A recent report released by ICRA reveals that India's renewable energy is on the verge of a wave of explosive growth, with its installed capacity projected to soar rapidly from the current 132GW to about 170GW by March 2025.Solar energy is set to be the main engine of growth, rising from the current 72GW to a projected 104GW.
Solar energy to lead the growth trend
The rapid growth in installed renewable energy capacity in India will be driven largely by solar, with 17GW and 20GW of solar capacity expected to be added by March 2025, the report noted. This is also in line with the 50GW per year tender trajectory announced in March 2023 by the Indian government.
Falling Prices Drive Installed Capacity Acceleration
Solar PV cell and module prices have fallen by 65 per cent and 50 per cent, respectively, over the past 12 months, providing strong support for healthy new project development. This has resulted in an improvement of more than 35 basis points in the average debt service coverage ratio of solar projects that have won tenders at a bidding price of Rs 2.5/kWh. While this is certainly a positive sign, developers still need to keep an eye on the volatility of imported PV cell prices.
Challenges and prospects
However, despite the positive outlook, ICRA's Vikram V also pointed out that implementation level challenges such as land acquisition and transmission connections may have some impact on the growth of installed capacity.
All-weather supply to help renewable energy
India seeks to increase the share of renewable energy and large hydropower in all-India electricity generation from 23 per cent in 2023 to about 40 per cent by 2030. To address the intermittent nature of renewable energy, round-the-clock supply is particularly important. This is now possible through wind and solar projects combined with the use of energy storage systems. The competitiveness of tariffs for renewable energy 24/7 supply projects has also been shown to be quite strong in recent tenders.
In summary
Renewable energy in India is rapidly emerging as a leader in the energy transition. Over the next six years, renewable energy is set to capture a larger share of India's electricity generation, helping to realise clean and sustainable energy goals. However, there are challenges and opportunities, so let's wait and see how this green energy trend flourishes.