With India moving towards achieving its target of 500 MW of non-fossil-fuel-based power capacity, there have been a host of policy interventions in the renewables space across different segments and catering to different consumers. Thus, momentum has been picked up in not just utility-scale solar and wind, but also hybrids, green hydrogen, offshore wind and energy storage, as well as distributed renewable energy systems catering to residential, utility and corporate customers. Further, the manufacturing of essential equipment is gaining traction to ensure secure supply chains. However, certain bottlenecks are still plaguing the overall growth of the sector. These need to be addressed urgently for India to achieve its clean energy targets in time. Leading industry experts discuss the state of the sector, developments over the past year and the outlook for the future…
What has been the progress in the renewables sector over the past one year? What more needs to be done in India’s energy transition journey?
Sujoy Ghosh
India’s power sector has made remarkable progress in decarbonisation, reflecting the government’s commitment to a renewables-led energy transition. With a total installed capacity of 442 GW, of which 42 per cent is derived from renewable sources, India is the third-largest producer and consumer of electricity globally. The year-on-year consumption growth of 9.5 per cent for 2023-24 indicates robust demand and is expected to attract substantial investments in the power sector, particularly in renewable energy projects, grid modernisation and energy storage solutions. As India continues to enhance its energy infrastructure and expand its renewable capacity, it is well on its way to achieving its ambitious climate goals and ensuring energy security for its population.
India’s energy transition initiatives, which began in 2010, have been a remarkable success, marked by a rapid scale-up in renewable energy deployments. The government’s consistent regulatory framework, especially regarding renewable purchase obligations, has been crucial in achieving deployment targets. Initiatives such as establishing solar energy parks, complemented by the necessary evacuation infrastructure, have further facilitated this growth.
The sector is now evolving from traditional wind and solar power purchase agreements (PPAs) to more flexible and despatchable renewable energy solutions. There is a clear shift towards integrating energy storage projects, including pumped hydro and electrochemical systems. Moreover, the growing focus on green hydrogen as a viable energy source holds immense potential and is a cause for optimism in the industry. In the near term, proactive planning and execution of transmission capacity are essential to accommodate the rapidly increasing renewable energy capacity. Some regions currently face a significant backlog of three to four years for securing transmission access for already allotted renewable projects, which poses a challenge to further expansion.
Looking ahead, developing appropriate market mechanisms for power, rather than relying solely on long-term contracted PPAs, will encourage greater adoption of flexible and forecastable renewable generation. This shift will ultimately benefit consumers by providing more reliable and cost-effective energy solutions. Addressing these challenges will be critical for sustaining the momentum of India’s energy transition and ensuring a robust and resilient power sector.
Naveen Khandelwal
The past year has seen remarkable progress in India’s power sector, particularly in the expansion of renewable energy. In the overall energy mix, renewables’ share has increased significantly, now accounting for around 33 per cent of the 443 GW total installed grid capacity. This surge is supported by the issuance of record renewable energy tenders in FY 2024 – over 69 GW, with a notable 17 per cent earmarked for firm and despatchable renewable energy projects.
Energy storage has gained considerable attention as a critical component of the energy transition in India. The union budget further underscored the importance of large-scale batteries as well as pumped hydro storage in enhancing grid stability and optimising the use of renewable resources. These technologies are crucial for balancing supply and demand, particularly as renewable energy becomes a larger share of the energy mix.
India’s efforts highlight its commitment to addressing the intermittency issues associated with solar and wind power and ensuring a more stable, reliable energy supply, aligned to the promise of providing Power for All.
We have seen a concerted effort to bridge last-mile connectivity and bring green energy to underserved areas through decentralised, off-grid solutions. Initiatives like the PM Surya Ghar Muft Bijli Yojana rooftop solarisation scheme will play a pivotal role in extending renewable energy access to remote regions, thereby addressing both connectivity challenges and reducing carbon footprints.
In addition to these developments, the government has prioritised building local supply chains through the production-linked incentive (PLI) schemes. This initiative aims to strengthen domestic manufacturing capabilities and reduce dependence on imports, thereby enhancing the resilience and sustainability of India’s energy sector.
On the financial front, there has been a notable improvement in the payment profiles of discoms, driven by the effective implementation of the late payment surcharge scheme. This has provided significant comfort to investors and created a more stable and predictable business regime for energy producers.
Looking ahead, the outlook for India’s power sector remains highly optimistic. With a favourable policy environment, continued advancements in technology, and growing international interest, the sector is poised for sustained growth. At BrightNight, we are well positioned to leverage these opportunities. Our commitment to developing a 7 GW hybrid renewable power portfolio across India by 2030 aligns perfectly with the nation’s clean energy goals. We aim to support utilities and corporations in achieving their decarbonisation targets and contribute to India’s net zero ambitions, driving sustainable growth and innovation in the power sector.
