India's solar energy capacity has surged from 2.82 GW in fiscal 2014 to 81.8 GW in fiscal 2024, significantly boosting its renewable energy portfolio. But to reach its 293 GW solar capacity target by fiscal 2030, the industry must address key factors. These include faster tendering of firm dispatchable renewable energy, higher battery storage systems and increased solar cell capacity, according to Rupesh Sankhe, senior power research analyst at Elara Capital.
"A significant scale up is required in annual capacity addition to meet the 293 GW target," said Vikram V, VP and co-group head of corporate ratings at ICRA. These additions require a continuation of healthy bidding activity, along with timely signing of power purchase agreements by the bidding agencies and state distribution utilities, he said.
Let’s take a look at how India is performing in various areas.
Timely Capacity Additions
India's solar capacity in fiscal 2024 stood at 81.8 GW. This leaves 211.2 GW to meet the fiscal 2030 target of 293 GW. To achieve this, the country needs to average 35.2 GW annually, or 17.6 GW every six months, as per NDTV Profit calculations.
However, growth slowed from fiscal 2022 to fiscal 2024. Even in the first half of fiscal 2025, India added only 8.95 GW of capacity. Timely execution is critical, as India has a solar potential of 748.99 GW, as per NITI Aayog. Currently, 369 projects are in the pipeline, totaling 101.99 GW, of which 54.31 GW are under construction.
"India’s power demand growth is real. While spare capacity in the system is only lowering. As a result, the peak deficit will rise. Unless capacity ramps up fast, the peak deficit would only worsen," as per IIFL Securities' equity research associate Yash Nandwani.
Battery Energy Storage
Solar energy generation is inherently intermittent, necessitating battery storage to manage excess energy and supply it during low production periods. As of March 2024, India's installed battery storage capacity reached 219.1 megawatt hours, nearly quadrupling from the previous year. The National Electricity Plan anticipates capacity could hit 61 GW by March 2030, with 69% from battery storage.
As per ICRA Research, recent declines in battery prices, now below $90 per kilowatt hour, have improved the cost economics for energy storage projects, which could boost adoption. Investments made by Tata Power Co., Adani Green Energy Ltd., NTPC Ltd. and Reliance Industries Ltd. in the space reflect rising demand.
Solar Components
India's solar energy ambitions also hinge on enhancing domestic manufacturing. In fiscal 2024, solar module capacity stood at 72 GW, but cell capacity was only 8.1 GW, creating a supply gap.
Furthermore, despite robust module production, India heavily relies on imports from countries like China, South Korea, and Japan, due to cheaper imports, and rapid industry growth outpacing domestic capabilities.
To remedy this, India has to increase solar manufacturing capacity, which could lower costs and stimulate demand. Key companies that are expanding capacity include Adani Enterprises Ltd., Premier Energies Ltd., Waaree Energies Ltd., Reliance Industries Ltd., Tata Power, and Vikram Solar Ltd.
Easing Of Execution Bottlenecks
ICRA Research highlights that resolving project execution bottlenecks is vital for meeting capacity addition targets. Addressing these issues would benefit solar project developers like NTPC, NHPC Ltd., Tata Power, and Adani Green Energy.
As per Nandwani, two key issues need to be addressed:
Land acquisition: Discussion with solar producers suggest that even after government approval and land allocation, actual transfers face challenges, leading to installation delays.
Financing: While financing RE projects has become less cumbersome, the magnitude of capital requirement is massive. As per IIFL Securities, an addition of 40 GW of solar capacity per year entails Rs 2 lakh-crore capex. While PSUs have balance sheet, and funding capacity, it needs to be seen how private players are able to balance return ratios, cashflows and growth, while committing massive investments in the space.
Disclaimer: NDTV Profit is a subsidiary of AMG Media Networks Limited, an Adani Group Company.
The views expressed in this public media appearance are solely those of the analyst and do not necessarily reflect the opinion of IIFL Securities Ltd. This discussion is for informational purpose only and should not be construed as a financial advice. It is essential to consult your financial advisor before making any investment decision.
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