An Action Year: Indian renewables take big strides despite geopolitical challenges

At COP26 held in Glasgow in Nove­mber 2021, India had announced am­bitious goals to increase its non-fossil fuel capacity to 500 GW and meet 50 per cent of its energy needs from re­new­able energy sources by 2030. A year later, it has accomplished ab­out 172 GW of non-fossil fuel capacity, clearly showing that the country is moving rapidly to­wards its Glas­gow goals. Meanwhile, renewa­b­le energy capacity has reached close to 120 GW as of October 2022 and contributed 13 per cent of the country’s total energy generation between April and October 2022.

These positive developments have been possible owing to a strong government impetus and enabling policies across various clean energy segments, transparent bidding procedures, an enthusiastic private sector as well as favourable market dy­­namics. India is a leader in the renewable energy market and an attractive in­vestment destination for developers and investors from across the world.

Successive waves of the Covid pandemic, followed by the Russia-Ukraine conflict and the ensuing energy crisis have made nations focus their attention on ensuring self-sufficiency, di­versification and security in future energy supplies. A rapid transition to clean energy sources and a reduction in the dependence on imported fossil fuels have become key. For this reason, climate ac­tion, equitable energy tran­sition and sustainable energy development are ex­pec­­ted to be the key priorities of India’s presidency of the G20 in 2023 as well.

While there is still a lot of work to be done to reach the 2030 clean energy targets, India made considerable progress on its re­newable energy journey during the past one year. There was an increasing focus on the diversification of the renewable energy basket along with utility-scale solar power expansion. Segments such as bioenergy, round-the-clock (RTC) rene­w­ables, energy storage, green hydrogen and offshore wind started gaining traction. Differe­nt bu­sine­ss models and power offtake arrangements we­re increasingly being adopted to en­sure sustainable energy supplies and thus, corporate power procurement and tra­­ding activity increas­ed the means to meet energy needs. Domestic manufacturing of solar cells, batteries and green hy­dro­gen electrolysers also started showing promise to ensure stable future supply.

In this article, Indian Infrastructure highlights the key trends and developments in the past year and discusses the outlook for the future…

Growing renewable energy installations

Renewable energy capacity additions have continued to grow over the years even as conventional power installations, including thermal and hydro, have dec­lin­ed. In the current year, for instance, only 2,115 MW of thermal and 641 MW of hydro capacities have been added against an impressive 15,074 MW of renewable energy capacity added between Decem­ber 2021 and October 2022.

The majority of the renewable energy additions have been contributed by solar pow­er. With 13,066 MW of installations last year, In­dia’s solar power capacity has gro­wn to 61,624 MW. It now contributes rou­g­h­ly 5 per cent to the country’s total power mix and a significant 61 per cent to the renewable energy mix. The bulk of this ca­pacity addition has taken place in the past few years as solar power became more cost effective on the back of government policies, competitive market conditions, and global technology advancements.

Wind, meanwhile, continues to struggle even after five years of the launch of competitive bidding. This segment saw a mo­dest 1,811 MW of new capacity addition to take its total in­s­talled capacity to 41,844 MW. Once a major contributor to the co­un­try’s renewable energy mix, it now lags be­hind solar and contributes just 24 per cent to the renewable mix. Oth­er re­ne­w­ab­le en­er­gy sources such as bioenergy and small hydro are far behind with 10,701 MW and 4,924 MW of installations respectively. Poli­cies are now being formulated to provide a fillip to these older segments that ha­ve been outshone by solar power.

Strong project pipeline

To boost renewable energy production, the government notified the renewable pur­chase obligation (RPO) and energy storage obligation (ESO) up to 2029-30. As per this order, the to­tal prescribed RPO will increase progressively, from 24.61 per cent in 2022-23 to 43.33 per cent by 2029-30. This includes the wind RPO, the hy­dro­p­ower purchase obligation and other RPOs. The prescribed ESO is 1 per cent in 2023-24 and increases to 4 per cent in 2029-30. These RPOs and ESOs help provide visibility regarding renewable en­ergy expansion to power sector stakehol­ders and indicate the growth trajectory to achieve the country’s energy targets.

Led by major auctions, large project an­no­uncements and expected growth ac­ross the ex­panding distributed renewable energy market, India has a strong project pipeline for the futu­re. According to Rene­wable Watch Research, ei­ght large solar power auctions (including flo­ating solar) for 500 MW or more capacity were conducted between December 2021 and October 2022, followed by two each for wind and hybrids. These resulted in an allocation of 6,288 MW of solar capacity, 1,600 MW of wind capacity and 1,950 of solar-wind hybrid capacity. Such auctions have been a major contributor to India’s renewable energy expansion, and this 10 GW of allocated capacity will help further the country’s clean energy agenda. How­ever, more such auctions are needed, especially by the states, in order to accelerate project development activity.

