New Delhi: India’s renewable energy (RE) capacity additions are expected to exceed 35 gigawatts (GW) annually over the next two years, driven by a robust pipeline of more than 100 GW, according to CareEdge Ratings. The country installed 18.5 GW of RE capacity in FY24, reflecting a 21% growth over the previous fiscal year.
Solar power driving growth
The solar power segment continues to dominate India’s renewable energy landscape, contributing 59% of the RE capacity mix as of September 2024, up from 15% in March 2016. India currently has a solar module manufacturing capacity of 70 GW and a cell manufacturing capacity of 8 GW, as of March 2024. Over the last two years, the country has averaged 21 GW of annual solar capacity additions on a Direct Current (DC) basis.
CareEdge Ratings forecasts that rooftop solar, hybrid solar, and off-grid solar projects will contribute about 20 GW of capacity additions over the next two to three years. Additionally, solar open access capacities of 4-5 GW are expected, supported by corporate Environmental, Social, and Governance (ESG) commitments and the growing economic viability of commercial and industrial (C&I) projects.
Investment and manufacturing expansion
Amid rising demand, the solar equipment sector is projected to attract a capital expenditure (CapEx) of nearly ₹1 lakh crore, with an estimated debt funding of ₹70,000 crore over the next three to five years.
CareEdge Ratings highlighted the need for significant investment in solar manufacturing capacity. Upcoming capacities include 50 GW for cells and 80 GW for modules, necessitating a CapEx of ₹32,000 crore and ₹12,000 crore, respectively. Additionally, ₹55,000 crore is envisioned for 40 GW of wafer and 25 GW of polysilicon capacities awarded under the Production Linked Incentive (PLI) scheme.
Jatin Arya, Director at CareEdge Ratings, said, “The Indian solar market is poised for transformative growth. With robust policy frameworks and a clear focus on sustainability, we are witnessing a significant shift towards renewable energy that will not only meet domestic needs but also position India as a global player in solar equipment manufacturing.”
Challenges in the sector
Despite this progress, CareEdge Ratings cautioned that certain headwinds could impact growth. The lack of integrated solar equipment capacity, supply chain challenges, reliance on imports from China, increasing competitive intensity, and systemic delays in capacity additions remain areas to monitor over the medium term.
Mayuresh Karavade, Assistant Director at CareEdge Ratings, stated, “The surge in renewable energy capacity is not merely an aspiration; it is essential for India’s energy security and environmental goals. With a strong pipeline of projects and increasing investments in domestic manufacturing capabilities, we are on track to achieve our ambitious targets.”
Policy support and future outlook
India’s renewable energy growth is further supported by an annual tendering target of 50 GW through renewable energy implementing agencies, with solar expected to dominate. The sector’s growth is attributed to a combination of corporate ESG focus, investor interest, proactive policies, and enhanced financing avenues.
As India scales up its renewable energy efforts, the focus on domestic manufacturing and addressing systemic challenges will be critical to achieving its energy and environmental objectives.
