Strong policy support by the government and energy transition goals are the primary factors driving India towards a renewable future, Vikram V, Vice President & Co-Group Head - Corporate Ratings, ICRA Limited told bne Intellinews in an interview. According to ICRA, the share of renewable energy including hydro in India’s power generation is forecast to rise to 35% by FY2030 compared to 21% in FY2024. India’s total power generation in FY2024 stood at almost 1,739bn units, according to government data.

“The energy transition goals set by the government with the ultimate objective of achieving net-zero by 2070, along with medium-term goals of increasing the non-fossil fuel-based power generation capacity to 500 GW are driving India towards a renewable future. This is reflected in the strong policy support, including increasing the renewable purchase obligation (RPO) to 43.3% by 2030 from 29.9% currently,” Vikram said.

The RPO is a regulatory mechanism that requires certain entities to purchase a percentage of their electricity from renewable energy sources.

The large untapped solar and wind power potential, superior tariff competitiveness and favourable outlook on electricity demand, are a few other drivers for the Indian renewable energy sector.

“Moreover, the sustainability focus by the large industrial and commercial customers is also driving the demand for renewables. A majority of the growth will be driven by the solar capacity, driven by the superior tariff competitiveness, low gestation period and large potential for solar power in the country,” Vikram said.

Solar to drive the renewable push

According to ICRA, within renewable generation, the share of solar generation is expected to be highest at 57% by FY2030, followed by hydro at 20% and wind at 19%. Within the overall electricity generation sector, the share of solar is predicted to be at 20%, followed by hydro and wind at 7% by FY2030. 

The share of nuclear based generation in the overall energy generation is estimated to remain at about 3-3.5% by FY2030.

India’s renewable energy capacity needs to double

ICRA anticipates that in order to achieve the RPO target of 43.3% by as soon as FY2030 will require in excess of double India's current 200 GW in renewable energy capacity. This will need investments in energy storage and grid integration solutions, alongside overcoming issues like land acquisition and transmission infrastructure.

Vikram said that the policy support from the government of India remains strong in terms of RPO targets, bidding trajectory for the projects, measures to augment transmission infrastructure as well as support the development of energy storage projects like battery storage and pumped hydro storage.

The government has already announced a renewable energy bidding trajectory of 50 GW per annum over the four-year period spanning 2024-2027 to provide the pipeline for the 500-GW capacity target by 2030. In line with this, bidding activity witnessed a jump in FY2024 and H1 FY2025, Vikram said. 

Furthermore, the government is focusing on awarding round the clock and firm & dispatchable renewable energy projects to mitigate the intermittency risk associated with renewables. The supply under these tenders can be made possible through use of solar, wind and energy storage projects.

While a number of projects are being bid out in the transmission segment to augment the evacuation infrastructure for upcoming renewable power projects, the timely completion of these projects remains important, Vikram said. Moreover, support from state governments in enabling timely completion of land acquisition for renewable energy projects and transmission projects remains important.

EVs: Shaping the future of mobility but challenges remain  

In the space of mobility, electric vehicles (EV) are attracting substantial investments, with almost INR250bn likely to be channelled into charging infrastructure and localisation of EV components over the next few years, according to ICRA.   

Vinutaa S, Vice President & Sector Head - Corporate Ratings at ICRA, stated that Indian charging infrastructure is at a nascent stage, with 25,200 charging stations in operation as of October 2024. This, however, is an improvement from the 1,800–2,000 public charging stations in place three years ago.

Lack of requisite charging infrastructure has been a key deterrent for EV penetration in the country, Vinutaa said. Apart from capability enhancement and driving demand, the government has, therefore, focused on improving the charging infrastructure to help address range anxiety concerns related to EVs, and allocation for the same in the recent PM E-Drive Scheme.

Vinutaa added that both PSU (public sector undertakings) and private players are active in the EV charging space. However, despite the anticipation of an increase in EV charging stations, the number could still be significantly low for any major EV penetration.

Currently, 30-40% of the EV supply chain is indigenous. Chassis components, which need minimal technological enhancements, are manufactured in India. In recent years, areas such as traction motors, control units and battery management systems have also seen significant localisation. However, advanced chemistry batteries, which are the most critical and expensive components, comprising nearly 35-40% of the vehicle's cost, are still sourced from overseas.

These low levels of localisation offer major manufacturing opportunities for Indian auto component manufacturers, Vinutaa said. In instances where parts are already used in internal combustion engine (ICE) vehicles, technological advancements may lead to increased content per vehicle.

Currently, battery cells are not made in India, with the majority of original equipment manufacturers dependent on imports. Domestic operations are primarily limited to battery pack assembly. As such, India needs to develop its own ecosystem for manufacturing battery cells locally to attain large-scale EV penetration with a competitive cost structure, according to ICRA.

The battery manufacturing space is thus attracting considerable attention. ICRA estimates that demand for EV batteries for use within India is likely to reach 15 GWh by 2025, and 60 GWh by 2030. 

However, setting up a cell manufacturing ecosystem faces many hurdles such as technological complexity, high capital intensity and raw material availability. The ability of battery manufacturers to build alliances across the value chain to mitigate these risks, along with the development of a robust recycling infrastructure, will be vital, Vinutaa said.