Will India’s Storage-Backed Renewable Energy Capacity Exceed 25 GW by 2028?

New Delhi, May 14 (NationPress) The installed capacity of storage-backed renewable energy (RE) in India is projected to rise to 25-30 gigawatts (GW) by the financial year 2027-28, up from nearly zero in 2024-25, as per a report by Crisil Ratings published on Wednesday.

This additional capacity is expected to represent over 20 percent of the total RE capacity that will be added over the next three years, a trend propelled by the central government’s commitment to enhancing the sustainability of renewables, the report stated.

Projects that utilize storage-backed RE offer an effective remedy for the inconsistency associated with RE generation. These initiatives—including firm and dispatchable renewable energy and solar combined with energy storage—provide power on demand, thereby bolstering grid stability. For example, they can deliver green energy on a monthly or hourly basis, including during peak demand hours.

The government's advocacy for these projects aims to integrate renewables as a reliable component of the nation’s energy landscape. This push is evident in the substantial quantity of such projects in recent tender auctions, which constituted approximately 25 percent (or 11 GW) of the total capacity awarded by central agencies in calendar year 2024, compared to just 11 percent (or 2.5 GW) in calendar year 2023. Due to high energy demands, these projects typically require an average oversizing of about 2.5 times the contracted capacity, leading to a cumulative capacity pipeline of around 34 GW.

Nonetheless, nearly all of the capacity awarded through these tenders is currently either under development or in the early stages of construction, leaving them vulnerable to the risks that accompany project implementation.

Challenges in these projects often arise from delays in securing offtake agreements, funding, and execution. However, we anticipate that these risks associated with commissioning and material overruns will be low to moderate, with off-take and funding risks being minimal. Moreover, the proactive stance taken by developers—especially regarding land and connectivity requirements—bodes well, as it mitigates construction risks.

The off-take risk is minimal for nearly half of the upcoming capacity, as they have secured long-term (25 years) power purchase agreements (PPAs) at a fixed tariff, offering revenue predictability. However, the risk is heightened for the other half, as their tariffs are 55 percent higher than conventional RE projects, which could delay the finalization of PPAs.

“Nonetheless, there are at least three reasons to be optimistic that these projects will secure PPAs soon: first, the government’s initiative for a larger share of green energy in overall generation; second, the enhanced capability of these projects to meet elevated energy demands (similar to thermal plants) at competitive tariffs; and third, the rising renewable purchase obligations (RPO) of distribution companies,” the report highlighted.

Access to funding is also not expected to pose a significant challenge, as the robust cash flow generated post-commissioning (supported by enhanced generation profiles and tariffs) coupled with long-term revenue assurance through 25-year PPAs should attract lender interest, according to the report.

Ankush Tyagi, Associate Director at Crisil Ratings, stated, “Ultimately, the risks related to construction execution seem to be low to moderate.”

“Our discussions with developers reveal that approximately 70 percent of the awarded capacities in calendar year 2024 have already identified or secured critical resources—primarily land and grid connectivity—prior to participating in bids. This positions them favorably,” he added.

However, significant challenges relating to the timely acquisition of land and evacuation infrastructure, as well as delays in PPA closures against our base expectations, could lead to longer-than-expected execution timelines, which warrants careful monitoring, the report noted.