The Solar Energy Corporation of India (SECI) conducted an auction for 500 MW/1,000 MWh standalone battery energy storage systems in August 2022. JSW Energy won the entire capacity with a bid of Rs 1,083,500 per MW for setting up two battery storage projects at the Fatehgarh III substations in Rajasthan. The auction, the first such bid by SECI for large-scale energy storage, has enhanced industry and government confidence in the potential for storage deployment on a large sca­le for renewable en­er­gy integration. Furth­er, announcements have been made by large renewable energy development fir­ms such as Adani Green Energy, Green­ko, JSW, NHPC Limited and NTPC Limit­ed to de­ploy mega energy storage (pum­p­ed hydro and battery) projects, which will facilitate the supply of RTC power. Various public sector companies such as ONGC, Coal India Limited and SJVN Li­mited too have announced plans to set up lar­ge solar capacities in Rajasthan and Gujarat, the­reby contributing to building the country’s project pipeline for the coming years.

Meanwhile, the distributed solar space is expanding owing to initiatives taken by corporates and the industry to reduce carbon emissions and switch to cheaper and greener rene­wable power. Hundreds of me­­gawatts of ca­pa­city is expected to co­me up every year, led by large open ac­c­ess and group captive projects, as indicated by recent announcements by various companies. Another encouraging de­ve­lop­­ment has been the recent release of a tender to lease seabed blocks off the coast of Ta­mil Nadu for surveying and de­veloping offshore wind energy projects. This is a major mile­stone for the nascent offshore wind segment in the country.

Tariffs rise

Despite the rapid growth witnessed and expec­ted in the Indian renewable energy space in the short term, the sector has not been immune to the global supply chain disruptions caused first by the pandemic and then by the Russia-Ukra­ine conflict. The upheaval in commodity markets has increased the prices of essential raw ma­terials such as steel, copper and aluminium. There is a scarcity of oil and gas in ma­ny countries while fuel prices and logistics co­sts rise relentlessly. In addition, currency vola­tility and increasing in­fla­tion have im­pac­ted project costs acro­ss segments.

In the solar segment, in particular, incre­a­s­ed global polysilicon prices due to de­ma­nd-supply concerns and the levy of basic customs duty (BCD) on imported cells and modules at home have hiked so­lar module costs, thereby impacting so­lar power tariffs. Notably, solar tariffs have been increasing since SECI’s 1,785 MW solar auction for Rajasthan in Dec­ember 2021, which saw the lowest bid at Rs 2.17 per unit. In Maharashtra’s August 2022 auction, the lowest tariff went up to Rs 2.90 per unit. The last auction, in Septem­ber 2022, for 500 MW of capacity in Guja­rat, registered the lowest bid at Rs 2.49 per unit. The average lowest solar pow­er tariff in recent bids has gone up to Rs 2.47 per unit from the previous level of Rs 2.30 per unit.

In the wind power space, the lowest tariffs have increased from Rs 2.69 per unit in SECI’s September 2021 auction to Rs 2.84-Rs 2.89 per unit as per the recent au­c­tion results. In the solar-wind hybrid spa­ce as well, the lowest bid price has inc­reas­ed from Rs 2.34 per unit in SECI’s August 2021 auction to Rs 2.53 per unit in SECI’s May 2022 auction and further to Rs 3.03 per unit in Rewa Ultra Mega Solar Limited’s (RUMSL) September auction. These tariffs may rise further if global price uncertainties continue.

Boost to local manufacturing

The lessons learnt from the pandemic and the current geopolitical situation reaffirm the need for secure raw material and eq­uipment supply and reduced reliance on imports. The government has, thus, been taking extensive measures to promote local manufacturing across different clean energy verticals. Most of these measures have been targeted at the solar segment, the backbone of India’s green energy transition, owing to its large dependence on imported cells and modules. To this end, a BCD of 25 per cent and 40 per cent has been im­posed on solar cell and module imports res­pectively, applicable from April 2022 onwards. Further, an Approved List of Models and Manu­factur­ers (ALMM) has been issued and only the models and manufacturers on this list are eligible to participate in government-tendered projects as well as open access and net me­tering-based projects. Both these measures aim to reduce the import de­pen­dence in the solar space.

