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Vaclav Smil, in his 2010 book, Energy Myths and Realities, has written: “Myth is new energy sources and technical innovations will eliminate the need for fossil fuels within a few decades. But the reality is comprehensive energy transitions take several generations.”

This reality stands truer than ever for India. The last two decades have seen exceptional wins in renewable energy (RE) capacity addition and cost reduction. From merely 10 gigawatts (GW) in 2010 to 250 GW now, India's RE growth is unprecedented, especially among developing nations. The cost of RE has fallen by 85% over the last 15 years and is now cheaper than new thermal power.

But there are some chinks in the armour, exposing the lack of foresight, a robust ecosystem and disconnected policies.

On one hand, there is so much RE, but hardly any state power purchase agreements (PPAs) vying for them. On the other hand, the mismatch between generation and transmission is a scary déjà vu of coal and hydro boom years. Then there is the Indian grid, which is handling the duck curve, necklace curve and any curveball that renewable and unprecedented electricity demand are throwing at it. In the middle of this multi-way tug of war sits the energy transition pathway of India, battered by wars, energy crises, and development challenges.

The silver lining is that most of these challenges are now becoming potential opportunities for investors and policymakers who are now tailoring the RE sector as per the market trends.

Modern problems require modern solutions

Grappling with issues which weren't on the radar a decade ago, the country's RE sector is now looking at novel ways to increase the uptake of green energy across stakeholders and not rely on just state-owned mechanisms.

Source: Ministry of New and Renewable Energy

Experts point out that the mismatch between capacity addition and PPAs is now evolving into states and discoms becoming more discerning buyers.

“Discoms want firm, round-the-clock or dispatchable green power that fits their resource plans and financial constraints. Several states are now conducting their own auctions and developing integrated resource plans,” said a former executive of a state-owned power generating company.

Madhya Pradesh is one such state which in recent times has conducted auctions for solar power where it has experimented with time of supply, energy storage and incentives.

Also Read: Beyond Capacity: Unlocking the Full Potential of India’s Clean Energy

This could mark a significant shift away from a procurement model dominated by central agencies such as the Solar Energy Corporation of India (SECI) towards more state-led and market-driven procurement. SECI, founded in 2011, is tasked with issuing tenders for RE projects and finding buyers for its electricity sales. It is one of the four government-appointed Renewable Energy Implementation Agencies (REIA). Over the years, a lack of interest from states in buying RE, along with delays in transmission and grid connectivity, has left close to 60 GW of projects languishing without a power sale agreement.

Some experts feel the models designed by agencies such as SECI need to be picked up by the states and customised as per their requirements. “Central tenders give a template for other states to experiment in that direction if it's successful.

For instance, copying a SECI tender format and moving it to a state government, can have long-term value.

“Whatever the price may be, it will still be cheaper than conventional. The linear growth plan of having [a pre-determined] amount of GW in a year is not in sync with the markets. States are registering their demands in the way they want,” said a Delhi-based energy researcher.

The chicken and egg question

The generation story of RE is also seeing a repeat of generation-transmission misalignment, as has happened with coal and hydro in the past. This problem is now particularly visible in RE-rich states such as Rajasthan and Gujarat, where pooling stations face congestion and renewable projects risk curtailment.

Source: Ember

Historically, the way transmission is planned is always generation-driven in India. “The electricity generator says, I want to set up my plant here, I want to set up a unit here, please provide a special line, I want to supply it to this place. Now, with the opening of markets, with something like General Network Access, whether a generator-led planning system can survive is a big question mark, especially with distributed resources like RE,” said a transmission sector industry executive.

The executive added that it is time that policymakers stop treating generation and transmission as separate planning exercises.

“Transmission requirements should be mapped alongside generation, with far greater attention to intra-state networks and transparent information on available connectivity. The country also needs to address the financial risks of building expensive transmission infrastructure that may remain under-utilised for much of the day when connected to variable renewable generation,” the executive said.

