth. Building on previous years’ trends, large utility-scale solar projects continue to be the backbone of India’s solar growth story, largely boosted by the government’s introduction of the Solar Parks and Ultra-Mega Solar Power Projects scheme. In December 2023, the Ministry of New and Renewable Energy announced that a total of 50 solar parks with a capacity of 37.5 GW have been sanctioned since 2014, of which 10.2 GW has already been established.
The segment has witnessed a steady decline in tariffs in the past decade. However, post 2020, there has been a slight increase in tariffs due to multiple factors such as the imposition of basic customs duty in April 2022 and an increase in equipment pricing and logistics costs due to supply chain issues, driving tariffs as high as Rs 2.90 per kWh in early 2023. Auctions from September 2023 to September 2024 have seen tariffs stabilising to Rs 2.48-Rs 2.68 per kWh. The total solar capacity auctioned in 2023-24 doubled to over 22 GW from the previous year. In 2024-25, 3.6 GW of capacity has been auctioned by Solar Energy Corporation of India Limited (SECI), SJVN Limited and NHPC Limited, as of September 2024.
While utility-scale projects have dominated the solar landscape, recent policy initiatives are giving a much-needed boost to the rooftop solar segment. The launch of the PM-Surya Ghar Muft Bijli Yojana in February 2024 marks a significant step towards promoting residential rooftop solar installations. The scheme aims to equip 10 million households with solar rooftop systems, offering substantial subsidies of Rs 30,000 per kW for up to 2 kW and Rs 18,000 per kW for additional capacity up to 3 kW. Furthermore, the scheme has laid out a separate component called “Model Solar Villages”, under which one village in each district is envisioned to be developed as a solar-powered village, with implementation being undertaken by state renewable energy development agencies and supported by central financial assistance. These policy changes are expected to accelerate the adoption of rooftop solar systems, particularly in the residential sector.
The government’s commitment to inclusive solar growth is evident in initiatives such as the Pradhan Mantri Janjati Adivasi Nyaya Maha Abhiyan, announced in January 2024. With a budget of Rs 5.15 billion, this programme aims to provide electricity to 100,000 households belonging to particularly vulnerable tribal groups through 0.3 kW off-grid solar power systems.
For solar pumps, the Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan scheme remains a cornerstone of the government’s strategy. As of August 2024, the total installed capacity under this scheme reached 3.76 GW, with Haryana leading at 902.7 MW, followed by Rajasthan and Maharashtra at 805 MW and 541 MW respectively.
India’s commitment to the solar segment is further underscored by the recent union budget in July 2024, which increased the allocation for solar power by 75 per cent from the previous year to Rs 86.49 billion. The focus on promoting domestic manufacturing through the restoration of the Approved List of Modules and Manufacturers and the exemption of customs duties on capital goods used in solar cell/module production were other major developments this year. Overall, the boost in distributed solar, focus on domestic manufacturing and industrial decarbonisation are expected to be the key drivers for solar power growth in India.
Wind power
Wind energy remains a crucial component of India’s renewable energy mix, with a total installed capacity of 47.19 GW as of August 31, 2024. This year, the segment has shown steady growth, with 2,456.1 MW of new capacity added till date in 2024. The onshore wind sector in India is witnessing a transition towards higher capacity turbines, with 3x and 5x capacity models now available in the market. Recent policy initiatives, such as the revised repowering policy introduced in December 2023, are expected to boost the sector further by facilitating the replacement of older turbines with more efficient models.
Since June 2023, the lowest utility-scale wind tariffs discovered in tenders have ranged from Rs 3.18 per kWh (SECI’s 1,200 MW Tranche XIV auction conducted in June 2023) to Rs 3.61 per kWh (SECI’s 1,350 MW Tranche XVI auction conducted in July 2024). The total wind capacity auctioned in 2024-25 so far has increased to 2,700 MW from 2,300 MW in 2023-24.
While India’s entire wind capacity currently comprises onshore projects, the government is making significant strides to harness the country’s offshore wind potential of more than 70 GW. The introduction of the viability gap funding (VGF) programme for offshore wind projects, with a total allocation of Rs 74.53 billion, marks a crucial step in this direction. It aims to support the installation of 1 GW of offshore wind projects – 500 MW each off the coasts of Gujarat and Tamil Nadu.
