The domestic renewable energy sector is poised to sustain its growth momentum in 2025, driven by both utility-scale procurement and commercial and industrial (C&I) sector demand.
In 2024, capacity addition in the sector surged to a historic high of 27 GW, according to the Ministry of New and Renewable Energy (MNRE) data. Solar energy saw a remarkable four-fold increase in capacity addition on-year. However, wind, with a modest capacity addition of around 3.5 GW — still the second highest in a year after the 5.2 GW recorded in 2017 — continued to struggle. The C&I sector is estimated to have accounted for around 45% of the solar and wind capacity added in 2024.
Major factors that will shape the growth trajectory of the domestic renewable energy sector in 2025 are as follows:
- Domestic solar cell manufacturing capacity: Expansion of the Approved List of Models and Manufacturers (ALMM) to include solar cells, effective July 2026, has provided a significant impetus to domestic solar cell manufacturing capacity, which currently stands at approximately 10 GW. The list, which is updated periodically by MNRE, restricts imports of solar components, which, in turn, boosts domestic production. Industry trends and announcements suggest the domestic solar cell manufacturing capacity will grow substantially to 43-47 GW by June 2026. Timely commissioning of these facilities will be key to ensuring a stable and reliable supply chain and mitigating potential risks associated with supply deficits and price volatility.
- Residential consumers to drive rooftop growth: Launched in February 2024, the PM – Surya Ghar Muft Bijli Yojana has generated substantial consumer interest in residential rooftop projects. In the first half of 2024, 3.3 GW of rooftop solar capacity was added in the country, with the residential sector accounting for 56% of this, surpassing the C&I sector for the first time. As of November 2024, the National Portal of India reported 1.46 crore registrations, 27.19 lakh applications and 6.58 lakh installations under the scheme. The outstanding applications are expected to contribute over 6 GW of capacity, assuming an average of 3 kWp per application. This momentum is anticipated to continue and expand further in 2025.
- Rising interest in flexible RE solutions: Popularity of flexible RE solutions is on the rise, with both states and open-access consumers evincing increased interest. In 2024, the country saw issuance of RE tenders of approximately 88 GW, resulting in allocation of around 48 GW of capacity. Notably, the share of pure-play solar and wind bids decreased from 65% in 2023 to 56% in 2024, indicating a shift towards more flexible RE solutions. Furthermore, the total RE allocation in 2024 was 20% higher on-year, laying the groundwork for a robust pipeline in 2025.
- Expansion of evacuation infrastructure: Development of evacuation infrastructure is gaining momentum, with significant progress made in recent years. As of October 2024, a substantial portion of the planned transmission infrastructure, including 28% of the targeted 114,687 circuit km of transmission lines and 20% of the planned 776 GVA substations, was completed. Giving further impetus, the government is expected to announce the Green Energy Corridor Phase III in the upcoming Union Budget. Phase 1 and 2, currently underway, aim to support evacuation of over 44 GW of RE. Phase 3 will further strengthen the evacuation infrastructure, enhancing resource adequacy among states.
- Project development timelines: To meet the government’s goal of 500 GW of non-fossil fuel-based power by 2030, the RE project installations have to speed up further. In 2024, solar installation of 25 GW was achieved. This needs to increase to 40 GW annually. While many large projects have been approved, execution has to be quickened. As of September 2024, there were 122 GW of solar and 38 GW of wind projects in the pipeline. Further, challenges need to be addressed in the wind sector, which has seen only 1-3 GW of new capacity added each year since 2018 owing to limited availability of suitable land and delays in project execution.
- Availability of finance: With RE capacity addition accelerating, demand for financing has also increased. Fortunately, domestic banks have concurrently increased their lending to the sector. For instance, the Indian Renewable Energy Development Agency’s loans for RE projects jumped 31% on year in 2024. Loan portfolios of Rural Electrification Corporation (REC) and PFC also reported a significant 49% and 19% on-year growth, respectively, during January-September 2024. However, to further stimulate growth, fund flow to the sector has to be stronger. While the Reserve Bank of India has classified RE as a priority sector, distinguishing it from the broader power sector could incentivise banks to lend more to this sector.
- Offshore wind development: India’s first offshore wind project, located off Gujarat coast, is currently underway with a bidding process that will define the future course of the sector. Globally, offshore wind development is facing major challenges due to delays in project development and high costs, making it an expensive proposition. However, in the Indian context, the government’s decision to provide support via viability gap funding for the initial 1 GW of capacity could help mitigate some of the costs.
Net-net, in 2025, government support and emerging technologies will continue to aid growth of the renewable energy sector. However, addressing challenges in project development, transmission infrastructure and manufacturing will be crucial to achieve the target of 500 GW non-fossil fuel-based power by 2030.
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