Build and store, then forget

In a recent tender, SECI invited bids for 'round-the-clock thermal mimic (RTCTM)’ RE supply. A thermal mimic RE project supplies a reliable and continuous supply, as thermal power plants would do. The bidding discovered successful tariffs in the range of ₹ 5.25–5.26 per kilowatt-hour, fixed in nominal rupees for 25 years.

Source: India Energy & Climate Centre, UC Berkeley

At this tariff, RE combined with storage is among India’s cheapest options for new reliable round-the-clock power, according to an analysis by the New Delhi-based India Energy & Climate Centre (IECC), UC Berkeley.

“This auction advances India's RE progression to baseload-like power: supplying through the night, meeting morning and evening peaks, and backing down during solar hours—much like thermal plants are scheduled to operate,” cited the analysis.

The push towards RE-RTC and fixed and dispatchable renewable energy (FDRE) is making storage more important than ever. Cost and deployment economics now favour storage over building new thermal and flexible thermal generation, according to an analysis by the London-based think tank Ember.

Also Read: If Energy Storage Comes at Scale, Can Flexi Coal be Left Behind?

India currently has 8.5 GW of pumped storage projects (PSP) and 16 GW of RE + battery energy storage systems (BESS) under construction. Additionally, according to government data, 28 GW of BESS is under various stages of bidding, and 64 GW of PSPs are under survey.

However, concerns around the procurement of BESS, weaving their costs into the final RE tariff for upcoming RE projects and curtailment of RE has slowed the construction of energy storage projects in the country.

A senior industry executive pointed out that the regulations governing energy storage at the power plant level are being altered constantly, as the government is trying to be in sync with the changing market scenarios.

“Setting up BESS is more of an obligation right now, primarily to address the government’s mandate. But it can open up a lot of consumer segments for RE power generators if the market becomes more flexible and regulations are eased. A storage-linked RE project can cater to the commercial and industrial (C&I) segment and recover the costs as well,” the senior executive said.

Sector experts pointed out that battery storage specifically could be deployed across levels — generation, transmission, distribution, and consumer — depending on where it delivers the greatest economic value. An energy transition expert said that India’s electricity demand is expected to grow rapidly from cooling, data centres, industrial electrification and new manufacturing, so the next phase of RE should follow these trends.

Also Read: How Should India Power Its Data Centres?

“Going forward, RE supply would need to be driven less by utility-scale procurement and more by commercial and industrial consumers seeking reliable, competitively priced clean power,” the expert said.

This is expected to change the fundamentals of the electricity market in India. Selling solar or wind projects through long-term PPAs to just one type of procurer could become a thing of the past. RE developers are now increasingly looking at becoming energy portfolio managers for large-scale energy consumers through a mix of RE generation, storage and demand management, said an executive of an RE company offering solutions to the C&I segment.

“Steel and similar other energy-intensive industries where renewable electricity could increasingly replace fossil fuels are the next frontier for the sector. The economics of green steel, in particular, may already be more favourable for new capacity than conventional blast-furnace production in some circumstances. The challenge is converting this emerging economic case into investment decisions through credible standards, demand signals and policy certainty,” said the RE company executive.

Smil, in one of his essays, has also said, “As in the past, the unfolding global energy transitions will last for decades, not years, and modern civilisation’s dependence on fossil fuels will not be shed by a sequence of government-dictated goals.”

The next milestones for the country’s RE sector are not just plain capacity addition but capacity for a specific customer, especially a fossil fuel guzzler. The policy landscape would also now need to support a power system capable of integrating additional RE capacity of all types - including storage, decentralised and for a targeted customer. There is also an urgent need to integrate generation-transmission planning and viable regulations that age well, while giving more power to the states to plan their energy future.

[Edit: Bhasker Tripathi, Shaswata Kundu Chaudhuri; Production: Paridhi Choudhary]

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