Renewable energy bidding activity experienced a significant decline in FY26, with capacity awarded dropping to 14.7 gigawatt (GW) from 40.6 GW in FY25, according to rating agency ICRA. The slowdown continued into the current year, with 4.7 GW awarded till August 10, 2026. As reported by ICRA, this decline was attributed to challenges in signing power purchase agreements (PPAs) and power sale agreements (PSAs), along with lagging transmission infrastructure development. The unsigned PPA capacity remained sizeable at 40-45 GW as of April 2026, highlighting the ongoing challenges in project execution.
The slowdown has been particularly impacted by transmission infrastructure constraints, with around 37 per cent of capacity at impacted substations in the North, West and South operating under temporary general network access (T-GNA). According to ICRA's study, these projects face curtailment of 30-50 per cent during solar hours. The rating agency estimates that total renewable energy capacity expansion will slow to 45 GW in FY27 from 50.9 GW in the last fiscal. As ICRA notes, timely completion of transmission projects and the scale-up of storage capacity remain critical to sustaining the pace of capacity addition.
The battery energy storage system (BESS) market showed significant growth, with total BESS capacity awarded reaching around 90 gigawatt-hours (GWh) as of June 2026. As reported by ICRA, there has been a significant increase in project awards in the last 12-18 months. The agency estimates that the levelised cost of storage using BESS for 2-4 hours of storage ranges from ₹4-7 per unit, compared with ₹5 per unit for pumped storage hydropower projects, with lower execution risks and gestation periods. The decline in battery costs over the past decade has helped reduce the cost of energy storage, which coupled with the availability of viability gap funding and extended transmission charge waivers till June 2028, have given an impetus to battery energy storage system (BESS) adoption in India.
Recent months have seen a notable shift in market focus, with bids for vanilla solar and wind projects declining while there has been increased focus on FDRE and RTC power. According to ICRA, the latest SECI tender follows the trend of thermal power to deliver demand-based supply, with a discovered tariff of ₹5.25 per unit that is lower than most new thermal plants (above ₹6.00/unit, exposed to fuel cost escalation). The renewable power pipeline remains healthy with more than 150 GW of projects under construction as on June 30, 2026, which are likely to drive capacity additions in the near-to-medium term. ICRA projects that renewable energy generation share will cross 35 per cent by 2029-30 from 22 per cent in 2024-25, contingent on the extent of implementation of the ongoing project pipeline and development of adequate transmission connectivity infrastructure.
Looking ahead, ICRA estimates that an investment of ₹5-6 trillion is required in the transmission segment over FY27 to FY32 to scale up transmission lines and substation capacity. The agency noted that expectations of further decline in battery prices have led to aggressive bidding in standalone storage tenders, though the reversal in price trends coupled with rupee depreciation against the dollar has impacted project economics. ICRA's outlook for the RE sector remains Stable, led by strong policy support, superior tariff competitiveness and sustainability initiatives by large commercial and industrial customers. The rating agency believes that storage is likely to emerge as an important enabler for grid stability, with the ICRA outlook for the RE sector remaining stable despite current challenges in bidding activity and transmission infrastructure.
