India Needs To Narrow Its Renewables Generation Gap

There are several reasons such as the lack of a generation target, low efficiency of renewable power plants, grid congestion, lack of adequate storage capacity, and inflexible power purchase agreements. India’s 50% non-fossil fuel target is a rolling target and denotes 50% of the installed capacity by the year 2030.

Globally, India has agreed to phasing down coal but locally, it has not announced any concrete plans to scale it down. On the other hand, for example, the United Kingdom shut down its last coal power plant last year.

India has committed to reduce the emissions intensity of its economy by 45% by 2030, which is tough without scaling down coal and absorbing more renewables in its power supply. The annual global climate conference is less than two months away and with India vying for a leadership role in renewables, these are some serious gaps it will have to address going forward.

IndiaSpend wrote to the Ministry of New and Renewable Energy and Ministry of Power on how it intends to bridge this gap. We will update this story when we receive a response.

The numbers

Energy is the mainstay of any economy. Globally, electricity consumption is set to rise by 3.3% in 2025 and 3.7% in 2026. “Emerging economies in Asia account for the bulk of global electricity demand growth, with China and India expected to drive 60% of the increase in the world’s electricity consumption over 2025 and 2026,” the International Energy Agency noted.

Coal still supplies just over a third of global electricity generation, followed by natural gas at more than 20%. Global renewable electricity generation is forecast to climb to over 17,000 terawatt-hours (TWh) by the end of this decade, an increase of almost 90% from 2023.

While countries like the USA, Russia and those in Europe are heavily dependent on natural gas to power their economies, others like China and India primarily use coal.

In 2021, countries had come together to sign the Glasgow Pact wherein it was agreed to phase down coal. At the same conference, India announced its ambitious plan to become carbon neutral by 2070 and also fulfil four other climate pledges by the year 2030. One of those pledges was “to achieve about 50 percent cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030”.

On July 14, India declared that it has met the goal five years ahead of time.

“This early achievement provides an opportunity to aim even higher. The next phase of India’s energy transition must prioritise quality, equity, and resilience in clean energy access,” it stated on July 14.

Overall in the last decade, India’s installed capacity rose 59% to about 485 GW as of July 2025. Non-fossil-fuel capacity tripled to 243 GW, while capacity from fossil fuel sources grew 5% to 242 GW. (Note: While the terms ‘renewables’ and ‘non-fossil fuel sources’ are sometimes used interchangeably, large hydro is no longer considered renewable because of its ecological impact.)

During the same period, India’s power consumption grew 64% to 1,824 billion units. (A unit is one kiloWatt-hour and a billion units amount to one teraWatt-hour). Non-fossil fuel sources generated about 371 billion units, up from 191 in 2014-15, while fossil fuel sources account for about 1,453 billion units or 78% of India’s power--a sign of continued emissions.

Estimates from the Central Electricity Authority suggest India will have a power demand of 2,473 billion units by 2031-32, and the likely installed capacity by that year would be 900 GW--with about 617 GW of non-fossil fuel capacity. The CEA’s plan entails about an additional 18 GW of coal capacity by 2031-32--even higher, considering plants being shut or retired.

At the current pace of rollout, India will fall short of the targeted 2030 capacity by 140 GW of solar and 70 GW of wind, as IndiaSpend reported in November 2024 based on an analysis by NewClimate Institute and Climate Analytics--both climate change research organisations.

Filling the gap

“Perhaps now is the time to set a target for renewable energy generation rather than capacity,” said Charith Konda, energy analyst at the Institute for Energy Economics and Financial Analysis (IEEFA). “Once you have the target, then solutions and supporting policies will come into play. If there is no target, we are all talking about only capacity and celebrating unnecessarily. Installed capacity means it hasn’t really materialised in energy use because that’s what determines emissions,” he said.

Firstly, how much electricity can be generated from any power plant depends on something called the ‘capacity utilisation factor’ (CUF) or a percentage of its theoretical maximum. The CUF of thermal power plants is inherently higher as renewable sources are variable in nature.

