By 2025, India’s installed renewable energy capacity has exceeded 185 GW, with 22 GW added in the first half of the year—a surge of 60% year-on-year. However, policy adjustments and market shifts are reshaping the industry landscape: the phase-out of inter-state transmission system (ISTS) charge exemptions has spurred a surge in energy storage demand, while a slowdown in bidding activities and supply chain pressures highlight the growing pains of the transition.
ISTS Fee Exemption Phase-out Ignites Energy Storage Boom
The explosive growth in India’s renewable energy sector is partly driven by a rush among developers to commission projects. Under the policy, solar and wind projects grid-connected by June 30 enjoy full exemption from ISTS fees, while new projects starting in July are required to pay 25% of the fees—a share that will increase to 100% by 2028. Only pumped hydro and supporting energy storage projects remain exempt. This change has directly incentivized a shift toward “renewable energy + storage” hybrid models.
Data show that energy storage components accounted for 50% of projects tendered and awarded in the first half of 2025, with a notable emphasis on long-duration storage. Recent tenders by India’s National Hydroelectric Power Corporation (NHPC) and the state of Bihar, for example, have required 4-hour energy storage systems (125 MW/500 MWh), significantly raising capacity costs compared to conventional 2-hour projects. Analysts note that policy directives are compelling developers to treat energy storage as a core component of projects rather than an optional add-on.
Slower Bidding and Structural Challenges Emerge
Although India aims to achieve 500 GW of installed capacity by 2032 through 50 GW of annual tenders, only 25 GW was tendered in the first half of 2025, with 13 GW awarded. In the second quarter, tender volumes fell 40% year-on-year to 12 GW, while awarded capacity dropped 30% to 5 GW. Federal agencies dominated over 60% of project awards, with Uttar Pradesh, Rajasthan, and Gujarat emerging as key states in distributed capacity allocation.
The market structure is undergoing profound changes: hybrid storage and standalone storage projects now account for equal shares in tender volumes, while standalone solar and wind projects are gradually being marginalized. However, stringent scheduling requirements and cost pressures are hindering project implementation. For example, a 1.2 GW “round-the-clock” tender launched by the Solar Energy Corporation of India (SECI) in May—requiring 4-hour storage, 80% annual availability, and 90% peak power supply guarantee—saw only 35% of its capacity subscribed, with final tariffs soaring to $61/MWh, 50% higher than the average for conventional hybrid projects. This highlights the imbalance between technical standards and economic viability.
Supply Chain Bottlenecks and Tariff Struggles
Tariff fluctuations reflect deeper industry contradictions. In the second quarter, the average bid for onshore wind projects was $44-47/MWh, higher than the $31/MWh for “solar-wind-storage” hybrid projects, underscoring the critical role of storage in cost stabilization. However, availability requirements have pushed up tariffs in some cases—for instance, stringent scheduling terms in SECI’s tender forced developers to raise bids to cover risks.
Meanwhile, domestic supply chain pressures are intensifying. Persistent shortages in solar cell and module supplies, coupled with rising capital costs, are further dampening bidding activity. Industry forecasts suggest that renewable energy tender activity in India will remain subdued for the rest of 2025, with the sector awaiting relief from the scaling of domestic manufacturing capacity and an influx of international capital.
Window of Opportunity Amid Transition Pains
Despite these challenges, India’s renewable energy transition still presents opportunities. On the policy front, the gradual phase-out of ISTS fee exemptions provides a buffer for market adjustment. At the market level, booming demand for long-duration storage and the adoption of hybrid projects are creating new investment hotspots. Federal and state governments must balance technical standards with economic feasibility while accelerating the development of local supply chains to avoid cost escalations caused by over-reliance on imports.
From the installation surge driven by the commissioning rush to the market’s pivot toward storage dominance, India’s renewable energy sector is undergoing profound restructuring. Short-term growing pains and long-term opportunities coexist amid policy adjustments, and the synergistic optimization of supply chain resilience, technical standards, and tariff mechanisms will be key determinants of whether India can achieve its green transition.
