India’s renewable energy sector has recorded exceptional growth in capacity addition, reaching 20.1 gigawatts (GW) in the first five months of Fiscal Year 2026, compared with 9.0 GW in the same period last year. This represents a 123 percent increase, according to a recent report by ICRA. The growth has been supported by a strong pipeline of projects and favourable market conditions, placing the sector on track to cross 35 GW of new capacity in FY2026. This momentum builds on the sector’s performance in FY2025, when capacity additions rose to 28.7 GW from 18.5 GW in FY2024.
The expansion is underpinned by a project pipeline of 142.8 GW as reported by the Central Electricity Authority, combined with attractive solar module prices and rising electricity demand. However, the report also highlights challenges that could slow progress. Bidding activity has seen a decline, with only 3.4 GW auctioned in the first half of FY2026. This slowdown is linked to delays in the signing of Power Sale Agreements by bidding agencies with state distribution utilities, which in turn has held back the finalization of Power Purchase Agreements with developers. The timely conclusion of these agreements, along with the development of adequate transmission infrastructure, will be critical to sustaining the sector’s growth trajectory.
ICRA continues to maintain a stable outlook for the renewable energy sector. This outlook is supported by strong government policy, the competitive pricing of renewable power compared with conventional sources, and the growing sustainability commitments of commercial and industrial (C&I) customers. The report also outlines several key sector developments. The rationalisation of Goods and Services Tax (GST) rates for solar photovoltaic modules and wind turbine generators—from 12 percent to 5 percent—is expected to reduce the capital cost of projects by about 5 percent.
This in turn is projected to bring down the cost of generation by around 10 paise per unit for solar projects and 15 to 17 paise per unit for wind projects. The C&I segment, which accounts for 45 to 50 percent of India’s electricity demand, is expected to play a central role in driving growth. Achieving 20 percent renewable penetration in this segment over the next five years would require around 100 GW of additional renewable capacity, translating to a compound annual growth rate of nearly 30 percent.
Energy storage is also gaining importance as part of the sector’s evolution. The tariffs quoted for battery energy storage systems have declined significantly, improving the cost competitiveness of hybrid projects. ICRA estimates that India will require about 50 GW of storage capacity by 2030, which will be met through a mix of battery storage and pumped hydro projects. On the module pricing front, the report notes that imported N-type modules were available at relatively low prices of 8–9 cents per watt in August 2025.
However, prices in the Indian market were considerably higher at 15–17 cents per watt due to the Approved List of Modules and Manufacturers (ALMM) restrictions. The extension of ALMM requirements to solar cells from June 2026 is likely to push module prices higher in FY2027, posing a challenge for developers in future bids. Additionally, the recent imposition of 50 percent tariffs by the United States on Indian products is expected to hurt the competitiveness and export prospects of Indian manufacturers.
Despite these challenges, the renewable energy sector continues to show resilience. In the first five months of FY2026, the sector recorded 15 rating upgrades compared with 13 downgrades. These upgrades were largely attributed to timely project completion, satisfactory generation performance, and ownership changes that strengthened project credit quality.
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