Wind Capex To More Than Double To Rs 1.8 lakh Crore By Fiscal 2028

CRISIL Ratings recently announced that, the wind capacity addition is expected to witness to rise 2.5x on auction ramp-up and easing supply side constraints. The research agency anticipates an increase in India’s wind capacity addition with an increase by 2.5 times to nearly 25 GW between fiscals 2025 and 2028. This is an increase compared to 9 GW added between fiscals 2021 and 2024, entailing a capital expenditure (capex) of Rs 1.8–2 lakh crore.

This rides on the increasing importance of wind generation in India’s renewable mix for grid balancing and providing renewable power throughout the day vis-à-vis solar generation, which typically happens during the day. A ramp-up in auctions of wind and hybrid projects (including storage linked projects)1 supported by construction of transmission infrastructure to wind sites, improved financial profiles of wind original equipment manufacturers (OEMs), and viable tariff bids in recent past indicate as much. India added wind capacity at 3.0 GW per year between fiscals 2014 and 2018.

However, the pace slowed down to 1.7 GW between fiscals 2018 and 2023 owing to lack of connected sites with high wind potential and diminished returns for developers following aggressive bidding. Several policies/ initiatives have since been rolled out to strengthen the prospects of the wind sector. For instance, the government has set a target to auction 50 GW of renewable projects every year, including 10 GW of standalone wind projects for specifically reinvigorating wind capacity additions.

This has already led to auction of around 5 GW standalone wind projects since the start of fiscal 2023, vis-à-vis around 3 GW auctioned in fiscals 2021 and 2022. Auctions of hybrid and storage linked projects are also on the rise—up from 4 GW in fiscals 2021 and 2022 to nearly 18 GW in fiscals 2024 and 2023. Says Ankit Hakhu, Director, CRISIL Ratings “Hybrid and storage linked projects would push higher wind additions. Nearly 30-50% of capacity of these projects will comprise wind power as these require developers to provide renewable power throughout the day, especially demand peaks during evening and night hours.” To further support wind capacity additions, supply side constraints have started to ease through an improvement in transmission connectivity and better financial health of wind OEMs.

The government is developing transmission infrastructure to improve connectivity to sites with high wind potential and plans to increase connected capacity for wind sites from 50 GW as of December 20224 to 75 GW by March 2025 and 100 GW by December 2027. Also, raising equity and prudent project bidding has helped OEMs reduce leverage and, thereby, improve their credit profiles. This is reflected in an improvement in the credit metrics of two leading manufacturers that implemented around 40% of the 3.3 GW capacity in fiscal 2024. For these OEMs, which are vital to the overall supply chain because of their technical and on-ground capabilities, interest coverage ratio improved from less than 1 time in fiscal 2020 to an estimated 2.7 times in fiscal 2024. Lastly, we also expect better viability of the projects under implementation. Says Varun Marwaha, Associate Director, CRISIL Ratings, “Average tariffs have stabilised around Rs 3.2 per unit in fiscals 2023 and 2024 and are expected to continue in fiscal 2025, vis-à-vis Rs 2.8 per unit over fiscals