The production-linked incentive (PLI) scheme, which focuses on scaling up do­mestic manufacturing capabilities, has also been introduced in the solar segment to promote the manufacturing of high efficiency solar PV modules. Following the successful allocation of the first tranche of the PLI scheme, the second tranche was approved in September 2022, with a budget of Rs 195 billion. SECI has alrea­dy issued a tender for the second tranche of the solar module PLI scheme. Owing to all the­se measures, domestic manufacturing has pi­cked up and a number of facilities have been announced by leading domestic manufacturers as well as new entrants.

Like solar power, energy storage too is he­avily dependent on imports, especially in the case of lithium-ion batteries. With energy storage demand expected to pick up rapidly, a PLI scheme was introduced in this space for manufacturing advanced ch­e­mistry cells with a budgetary outlay of Rs 181 billion. A program­me agreement has been signed under the PLI scheme with Reliance New Energy Limited, Ola Electric Mobility Private Limited and Rajesh Exports Limited for the development of capacities following a bidding round. These PLI sc­hemes for solar modules and batteries are expected to significantly help boost dom­es­tic manufacturing capacities.

Focus on open access and rooftop solar

Historically, utility-scale projects have re­ce­i­­ved greater focus owing to the larger ca­pa­city additions possible in this space. As a result, distributed renewable energy in the form of rooftop solar projects or open ac­­c­ess have not witnessed the sa­me growth as that in utility-scale projects. Both rooftop solar and open access suffer from challenges owing to complicated procedures and approvals as well as gaps in re­gulations and on-the-ground im­­plemen­ta­tion. While rooftop solar faces is­s­ues relating to net metering restrictio­ns, open acc­ess projects face challenges owing to discom reluctance on ac­count of losing high-paying commercial and industrial (C&I) consumers and regulatory un­certainty with respect to various charg­es. To ad­d­ress the­se concerns and impro­ve the uptake of distributed renewable en­ergy projects, en­abling policies and portals were launch­ed for both open acc­e­ss and rooftop solar.

In June 2022, the government notified the Gr­een Open Access Rules, 2022 that reduce the limit of open access transactions from 1 MW to 100 kW for green energy. Further, the ru­les enable a simplified procedure for green po­wer open access, which will help in faster app­rovals for gre­en open access, uniform banking, voluntary purchase of renewable power by C&I consumers, applicability of open access ch­ar­ges, etc. In addition, the green ener­gy open ac­c­ess portal was launched in November 2022 th­rough which consu­mers with a connected load of 100 kW or above can apply for renewable power op­en access approval, which must be gran­ted within 15 days.

In the rooftop solar space, the governme­nt’s focus is on improving uptake in the reside­ntial segment, which has a huge untapped po­tential for development but suffers from lack of awareness, capital investment issues and complicated subsidy procedures. In an encouraging mo­ve, Phase II of the Grid-Connected Roof­top So­lar Programme, which focuses on the residential solar space, has been extended till March 31, 2026. Further, a rooftop solar portal was launched in July 2022 to enable online tracking of the ins­tallation process of rooftop solar plan­ts. Thus, all activity, starting from the registration of applications to selection of vendors to disbursement of subsidy in re­sidential consumers’ bank accounts after the ins­talla­tion and inspection of the plant, can be track­ed through this portal.

Green hydrogen takes off

Green hydrogen has emerged as the most promising market in the global and Indian energy space owing to its vast untapped potential and versatile range of applications across the transport, power and hard-to-abate industries. India’s green hydrogen ecosystem got a kickstart with the introduction of the first phase of the green hydrogen policy in February 2022. The policy, which has been largely well recei­ved by the industry, has various no­table provisions to promote the production and uptake of green hydrogen and its de­rivatives. These in­clude a waiver of interstate transmission system charges for a pe­riod of 25 years, banking provisions for unconsumed renewable power, ease in grant of grid connectivity and open ac­ce­ss, and single-portal clearances.

Aided by the introduction of the policy as well as emerging market dynamics, both public and private sector players have joined the gre­en hydrogen bandwagon owing to the vast op­portunities in project development and electrolyser manufacturing. For instance, oil and gas majors such as GAIL, Indian Oil Corpora­tion Limi­ted, Bharat Petroleum Corporation Limi­ted, Reliance and the Adani Group have all an­nounced projects and collaborations in this space, as their experience and rea­dy pipe­line infrastructure would give them an advantage in hydrogen production, transportation and consumption. Leading po­wer companies such as NTPC and re­ne­wable energy developers such as ACME, Hero Future Energies, Ayana, Re­New Po­wer, Greenko, Avaada and JSW En­ergy have announced ambitious plans for green hydrogen investments. In fact, ACME has already commissioned a green ammonia facility in Bikaner, Rajasthan. Moreover, to build local supply ch­ains, some domestic companies have tied up with established foreign companies to set up electrolyser manufacturing units in India. The industry now awaits demand-side provisions su­ch as green hydrogen up­ta­ke mandates for industries like oil re­fineries and fertilisers. Do­mestic manufacturing of electrolysers needs to also be promoted through incentivisation and PLI schemes, and access to low-cost finance must be facilitated for developing the re­quired supply chain capabilities.

