CLEAN ENERGY Goals and the Way Forward

Renewable energy has abundant opportunities given the way projects and sustainability initiatives are progressing in the country. However, will these be enough to achieve the goals and sustain the growth in the long run? Construction Times explores the trend and outlook.

India has set the goal to be carbon neutral by 2070. Meanwhile, the country will require investments of around USD 200 billion to establish RE generating assets by 2030, according to a Nomura report. In FY24, as per the report the country auctioned 40 GW of RE capacity. However, to meet the country's ambitious goal of 500 GW of renewable energy capacity by 2030, the pace of RE auctions will need to increase significantly, with approximately 60 GW of capacity needing to be auctioned each year.

Prevailing RE trends

The country has steadily built a diverse renewable energy base ranging from sprawling solar parks to wind farms and hydroelectric projects. These initiatives have not only reduced reliance on fossil fuels but also strengthened the nation’s energy security. When factoring in the 8,180 MW of nuclear capacity, the total non-fossil fuel-based power now accounts for almost half of the country's installed electricity generation capacity, signalling a strong move toward clean energy leadership on the global stage.

The renewable energy (RE) capacity increased at a CAGR of over 16% over the past decade and this growth trend is expected to continue. The RE capacity, including large hydro, stood at 201 GW as of September 2024, accounting for 45% of overall installed power generation capacity.

Girishkumar Kadam         Senior Vice President & Group Head -         Corporate Ratings, ICRA.

The RE capacity, including the large hydro capacity, required to meet the renewable purchase obligation (RPO) trajectory approved by the Government of India of 43.33% by FY2030 is estimated to be over 440 GW considering the annual demand growth of 6.0% till 2030. Given the installed RE and large hydro capacity of 201 GW as of September 2024, the incremental RE capacity requirement over the next 5.5 years is large at over 240 GW, translating into an annual capacity addition of ~44 GW.

“The share of RE-based projects in all-India electricity generation is witnessing a secular growth, increasing to 13.0% in FY2024 from 7.8% in FY2018 and is likely to reach 14.5% in FY2025. This is further expected to increase to 28% by FY2030 as per ICRA’s estimates. Including the share of large hydro, the share of RE would increase to over 35% by 2030 from 21% in FY2024,” says Girishkumar Kadam, Senior Vice President & Group Head - Corporate Ratings, ICRA.

Given the intermittent nature of RE generation, there is a requirement of energy storage capacity to ensure grid balancing. The storage capacity is expected to be used to meet the evening peak demand, when solar energy is not available, and to enable grid operators to manage the variable generation associated with solar and wind resources. The National Electricity Plan (NEP) projects an installed storage capacity of 74 GW by 2032, together providing 411 GWH of storage for integrating RE with the grid through a mix of battery energy storage systems (BESS) and pumped hydro storage projects. Hence, availability of energy storage at a competitive cost remains the key to meeting these capacity targets.

Several states in India have emerged as leaders in renewable energy capacity, contributing significantly to the nation's progress. Rajasthan tops the list with an impressive 29.98 GW of installed renewable energy capacity, benefiting from its vast land and abundant sunlight. Following closely is Gujarat, which boasts a capacity of 29.52 GW, driven by its strong focus on solar and wind energy projects. Tamil Nadu ranks third with 23.70 GW, leveraging its favourable wind patterns to generate substantial energy. Karnataka rounds out the top four with a capacity of 22.37 GW, supported by a mix of solar and wind initiatives. Together, these states play a crucial role in advancing India’s renewable energy goals and establishing a more sustainable energy future.

Solar shines

The solar power segment remained the key driver of capacity addition in the RE sector, with significant capacity additions over the past 10 years, which in turn increased its share in the overall RE mix to 58.7% as of September 2024 from 8.3% as of March 2014.

India has witnessed remarkable capacity growth, with solar installations increasing from 22 GW to 90 GW (from FY18 to FY24), now accounting for 45% of the total renewable energy capacity of 200 GW. This growth is complemented by a significant decline in the costs of solar PV technology, making both utility-scale and decentralized solutions like rooftop and microgrid systems more accessible. Vimal Kejriwal, MD & CEO, KEC International Limited, elaborates, “First, hybrid projects are gaining traction. Combining solar with other renewable sources such as wind allows for more stable and reliable energy generation, which is essential for meeting growing demands.

Vimal Kejriwal            Managing Director & CEO,             KEC International Limited

Additionally, integrating solar with Battery Energy Storage Systems (BESS) is a game-changer. It enhances energy management and provides grid stability, making it the need of hour. Market is looking at 2-6 hours battery storages now which will move to 12 hours soon. Floating solar installations are also gaining popularity and we are studying the market.”

