India’s renewable energy sector is poised for a major transformation with storage-backed renewable energy (RE) capacity expected to soar to 25-30 gigawatts (GW) by financial year 2027-28, up from almost zero in 2024-25, according to a Crisil Ratings report released on Wednesday.
This explosive growth will account for over 20 per cent of the new renewable capacity to be added in the next three years, driven by the government’s increasing focus on grid stability and round-the-clock green energy supply.
Storage-Backed Projects to Solve Intermittency Challenge
Storage-backed RE systems, such as solar-plus-battery storage and firm dispatchable renewable energy, are being viewed as critical to addressing the intermittent nature of renewable generation. These projects can deliver green power on demand—whether monthly, hourly, or during peak usage hours like mornings and evenings, thereby strengthening grid reliability.
The government’s support is reflected in tender trends. In calendar year 2024, about 25 per cent (11 GW) of central agency-awarded RE capacity came from storage-backed projects, up from 11 per cent (2.5 GW) in 2023.
Strong Pipeline Despite Execution Risks
Crisil’s report highlights a 34 GW cumulative pipeline of storage-backed renewable energy projects, though nearly all are currently in the development or early construction stages. While this raises typical project execution concerns, like delays in funding, land acquisition, and power purchase agreement (PPA) closures, Crisil expects the actual commissioning risks to be low to moderate.
Ankush Tyagi, Associate Director, Crisil Ratings, noted:
“Nearly 70 per cent of the awarded capacity in 2024 has either secured or identified key resources such as land and grid connectivity ahead of bidding. This proactive approach mitigates many construction-related risks.”
PPA and Funding Outlook Remains Positive
Nearly half the upcoming capacity has secured 25-year fixed-tariff PPAs, ensuring long-term revenue visibility. However, the remaining projects, whose tariffs are around 55 per cent higher than standard RE tariffs, may face delays in signing PPAs.
Yet, Crisil remains optimistic, citing three drivers for potential PPA tie-ups:
- The government’s push for a greener energy mix,
- Storage-backed projects’ capability to meet higher energy demands,
- Rising renewable purchase obligations (RPOs) for power distribution companies (discoms).
On the funding front, lenders are expected to show strong interest given the healthy post-commissioning cash flows, higher tariffs, and long-term revenue certainty.
Watchpoints: Land and Evacuation Infrastructure
Despite the promising outlook, Crisil flags some concerns, especially around timely land acquisition and power evacuation infrastructure. Delays in these areas, along with slower PPA closures, could extend project timelines beyond current expectations.