Fillip to bioenergy

As per government statistics, India has the potential to generate around 18,000 MW of renewable energy using biomass and an additional 7,000-8,000 MW from baga­sse cogeneration. However, the segment suffers from inefficient management, high capital requirement and techno-economic barriers, and has thus not progressed at the expected pace. Recog­nising the huge importance of bioenergy for agricultural waste management, curtailment of air pollution and provision of an additional inco­me source for farmers, the government has taken a host of measures this year to promote the segment.

The budget 2022 speech mentioned a proposal to increase biomass pellet co-firing in thermal power plants from 5 per cent to 7 per cent. This step would enable optimal utilisation of waste biomass and help solve the issue of stubble burning in north India during the winter months. In June 2022, the government anno­un­ced that the target of 10 per cent ethanol blen­ding had been achieved much before the Novem­b­er 2022 deadline. Encourag­ed by this de­ve­lop­ment, a decision was made to ad­van­ce the target of 20 per cent blending of ethanol in petrol from 2030 to 2025-26. Further, from April 2023 onwards, oil companies will be selling up to 20 per cent ethanol-blended petrol. More recently, the Ministry of New and Rene­wable En­er­gy has announced the continuation of the National Bioenergy Programme for the period 2021-22 to 2025-26 with three sub-schemes for waste-to-energy, biomass, and bio­gas. These po­licy initiatives will help renergise the bioenergy space and att­­ra­ct private players to this segment, whi­ch has until now been largely overshadowed by the more dyna­mic solar segment.

Wave of M&A activity

With the country chasing massive renewable energy targets, there is a huge opp­ortunity for developers and investors to make significant investments in this ex­pan­ding sector and en­lar­ge their own portfolios. Interestingly, like many large global markets, mergers and ac­qui­si­tions (M&As) have been popular in India’s re­newable energy financing landscape as well, and this trend has continued year on year. India’s renewable energy landscape is quite competitive, and many players are unable to sustain themselves in this market, thus opting to sell their assets, which fetch good value. Some de­ve­lopers prefer to develop assets and then sell them to the highest bidder. Mean­while, many deep-pocketed buyers with huge risk appetites and strong backing from large investors opt to acquire such assets to quickly expand their portfolios rather than develop a project from scratch.

A landmark deal of the year was Shell’s 100 per cent acquisition of Solenergi Po­wer Private Limited and the Sprng Ener­gy group of companies from Actis Solene­rgi Limited in August 2022. The deal is estimated to be worth around $1.55 billion. The portfolio under consideration consists of 2.3 GW of operating and un­der-cons­truc­tion assets, with a further 7.5 GWp of renewable energy projects in the pi­pe­line. Another big-ticket deal of the year was the announcement of the JSW Grou­p’s Rs 105 billion planned acquisition of Mytrah Energy India. With the successful completion of this transaction, expected soon, JSW will get My­trah’s portfolio of 1.75 GW of renewable energy assets comprising 1,331 MW of wind and 422 MW of solar power. Mytrah had reportedly been on the lookout for buyers for its assets for a long time. Another development was ReNew Power’s sale of its 138 MWp distributed roof­top solar portfolio to Fourth Partner Energy for Rs 6.72 billion and the subsequent acquisition of an operating wind and solar power portfolio of 527.9 MW. This M&A wave is expected to continue as the Indian renewable energy market gro­ws, and regulatory and cost flux persists.


It has been a year of exciting developments in the renewable energy sector as it continues to evolve and expand in the wa­ke of changing global and local market conditions. However, as the sector moves towards achieving its am­bi­tious clean energy targets, it must also safeguard itself from the market upheavals caused by un­precedented events like the pandemic and geopolitical dynamics. Thus, it must constantly innovate and diversify supported by en­abling policies, scalable business models and new growth opportunities across emerging are­as such as offshore wind, green hydrogen and RTC pow­er supply. Going forward, the security of supply chains will gain precedence as consumers become prosumers and more equipment is required to enable a true na­tion­wide green energy transition.

Khushboo Goyal