India's solar push hits slowdown as transmission and demand gaps emerge

India's rapid solar boom is slowing as grid constraints, weak demand growth, stalled contracts, and rising storage needs push the sector into a recalibration phase

The past few months have seen an upheaval in India’s solar power sector. What was until recently a sunrise sector drawing record investments and adding new capacity at a record pace, has sudd­enly skidded to a phase of consolidation and recalibration, with the government saying it may not make sense to go for large-scale renewable energy bids amid a flattening of project pipelines. While the government aimed for a national target of tendering 50 gigawatt (Gw) annually with the larger aim of reaching 500 Gw of installed non-fossil fuel-based generation capacity, the country is now adding only 15-25 Gw capacity annually. 

To be sure, the country’s overall rene­wable energy capacity has jumped mult­ifold from a mere 35 Gw in 2014 to 197 Gw at present. The past 11 years have witnes­sed growth in capacity creation at a pace unparalleled in India’s energy sector. On October 22, the ministry of new and renewable energy (MNRE) issued a statement saying such expone­ntial growth inevitably reaches a point where the next leap requires not just more megawatts, but deeper system reforms. 

“The sector has entered that phase, where the focus is shifting from capacity expansion to capacity absorption,” the MNRE said in a statement. 

“We are now dealing with grid integr­ation, energy storage, hybridisation, and market reforms, the real foundations for a 500 Gw plus non-fossil future. In that sense, the recent moderation in capacity addition is a recalibration, a necessary pause to ensure that future growth is stable, dispatchable and resilient.” 

In other words, a confluence of factors has come into play, all at the same time, making it necessary to redraw priorities, projections, and policy focus. 

From surge to slowdown 

The slowdown in tendering activity can be gauged from these numbers: The year-wise renewable energy capacity awarded in the country jumped from 9.3 Gw in 2022-23 to 47.3 Gw in 2023-24, before slipping slightly to 40.6 Gw in 2024-25 and finally plummeting to a mere 5.8 Gw in the first eight months of 2025-26, the current financial year ending March 2026, according to research and ratings agency Icra. 

Unsigned power purchase agreements (PPAs) also remain sizable at about 40-45 Gw as of date, it said in a statement on November 20. 

One key and landmark change that has happened in the renewable energy sector is the emergence of what are call­ed firm and dispatchable renewable energy, or FDRE tenders, which have replaced plain vanilla solar and wind auctions. These tenders couple green energy with mandatory storage capacity. The bouquet aims to address the traditional problem of intermittency associated with renewable energy but increases the cost of power generation. Intermittency refers to the non-continuous nature of availability of solar power or wind energy. 

Battery energy storage systems (BESS) are currently being integrated at both grid and project levels, marking the emergence of a new market. 

The government is reimagining development of the national power grid under a ₹2.4 trillion transmission plan for achieving the 500 Gw target, linking renewable-rich states with demand centres. It is prioritising investment in green energy corridors and new high-capacity transmission lines from Rajasthan, Gujarat and Ladakh. These projects are multi-year efforts and are expected to unlock over 200 Gw of new renewable capacity. 

“The current stage is therefore temporary, a transition lag, not a structural ceiling,” MNRE said in its October statement. 

The lag in grid infra 

Power transmission capacity creation is currently lagging growth in generation capacity as there have been delays in ramping up grid infrastructure, according to Icra. Grid infrastructure is lagging due to delays in project implementation. 

In this situation, ensuring grid reliability becomes critical and slow transmission build-out undermines project economics and capacity growth, Icra said, even as it maintained a stable outlook for the sector on the back of strong demand prospects, policy support and superior competitiveness of the industry. 

“There are a couple of factors behind this changed scenario in the solar power sector. First, while new demand centres have come up in the form of electric vehicles and data centres etc, the country has not witnessed huge overall electricity demand growth this year and that has possibly led to rationalisation of expectations on the capacity front. Here, a key issue is lack of transmission strengthening and, more importantly, Time of Day (ToD) pricing which can shift evening and night demand for pow­er to daytime demand, which coin­cides with availability of solar power,” said Vibhuti Garg, director for South Asia at the Institute for Energy Economics and Financial Analysis (IEEFA), a US-headquartered think-tank. 

“If a large part of the power demand is not coming up during solar hours, you are naturally going to need more storage and grid strengthening measures. The go­vernment must, therefore, boost mea­s­ures to manage the demand curve in a way it matches RE generation,” she added. 

Stalled agreements 

Another key issue that has occupied much of the discussion in the solar sector of late is stalled power sale and purchase agreements (PSAs). As of September-end, the renewable energy (RE)  implementing agencies, including NTPC, NHPC and SECI, have issued letters of award for 43.9 Gw capacity, where such agreements with end- procurers — the power distribution companies— remain unsigned due to a variety of factors, including lack of connectivity. MNRE is currently monitoring all such cases. 

A few distribution companies have expressed reluctance to sign PSAs for bids where the likely start date of connectivity for the successful bidders is in the distant future. The government has advised the implementing agencies to carry out due diligence by reviewing and categorising such cases based on the likelihood of securing PSAs with end-procurers. 

The likely churn in the sector is reflected in the fact that the ministry last month had to scotch speculation around a blanket cancellation of project awards. It is, however, actively exploring mechanisms with stakeholders to optimise transmission capacity and improve the contracting framework. 

It is crucial for these efforts to meet success. The growth of the solar power sector has critical linkages with India's long-term Net Zero and climate change targets, apart from the larger energy security considerations.