RE Supply Shift Poised To Favor North And South India Over West By 2032: SBI Caps Report

India added 30 GW to its installed base (net basis) in the past 12 months, of which 75% was renewables, according to the latest data released in the SBI Caps report. Renewable energy has made notable progress recently, driven by fresh wind additions and a surge in energy storage system (ESS) tenders, as noted in the report.

Alongside the rise of solar, wind energy additions have rebounded after several stagnant years, complemented by a rise in ESS deployments. This growth has been facilitated by the prevalence of round-the-clock (RTC), firm and dispatchable renewable energy (FDRE), and wind-solar hybrid (WSH) tenders found SBI Caps report. The data also showed a rise in the inclusion of storage elements in a third of tenders during the first eight months of FY25 (8MFY25), compared to 23% in FY24 and just 5% in FY20. However, the industry continues to face challenges in implementing renewable energy projects. Several projects are currently awaiting power purchase agreements (PPAs) and suitable evacuation infrastructure, which could jeopardize the pace of new additions.

The recent growth in energy supply is expected to be a modest ~3% year-over-year (YoY) in November 2024, which is below the year-to-date FY25 (YTDFY25) level of ~5.3% YoY. This slowdown is partly attributed to a prolonged period of above-normal monsoons, which offset the strength observed in Q1. The power demand peak for FY25 likely occurred in May 2024, reaching a record 250 GW. Given long-term drivers of both energy and power demand—such as data centers, green hydrogen, and electric vehicles—robust growth beyond the projections of the National Electricity Plan (NEP) is anticipated.

Renewable Supply Shift May Realign Power Flow Dynamics

A significant portion of incremental renewable supplies until March 2032 will come from the North (particularly solar-rich Rajasthan and Ladakh) and the South (wind-abundant coastal areas of Tamil Nadu, Karnataka, and Andhra Pradesh). This shift is expected to tilt the balance of power away from the West, whose share in installed capacity will likely drop from 33% now to 25% by March 2032, even as it remains a key energy consumer and a secondary driver of the national peak.

This shift will necessitate increased transmission capacity, with the West as the focal point. Furthermore, as several renewable power hubs are located in remote deserts with limited evacuation infrastructure, significant greenfield transmission expansions will be essential.

Renewable Energy Surpasses 200 GW Milestone

As per the latest estimates, renewable energy witnessed over 75% growth in the past 12 months, with 20 GW of solar energy added. The report predicts a strong pipeline for renewable projects, estimating 50 GW of solar and wind additions during FY25 and FY26. Wind energy has shown a recent uptick, driven by the growing influence of RTC and FDRE contracts, particularly in October 2024.

According to the latest iteration of the NEP, installed capacity is projected to grow at a robust 10.4% compound annual growth rate (CAGR) between now and March 2032, outpacing demand growth due to the low capacity utilization factor (CUF) of renewables. Maximum growth will occur in storage and solar, with wind energy also expected to perform better than in the past decade (13.5% CAGR vs. 8.0% CAGR in the last decade).

Breaking decades-long dominance, the North and South regions are set to overtake the West in installed capacity by March 2032, driven by extensive solar installations in the North (notably Rajasthan and Ladakh) and wind installations in the South (Tamil Nadu, Karnataka, and Andhra Pradesh).