India’s energy transition has been both ambitious and commendable, setting a global example with its rapid expansion of renewable energy capacity and commitment to energy efficiency. The country has emerged as a key player in the global clean energy landscape, attracting significant foreign investment and positioning itself as a preferred destination for sustainable energy projects.
However, we still have a long way to go. To fully harness the potential of renewable energy, India must address the challenges associated with integrating intermittent renewable sources into the grid. Advanced energy storage solutions, such as next-generation batteries and pumped hydro storage, are critical for ensuring grid stability and reliability.
Continuous policy innovation and adaptation are necessary to support emerging technologies and evolving market dynamics. India’s unique approach to leveraging green energy for electrification, rather than relying on fossil fuels, is setting a precedent for sustainable development. The country must continue to champion this approach, adopting a diversified energy strategy that includes solar, wind, green hydrogen and other new-age solutions.
A transition to clean energy is a huge economic opportunity. India is particularly well placed to become a global leader in renewables, storage technologies and green hydrogen. These and other low-carbon technologies could create a market worth up to hundreds of billions of dollars in India within this decade.
Arun Sharma
Over the past year, India’s power sector has achieved significant milestones. FY 2025 began with a strong demand surge, which is projected to grow by 6 per cent. FY 2024 saw a 7.6 per cent rise in electricity demand, driven by economic activity and extreme weather conditions. Power generation capacity grew by 25.4 GW, with substantial contributions from the renewable energy and thermal segments. This momentum is expected to continue, with over 30 GW of capacity additions projected for FY 2025. Power consumption also grew by 9.5 per cent in FY 2023, reaching 1,503.65 BUs, reflecting rising demand due to population growth and increased electrification. Despite this growth momentum, several challenges remain. According to Ember’s Global Electricity Review, India ranked among the top three global power sector emitters in 2023. This highlights the critical need to balance expanding energy demand with sustainable practices.
India’s energy transition has shown commendable progress, with a significant increase in renewable energy capacity and a more extensive national grid. However, the transition still faces challenges. Despite notable achievements, the country needs to accelerate the deployment of renewable energy infrastructure to meet its target of 500 GW of non-fossil fuel capacity by 2030. This requires enhanced support for policy frameworks, increased investment in grid modernisation and broader adoption of innovative technologies.
Expanding high voltage transmission networks and enhancing inter state connectivity are essential for connecting remote renewable generation sites to major consumption centres. Furthermore, tackling grid stability and energy storage challenges is crucial for managing the intermittency of renewable sources. Accelerating the development of these technologies and infrastructure will be vital to sustaining progress and achieving long-term energy goals. Strengthening the regulatory environment and ensuring the efficient implementation of government schemes will also play a key role in overcoming these hurdles.
What are the key challenges that remain unaddressed?
Sujoy Ghosh
As India’s power sector undergoes significant transformation, addressing structural challenges is essential to attract and de-risk private sector investments. A critical area for reform is the restructuring of discoms and the separation of carriage from content. Achieving this separation is vital for fostering genuine competition within the sector. Consumers, particularly in the commercial and industrial segments, face artificially inflated tariffs designed to offset the subsidies and losses incurred by discoms. This situation poses a significant barrier to investment, especially in high-value manufacturing, as India’s regulated tariffs are less competitive than those in the Association of Southeast Asian Nations countries. While larger industries may have the resources to invest in captive generation, the majority of small and medium enterprises and micro, small and medium enterprises that constitute a substantial portion of the industrial sector are disproportionately affected by these tariff structures.
Furthermore, the need for a comprehensive overhaul of the dispute resolution mechanisms governing the power sector cannot be overstated. The independence of state regulators and the backlog of cases in appellate authorities are concerns for investors in this sector. A comprehensive overhaul of these systems is required to maintain the growth momentum necessary for the rapid electrification of India’s economy. This can only be achieved through effective collaboration between the central and state governments, ensuring a more stable and attractive investment environment in the power sector.
Naveen Khandelwal
Although we have made significant strides in the energy transition, we need to address certain impediments. One of them is the underutilisation of renewable energy due to limited storage capacity. Effective implementation of the recent budget announcement on building a robust storage ecosystem thus will be key. We need to accelerate the development and deployment of advanced energy storage solutions, such as battery energy storage systems and pumped hydro storage, at pace and at scale. These technologies can help stabilise the grid and ensure a consistent power supply even when renewable generation is variable.
Another challenge is grid congestion, particularly in states like Rajasthan and Gujarat, where renewable energy development has outpaced grid capacity. This situation can persist for quite a few years if unaddressed. There is a need for targeted investment in grid infrastructure upgrades and the development of more flexible, responsive transmission networks. Enhancing grid management through smart grid technologies could also optimise the use of existing infrastructure and facilitate better integration of renewable energy.
