India needs to look into the challenges related to utility-scale renewable energy tenders, according to a new IEEFA and JMK Research report
While there is strong tender issuance activity, there are increasing instances of undersubscription and delays in signing of offtake agreements
There must be clarity on clearing the unsold power inventory for IPPs to continue bidding for new large-scale projects
India continued to exceed its 50 GW annual renewable energy tender issuance target for the 2nd year in a row with 73 GW of utility-scale capacity tendered in 2024. Yet, there have been increasing instances of undersubscription, delays in signing power purchase agreements (PPA), and cancellations adding to the challenges in the space, according to a new report.
Analysts with the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research & Analytics count that out of 73 GW tendered last year, non-vanilla renewable technologies such as wind-solar hybrid and energy storage accounted for half of the issued capacity. But there was an undersubscription of approximately 8.5 GW of the total, 5x higher compared to undersubscription in 2023.
Their report lists complex tender design, such as firm and dispatchable renewable energy (FDRE), aggressive bidding during reverse auctions, and delays in the readiness of inter-state transmission system (ISTS) infrastructure as factors responsible for the undersubscription.
Under pressure to meet the strict 50 GW annual tendering guidelines, state agencies end up issuing bids and finalizing auctions without securing and planning for offtake agreements. This, according to the analysts, delays signing of agreements.
Out of more than 40 GW capacity awaiting power sale agreements (PSA) with offtakers, those awarded by the Solar Energy Corporation of India (SECI) comprise 30% with 12 GW of unsigned PSAs, according to the report titled Challenges in India’s Tender-Driven Renewable Energy Market.
Developers tell the report writers that tenders facilitated by the offtakers themselves get PSAs signed quickly with no intermediary agency involved.
The primary reason for the delays in signing these PSAs appears to be the energy offtakers’ expectation of continuously falling renewable energy tariffs, according to the report. Tariffs are directly related to solar module prices that fell 63% YoY in the global markets in 2024 and 78% in the domestic market. The cost of a solar module manufactured in India was $0.202/W compared to $0.085/W globally. However, tariffs for solar tenders in India continued to range between $0.025 and $0.027/W in 2023 and 2024.
Cancellations are another sore point. Between 2020 and 2024, 38.3 GW of utility-scale renewable energy tender capacity was canceled, representing about 19% of the total issued capacity during the period. Such factors may deter investors from taking interest in future renewable energy projects, especially overseas large-scale investors that offer low-cost financing.
“Until there is clarity on clearing the unsold power inventory, independent power producers (IPPs) may hesitate to bid for new large-scale projects,” reads the report.
These challenges can affect 75 GW of utility-scale renewable energy capacity tendered by 2030, caution the analysts.
For India to achieve its 2030 target of 500 GW of non-fossil fuel based electricity, including 280 GW of solar, it needs to double the record of 35 GW of new renewable energy capacity it installed in 2024, according to the Global Energy Monitor. At the end of January 2025, it had reached only 217.62 GW (see India Must Double Renewables Deployment To Achieve 2030 Target).
To achieve its targets, the growing renewables market will need to delve deep into the challenges facing its renewable energy industry. The IEEFA and JMK analysts recommend the government to also establish clear annual targets for both the allotment and the execution of PSAs to ensure that tendering agencies issue bids only after securing necessary offtake agreements.
They also lay emphasis on stricter enforcement of renewable purchase obligations (RPO) and associated penalties to bring discipline to the market and sustain renewable energy demand.
The complete report is available for free download on the IEEFA website.