“The solar energy industry has already seen a chain of revolutionary trends. Perhaps the most significant change to the business arises with PV technology thanks to perovskite solar cells and tandem cells, looking promising enough to come up with higher energy conversion rates at lower costs. Bifacial solar panels also started to gain their prominence with the possibility to absorb sun rays both from the front and backside,” says Ankit Singhania, Director - Sales & Procurement, Navitas Solar.

Open access policies allow industries to purchase solar power directly, promoting renewable energy adoption. From supply standpoint, the Production-Linked Incentive (PLI) scheme promotes domestic manufacturing of high-efficiency solar modules with a significant outlay. The PM Kusum scheme encourages decentralized solar installations to reduce farmers' dependence on diesel. India is also focusing on developing solar parks and Ultra Mega Solar Power Plants to streamline land acquisition and regulatory approvals. Additionally, the imposition of Basic Customs Duty (BCD) on solar imports aims to bolster domestic production, while waivers on transmission charges encourage the establishment of renewable energy projects. “Overall, while there are significant opportunities in the solar sector, the effective implementation of supportive policies is crucial for its sustained growth and viability,” observes Kejriwal.

In spite of the brighter prospects of solar sector, there are challenges abound. Kejriwal elaborates, “Firstly, solar modules are a significant cost driver, accounting for about 60% of the total project cost. While we’ve seen a decline in module prices recently, they remain volatile due to global supply and demand imbalances. India is still a module assembler, and we are dependent on the PV cells and wafers. This uncertainty poses challenges for long-term project planning and profitability.”

Ankit Singhania               Director - Sales & Procurement,               Navitas Solar.

In addition to module costs, commodity prices—such as copper, aluminium, and steel—affect approximately 15-20% of the total project expenses. Another pressing issue is labour. The solar sector’s rapid expansion has created a strong demand for skilled labour, making recruitment and retention increasingly challenging.

Wind sets to regain momentum

Wind power capacity according to the government figures is 47.36 GW, driven by the vast potential of the coastal and inland wind corridors across the country. However, the share of the wind segment declined to 30.6% from 66.7% during the last 10 years as the capacity addition slowed down, following the shift from a feed-in tariff regime to a bidding regime.

According to the Global Wind Energy Council (GWEC) Global Wind Report 2024, India currently ranks fourth globally in total wind installations as of January 2024 and the second-largest wind market in the Asia-Pacific region, following China. GWEC projects a capacity addition of 22.8 GW of onshore wind capacity between 2024 and 2028.

Green hydrogen

Green hydrogen is an important piece of the carbon neutrality jigsaw. It can help in decarbonizing applications such as shipping fuel, DRI steel, heavy transportation and others. “The Central Government has set a goal of production of 5 MMTPA under the India Green Hydrogen Mission. Producing this hydrogen will itself require about 125 GW of RE. Thus, even as India explores multiple avenues of decarbonization, RE will remain at the core of most efforts,” says Naveen Munjal, Director - Business Development and Commercial, Apraava Energy. Green hydrogen, too, is likely to give a big boost to the power sector and contribute to carbon neutrality.

Naveen Munjal            Director - Business Development and            Commercial, Apraava Energy.

RE outlook

The outlook for the renewable energy sector remains stable led by strong policy support from the Government of India, healthy demand growth, superior tariff competitiveness and sustainability initiatives by large commercial and industrial (C&I) customers.

In spite of the growth trend in RE sector, capacity addition remains short of the required addition and should significantly increase to meet the RPO targets by 2030. According to Kadam, the capacity addition is constrained by challenges in securing land, delays in augmenting transmission infrastructure and supply chain challenges for RE equipment. Resolving these challenges remains key to augmenting the RE capacity addition.

Kejriwal points out, “The future of solar energy and renewables is undeniably bright, but I believe it’s essential to recognize the complexities involved. As an EPC player, we need to approach the market with careful analysis and caution. On the positive side, we have ambitious installation targets for solar modules and supportive government policies that are driving growth.”

Munjal is of the view, “There is enough global capital looking to tap the huge opportunity that India presents. The key to realizing this potential lies in establishing the required transmission infrastructure and addressing the challenges around land acquisition & Rights of Ways.”

Overall, there are significant opportunities in the RE sector the way future trends are turning out. However, supportive policies and a conducive execution environment will be crucial for the sustained growth & viability of the sector.