The provision for upgrading two ports to meet logistics requirements for offshore wind energy projects is expected to create an ecosystem to support India’s ocean-based economic activities and pave the way for the development of an initial 37 GW of offshore wind energy at an estimated investment of Rs 4,500 billion. Going forward, apart from the offshore wind segment, the government’s focus on hybrid models, combining wind and solar power, is likely to drive new wind energy capacity additions.
Bioenergy
India’s bioenergy sector strategy encompasses several vital areas, including ethanol and biodiesel blending, compressed biogas (CBG), sustainable aviation fuels (SAFs), biomass utilisation (such as pellets and briquettes), biohydrogen and waste-to-energy (WtE) solutions. As of August 31, 2024, the total bioenergy capacity in the country stood at 10.96 GW, encompassing various segments including biomass (bagasse) cogeneration at 9,433.56 MW, biomass (non-bagasse) cogeneration at 921.79 MW, WtE at 249.74 MW and off-grid WtE at 351.12 MW.
India’s ethanol blending programme has been a success, with the country achieving its targets ahead of schedule. Since its inception, the ethanol blending percentage has surged from 1.53 per cent in 2014 to 15 per cent in 2024. According to the Ministry of Petroleum and Natural Gas (MoPNG), the production of ethanol blended with petrol has increased from 380 million litres in 2013-14 to 3,023 million litres by 2020-21, marking a sevenfold increase. Encouraged by this progress, the government has set an ambitious target of reaching 20 per cent blending by 2025.
The CBG segment has also seen significant growth over the past few years, with the number of functional CBG plants increasing from 19 in 2020 to 113 as of September 2024, driven by schemes like the Sustainable Alternative Towards Affordable Transportation. The segment is poised for continued growth, driven by the CBG blending obligations (CBOs) announced by the MoPNG in November 2023. The CBOs will be voluntary till FY 2024-25, with mandatory blending obligations starting from FY 2025-26. This initiative is expected to bring in investments of up to Rs 375 billion and facilitate the establishment of 750 CBG projects by March 2029.
Recent amendments to the PM JI-VAN Yojana, which provides financial support to advanced biofuel projects, underscore the government’s commitment to the bioenergy sector. The scheme’s timeline has been extended by five years, until 2028-29, and its scope now includes advanced biofuels produced from lignocellulosic feedstock, industrial waste, synthesis gas and algae. The government is also focusing on developing SAFs as part of its bioenergy strategy, aligning with global trends towards decarbonising the aviation sector.
Small hydro
Small-hydro power (SHP) projects, are defined as those with a capacity of 25 MW or less. With an estimated potential of around 20,000 MW, small hydro can significantly contribute to improving rural electrification and sustainable energy generation across the country.
While large hydropower continues to play a crucial role in India’s renewable energy mix, with a total installed capacity of 46.93 GW, the total installed capacity of SHP remains at 5.07 GW as of August 31, 2024. The majority of these installations are located in hilly states such as Arunachal Pradesh, Himachal Pradesh, Jammu & Kashmir and Uttarakhand, which together account for nearly half of the total potential.
While there is no active central scheme or policy for this segment, different states have developed their own policies to encourage SHP projects. However, year-wise capacity additions of SHP projects are minimal, as these projects struggle with financial viability due to high upfront costs and competition from other renewable sources like solar power.
Green hydrogen
India’s ambitious National Green Hydrogen Mission (NGHM), launched with an initial investment of Rs 197.44 billion, aims to establish a green hydrogen production capacity of at least 5 million metric tonnes (mmt) per year by 2030. This initiative is expected to attract investments exceeding Rs 8,000 billion, create over 600,000 jobs and significantly reduce dependence on fossil fuel imports and greenhouse gas emissions. The demand for green hydrogen is primarily driven by an increasing focus on the decarbonisation of hard-to-abate sectors such as oil and gas, steel, cement and fertilisers.
The Strategic Interventions for Green Hydrogen Transition (SIGHT) programme, a central element of the NGHM, provides financial incentives to boost domestic electrolyser manufacturing and green hydrogen production. The mission’s budget allocates substantial funds for pilot projects, research and development, and other components, highlighting the government’s commitment to developing a robust green hydrogen ecosystem. The government has released several guidelines to support this initiative, including the green hydrogen standard, guidelines for green hydrogen pilot projects in the steel and shipping sectors, setting up of hydrogen hubs and testing facilities, and skill development programmes.
