India’s renewable energy sector is encountering challenges in executing utility-scale renewable energy projects, including weak demand for tenders, project cancellations and delays in power agreements, according to a report by the Institute for Energy Economics and Financial Analysis (IEEFA).
These issues could impact India’s goal of achieving at least 500GW of non-fossil power capacity by 2030.
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In 2024, India issued a record 73GW of utility-scale renewable energy tenders, surpassing the Ministry of New and Renewable Energy’s annual bidding plan of 50GW.
Wind-solar hybrid became the leading segment in utility-scale renewable energy tendering during the year, surpassing solar power.
However, 8.5GW was undersubscribed, a level five times higher than in 2023.
The undersubscription issues were attributed to complex tender structures, aggressive bidding during reverse auctions and delays in interstate transmission readiness.
India’s total unsigned power sale agreement capacity has surpassed 40GW, with approximately 1GW of this attributed to tenders from the Solar Energy Corporation of India.
The delays in finalising power supply agreements (PSAs) were mainly caused by the anticipation among energy buyers of ongoing reductions in renewable energy prices.
Tender cancellations are also highlighted in the report. From 2020 to 2024, 38.3GW of capacity was cancelled, representing 19% of the total issued capacity during the period.
Issues such as tender design, location or technical challenges, undersubscription, and delays in signing PSAs contributed to these cancellations.
Setbacks in project implementation are another significant hurdle to India’s achievement of its renewable energy target for 2030.
Continued difficulties in project delivery may undermine investor confidence in future renewable energy initiatives, which could, in turn, limit access to affordable financing from major overseas investors.
The IEEFA report highlighted the need for the government to give balanced attention to every stage of the tendering process, starting from the release of requests for selection to the allocation and signing of PSAs.
It also underscored the need for stricter regulations regarding renewable purchase obligations and related penalties to maintain demand for renewable energy.