“Unlike conventional power, solar and wind energy are dependent on nature. This is quantified by the term 'capacity factor',” explained Anas Rehman, senior policy advisor and Shruti Sharma, lead (affordable energy) at the International Institute for Sustainable Development.

“Typically, a solar plant in India has a capacity factor of 20% and wind power plants have it ranging between 20-30% depending on their location. Meanwhile thermal power plants typically achieve around 60% capacity factor. Hence the share of RE in electricity generation will always be less than its share in the capacity. While increase in the efficiency of solar and wind power plants could improve the capacity factor in the future, the gains will only be incremental. In the medium term, the only solution is to build more RE as fast as we can,” the duo said.

India also has a separate goal to have 500 GW worth of its installed capacity from non-fossil fuel sources by the year 2030--that is, about double the current capacity.

Beyond building capacity, India will also have to put in place the nuts and bolts that are missing or weak right now to absorb the growing renewables capacity.

“India's inability to integrate/absorb more VRE [variable RE] will only exacerbate with more renewable energy capacity addition every year. While renewable energy capacity addition is growing at a healthy rate, its share in the energy supply mix is not,” a 2023 report by IEEFA had said.

Some reasons behind low share of renewable energy in the total generation include grid congestion, lack of adequate storage capacity and inflexible power purchase agreements.

For example, the existing coal power plants have long-term power purchase agreements (PPAs) with two-part tariffs--a fixed payment based on capacity availability and a variable payment to cover the variable fuel costs. The fixed portion of the contract is on a take-or-pay principle, wherein the electricity distribution company (discom) has to pay the power plant even if it does not buy the electricity. This makes the contract inflexible leading to discoms preferring to purchase coal power to meet peak demand and keep the overall costs low.

As for grid congestion, the seasonality of wind power generation and concentration of wind power generation assets in six states leads to grid congestion in peak seasons. This results in the ‘curtailment’ of wind power or in simple terms, power going unutilised.

Energy storage is done using battery energy storage systems (BESS) or pumped hydro storage projects wherein excess renewable energy is stored and utilised when the sun or wind is not available. By 2032, India plans to increase its BESS capacity from the current 205 MW to 74 GW, a massive leap. Also, our target for pumped hydro storage capacity is 50 GW but we only stand at 5 GW at present.

“Our renewable capacity is growing fast, we are adding 25-30 GW every year. But without storage, we will either waste that energy or fall back on coal when renewables dip,” said Union Minister for New and Renewable Energy Pralhad Joshi earlier this year.

IEEFA recommended a combination of flexibility and grid balancing measures to increase RE in generation. This includes introducing measures like time-of-use electricity prices for all consumer segments, developing a well-connected national grid, deploying various energy storage options for grid balancing services and converting the fossil-fuel powered fleet to operate in a flexible manner.

“In simple terms, after ‘solar hours’, electricity prices can be kept high. In time-of-use tariffs, you discourage usage of electricity after certain hours and minimise the discretionary consumption of electricity. This encourages people to do optional tasks that require electricity in the daytime, when solar power is available, and not at night, when we depend on thermal power alone,” said Konda, author of the report.

Ruchita Shah, energy analyst (Asia) at global energy think-tank Ember, said that so far, policy has rightly focused on scaling up renewable capacity at record-low costs.

“The next phase, however, increasingly centres on addressing the generation gap. This includes bringing large-scale energy storage online and operationalising demand flexibility to enhance the utilisation of solar and wind. Storage will enable shifting of excess solar generation to non-solar hours, while flexible demand, supported by tariff incentives, will absorb more solar power during the day,” said Shah.

The government has acknowledged the need for some of these measures.

“There is a need to build a robust, digitally integrated electricity grid that can effectively manage high levels of renewable energy penetration, demand fluctuations…,” MNRE stated. “Expanding the deployment of Battery Energy Storage Systems (BESS) and pumped hydro storage will be critical to ensure grid reliability and round-the-clock power availability.”

“Looking ahead, the National Electricity Plan 2022-2032, envisages installation of 616 GW non-fossil fuel-based capacity, which would lead to an increased share of non-fossil fuel based generation to 48.7%,” Shah pointed out, a sign of the long road ahead.

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