Recent tenders and auctions in the green hydrogen sector have garnered significant interest from industry players. In August 2024, SECI issued a call for proposals to establish green hydrogen hubs under the NGHM, with a budget of Rs 2 billion allocated until FY 2025-26. The tender aims to fund at least two hubs, each with a planned capacity of at least 100,000 million tonnes per annum (mtpa). July 2024 saw SECI launch the Tranche II tender under the SIGHT programme to allocate 450,000 mtpa of green hydrogen capacity, split between Bucket 1 (technology-agnostic methods) and Bucket 2 (biomass-based methods). Additionally, a tender for the production and supply of green ammonia through cost-based competitive bidding was released in June 2024.
The export potential of green hydrogen and its derivatives is emerging as a focus area for policymakers. The recent agreement between India and Japan for the export of green ammonia marks a positive step in this direction, highlighting India’s potential as a global green hydrogen hub.
Energy storage and solar-wind hybrid plants
India’s aggressive renewable energy targets pose challenges to grid stability and power quality due to the intermittent nature of wind and solar power. This intermittency is being addressed through the bundling of solar and wind power, as well as the integration of energy storage systems. With the increasing penetration of renewables and climate commitments of commercial and industrial consumers, the demand for reliable round-the-clock (RTC) green power has increased significantly, driving the market towards hybrid and storage projects. For instance, more than 25.85 GW of RTC/firm and despatchable renewable energy capacity was auctioned between April 2023 and September 2024, with over 20 GW of capacity auctioned in 2024 alone.
The shift towards hybrid projects is a welcome move as it addresses the most crucial constraints faced by vanilla solar/wind projects, with benefits such as improved land utilisation, better transmission efficiency and firm power. These hybrid projects offer higher plant load factors compared to standalone projects, making them an attractive option for developers and investors alike.
For grid-scale energy storage, two key technologies have emerged as front runners in India – pumped storage projects (PSPs) and battery energy storage systems (BESS). Both are witnessing increased momentum in terms of project tenders, auctions and investments. According to India Infrastructure Research, 80 GWh of energy storage tender capacity has been floated till August 2024, including 14 GWh of battery storage, 51 GWh of PSP and 15 GWh of technology-agnostic capacity. Moreover, there is a substantial upcoming pipeline of PSP projects in India, with over 200 PSPs in various stages, totalling a capacity of 229 GW, slated for commissioning by 2032.
This development has been supported by several policies. In 2022, the Ministry of Power notified the energy storage obligations (ESOs) for power entities, mandating a certain percentage of their renewable energy to come from storage-integrated projects. The ESO targets start at 1 per cent for 2023-24 and increase linearly by 0.5 per cent annually, reaching 4 per cent by 2029-30. To promote battery storage, a VGF scheme was launched in September 2023 to support 4 GWh of BESS capacity by 2030-31, offering VGF for 40 per cent of the project capital cost over three years, with a total budgetary allocation of Rs 37.6 billion. For pumped storage, the government announced plans for a comprehensive PSP policy in the union budget of July 2024, aimed at facilitating the smooth integration of renewable energy. The levellised cost of storage (LCOS) of energy from PSP remains around Rs 5 per unit, whereas LCOS of BESS ranges between Rs 6 and Rs 7 per unit, according to ICRA. While PSPs currently maintain a cost advantage, especially for long-duration storage, BESS costs are expected to continue declining sharply as lithium-ion battery pack costs witness a global decline.
Challenges and future outlook
Despite the significant progress across various renewable energy segments, several challenges remain. The grid integration of large-scale renewable energy, land acquisition for projects and decongestion of power evacuation infrastructure are some of the key hurdles that need to be addressed. The intermittent nature of renewable energy sources like solar and wind necessitates the development of robust energy storage systems. While pumped hydro storage projects are gaining traction, there is a need for further innovation in battery storage technologies to ensure grid stability and RTC power supply at economic tariffs.
Policy consistency and long-term visibility are essential for attracting investments and ensuring sector growth. While the government has introduced several supportive policies, their effective implementation and periodic review are crucial for addressing industry concerns and adapting to evolving market dynamics.
Looking ahead, India’s renewable energy sector is poised for significant growth. The government’s ambitious targets, coupled with declining technology costs and increasing private sector participation, are expected to drive the sector’s expansion. The transition towards hybrid projects is likely to maintain its momentum. Furthermore, the focus on emerging technologies such as green hydrogen, offshore wind and advanced biofuels presents new opportunities for innovation and investment.
Lavkesh Balchandani