Policy inconsistencies between federal and state governments also sometimes create hurdles in executing energy projects. A more coordinated approach to policymaking, with clearer guidelines and a unified regulatory framework, could help streamline project approvals and reduce delays. Improved alignment between central and state policies would enhance the overall efficiency and effectiveness of renewable energy initiatives.
On the manufacturing front, we need to fast move past the last-leg assembly. This will require investment in innovation and R&D across the entire energy life cycle, from material sourcing to advanced manufacturing processes. Fostering local innovation at every stage of production will be essential for driving down costs and enhancing the competitiveness of India’s clean energy sector.
By addressing these challenges with targeted solutions, India can continue to strengthen its position as a global leader in renewable energy and accelerate its transition to a sustainable,
low-carbon economy.
Arun Sharma
One major issue is the accelerated integration of renewable energy into the grid, which impacts stability and reliability. The country’s energy infrastructure still faces inefficiencies in transmission and distribution, exacerbated by technical losses and regulatory hurdles. Ensuring 24×7 renewable power supply requires massive expansion in pumped hydro storage, battery, etc.
Land acquisition and environmental approvals also pose delays and obstacles. Additionally, financing renewable projects and transitioning existing coal-based power plants to cleaner alternatives are pressing concerns.
The introduction of 400 kV and 765 kV transmission lines has substantially improved power quality in India. These high voltage lines, considered top tier in the transmission hierarchy, enhance reliability and reduce losses. The 765 kV lines ensure 100 per cent system availability and the extensive network facilitates efficient power distribution across regions. This massive national grid allows for the seamless transfer of power from generation hubs in Rajasthan to consumption centres in Odisha, promoting energy efficiency and stability. Government policies such as the interstate transmission system waiver have further supported this infrastructure, boosting sector performance. Implementing similar policies will continue to benefit the grid and ensure reliable power supply nationwide.
What is the sector outlook for the next one to two years?
Sujoy Ghosh
The demand and growth potential of India’s power sector are substantial, driven by increasing energy consumption, a commitment to renewable energy and the government’s focus on infrastructure development. However, to fully realise this potential and attract private sector investments, it is imperative to address the associated risks, particularly concerning fair returns on these investments.
In conclusion, while India’s power sector’s demand and growth potential is apparent, addressing the risks associated with private sector investments is crucial. The government can significantly improve the investment landscape by implementing the necessary structural reforms – reforming discoms, creating a fair tariff structure, enhancing dispute resolution mechanisms and developing dynamic market frameworks. These changes will not only attract private capital but also ensure that the power sector can meet the country’s growing energy needs while supporting its broader economic goals.
Naveen Khandelwal
The power sector in India is currently experiencing a significant transformation, presenting a remarkable opportunity for growth and innovation. The outlook for the next few years is highly promising, with substantial development anticipated across the entire power value chain – including generation, transmission, distribution, manufacturing, and supply chains. A key trend will be the shift towards a more sustainable and diversified energy mix, with green energy expected to gain a larger share as renewable energy technologies become more competitive. This evolution will facilitate greater integration of renewables into the grid on a round-the-clock basis, paving the way for a more resilient and sustainable energy future.
The energy storage market is set to experience rapid growth, driven by the integration of renewables and the electrification of transportation. With the PLI scheme boosting local manufacturing, the sector is poised to see advancements in storage technologies beyond traditional lithium-ion batteries,
making alternative solutions more economically viable.
As per the National Electricity Plan of the Central Electricity Authority, India’s energy storage capacity requirement will be more than 400 GWh by 2030 to support India’s renewable energy ambitions. This growth trajectory is expected to result in multifold expansion of the energy storage market, creating significant opportunities for innovation and investment.
While coal will remain part of the energy mix in the short term, the momentum towards cleaner alternatives is accelerating. Technological advancements in energy storage and grid management will be pivotal in reducing reliance on fossil fuels and enhancing the reliability of renewable energy.
We believe that with the right mix of technology, policy support and collaborative efforts, India can continue to lead the way in the global energy transition. We are looking at exciting times ahead.
Arun Sharma
The power transmission sector in India is set to witness robust growth and transformation in the coming years. This growth will be driven by the government’s continued focus on enhancing grid infrastructure and promoting renewable energy integration. With a significant investment plan of Rs 4 trillion by 2030, there will be an accelerated deployment of advanced technologies and expansion of transmission networks.
The push towards smart grids, energy storage solutions and increased capacity for high voltage transmission lines will improve grid reliability and efficiency. Additionally, policy frameworks supporting green energy projects and international collaborations are expected to drive further innovation and market expansion. This dynamic environment will create ample opportunities for industry players to contribute towards India’s energy transition, meet rising electricity demands and advance towards net zero targets.
