India’s Surge In Tendered Capacity Of RE Projects faces Multiple Risks

India’s two consecutive years of record renewable energy tendering capacity has placed the country on a record capacity addition trajectory. With tenders equaling 73 GW  in 2024 versus 58 GW in 2023, the numbers have surpassed even the central government’s own targets of 50 GW per year. These are among some of the findings of a report by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research & Analytics.

Nearly half of these new tenders in 2024 were for non-vanilla renewable technologies like wind-solar hybrid and battery energy storage in response to demand from energy offtakers for improved power quality.

“The evolution of renewable energy tenders demonstrates that market stakeholders are actively working to overcome shortcomings,” says the report’s contributing author, Vibhuti Garg, Director – South Asia, IEEFA. 

Rising Issue Of Tender Cancellation

The report also finds that the surge in tendering activity has brought fresh challenges that could temper investor enthusiasm and delay or cancel major projects. The report identified Tender undersubscription, Delays in power agreements with energy offtakers, Tender cancellations, as some of the key challenges in execution of utility-scale renewable energy projects.

“Tender undersubscription is emerging as a challenge for tendering authorities. Last year, about 8.5GW of utility-scale renewable energy tenders went undersubscribed, five times more than in 2023, owing to complex tender designs, aggressive bidding during reverse auctions and delays in the readiness of the interstate transmission system (ISTS) infrastructure,” says the report’s co-author, Prabhakar Sharma, Senior Consultant, JMK Research. 

Further, the report also highlighted delays in signing power sale agreements (PSA) with energy offtakers, which have now exceeded 40GW. Solar Energy Corporation of India (SECI)-led tenders comprise 30% (12GW) of the large backlog of unsigned PSAs. Other challenges such as tender cancellations, are also on the rise. From 2020 to 2024, 38.3GW of utility-scale renewable energy capacity was cancelled, accounting for about 19% of the total issued capacity. The report found that the cancellations were attributed to tender design issues, location or technical complexity, undersubscription and PSA delays.

REIAs 

The IEEFA report found that SECI continues to be India’s largest utility-scale renewable energy tendering agency. As of December 2024, it had issued more than 113GW of tenders, three times the amount issued by NTPC Ltd, the second-largest issuer. In addition to the central agencies, state agencies such as Maharashtra State Electricity Distribution Co. Ltd (MSEDCL), Rajasthan Urja Vikas Nigam Ltd (RUVNL) and Rewa Ultra Mega Solar Ltd (RUMSL) have also played significant roles in issuing considerable capacities, becoming key players in India’s renewable energy tendering landscape. Like REIAs, state agencies are also emphasising non-vanilla tendering.

“Delays in project implementation pose a significant challenge to India’s renewable energy target for 2030,” says the report’s co-author, Ashita Srivastava, Senior Research Associate, JMK Research. “Ongoing issues with project realisation could deter investor interest in future renewable energy projects in India, potentially affecting the availability of low-cost financing from large-scale investors,” he adds.  

The report recommends authorities focus equally on all aspects of the tendering process, from issuance of requests for selection to allotment and signing of PSAs, to keep momentum high on adding renewable energy capacity via such tenders. “In addition to issuing tenders, the government should establish annual targets for both allotments and the execution of PSAs. This will ensure that renewable energy implementing agencies (REIAs) issue bids only after securing the necessary offtake agreements,” says the report’s co-author Deepalika Mehra, Research Associate at JMK Research. 

Tariff Trends

The report compared the trends over the past year and found that, “In 2023 and 2024, solar module prices in both the global and domestic markets declined by 63% and 78%, respectively. In December 2024, the cost of a solar module manufactured in India was US¢20.2 per Watt-peak (Wp) output, more than double the price in global markets, i.e. US¢8.5/Wp.3”

It also noted, “While solar module prices are dropping significantly, solar tender tariffs haven’t had a corresponding decrease and remained in the US¢2.5-2.7 per kilowatt hour (kWh) range in those two years.  WSH (Wind Solar Hybrid) tariffs are affected by concurrent cost trends from the solar and wind sectors. While solar tariffs have remained marginally high, wind tariffs have risen substantially, marking a rise in WSH tenders with the highest tariff discovery of Rs3.52 (US¢4)/kWh.”

New Entrant

Highlighting the growth made over the past year, it mentioned, “Some new entrants, such as IndiGrid and Gensol, are primarily focusing on standalone BESS tenders. In 2024, entities from other sectors also won renewable energy tenders. These included HG Infra Engineering (a road engineering, procurement and construction company), Pace Digitek (a telecommunications company) and NRC Industries (a conveyor belt manufacturer).”

 

 

While the report highlights the key challenges, recent news on the financial issues being faced by Gensol Engineering, which has won a few BESS tenders in recent months, besides the risk of a further rise in solar costs if Chinese prices inch up as projected, further underlines the serious risks to continuing growth.