India’s renewable energy sector is facing a significant setback—despite having ample clean energy available, there are no buyers. While the central government is keen to transition away from polluting coal-fired power generation towards solar and wind energy, state government-owned power distribution companies are reluctant to finalise renewable purchase agreements.
Nearly 40 gigawatts of renewable energy projects in India remain stalled due to states’ unwillingness to sign power sale agreements. These projects, awarded through the Solar Energy Corporation of India (SECI) and state-run power generators such as NTPC, NHPC, and SJVN, have been pending for over a year, according to a presentation at an MNRE review meeting on February 5. The delays are severely impacting future investments in the renewable energy sector.
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States hesitant to buy renewable energy
Under bidding guidelines, a Letter of Allocation must be awarded within 180 days of the tender announcement. However, several factors contribute to states’ reluctance to sign PSAs. Many states hesitate to commit to PSAs at higher tariffs when newer projects offer lower rates. Slow approvals from regulators add to the delays. Additionally, many states lack the necessary transmission infrastructure and storage capacity to accommodate the rapid growth in renewable energy generation. Reliability concerns also play a role, as states remain dependent on fossil fuels due to the intermittent nature of renewables.
The central government is under increasing pressure to accelerate renewable energy projects to meet its ambitious target of 500 GW of non-fossil fuel capacity by 2030. However, without cooperation from states, these goals remain unattainable. Renewable Purchase Obligations (RPOs) mandate that states increase their clean energy adoption to ensure the national renewable energy share doubles to 43.3% by March 2030.
Resistance to open access projects
While commercial and industrial consumers in India are eager to procure renewable energy directly from independent power producers (IPPs) to meet their financial and decarbonisation goals, states have little incentive to facilitate such transactions. An even greater challenge is the obstruction of open access projects, which allow corporations and large consumers to directly source renewable energy instead of relying on state-run DISCOMs.
Several state governments, including Rajasthan, Gujarat, and Andhra Pradesh, have been exploiting legal loopholes to discourage OA projects. Some states delay approvals, as seen in Rajasthan and Haryana. Others restrict power banking facilities, which has been evident in Andhra Pradesh and Gujarat. Additional obstacles include increasing transmission and wheeling charges or introducing new levies such as an additional surcharge in Maharashtra or a reliability charge in Haryana.
Stalled progress despite increased bidding
A recent review meeting led by Union Minister Joshi underscored a major roadblock in India’s renewable energy expansion. Of the 94 GW of projects bid out by the four Renewable Energy Implementing Agencies (REIAs) in 2023-24, only 45 GW have progressed to the LoA stage. The LoA is issued only after a PSA is signed between a project and a state buyer, followed by a Power Purchase Agreement (PPA) with the respective REIA.
India’s total installed renewable energy capacity currently stands at 164 GW, excluding large hydro projects. In the 2023-24 fiscal year, the country added 18 GW of renewable capacity, a figure expected to be matched in 2024-25 by December. However, the lack of state-level demand is now threatening to derail further expansions, with serious discussions about pausing new tenders until existing projects secure buyers.
Implications of Adani bribery case
India’s renewable energy woes gained international attention with the Adani bribery case. The inability to secure buyers for renewable power projects has become a major concern for developers. The controversy involving Adani Green and Azure Power came to light when the companies allegedly approached multiple states and offered bribes to secure PSAs, as per an indictment by the U.S. Attorney for the Eastern District of New York.
The $265 million bribery scheme targeted Indian state government officials after Adani entities struggled for years to find buyers for a $6 billion project. According to the indictment, Andhra Pradesh was eventually persuaded to purchase power from the project at ₹2.49 per unit. While Adani Group has denied the allegations, the case highlights the growing delays in securing buyers for renewable electricity, an issue affecting many other developers as well.
Resolving the bottleneck
Although SECI has tripled its tendering activity, states are struggling to keep pace and sign the required PSAs. This mismatch between project timelines and demand, combined with slow infrastructure development, has resulted in an oversupply of power that remains unsold.
Industry experts now advocate for several solutions to address these challenges. Creating a demand pool is one such approach, ensuring states commit to renewables before projects are awarded. State-level awareness campaigns are also essential to educate state governments on the long-term benefits of transitioning to clean energy. Strategic project planning is another key solution, with former Central Electricity Authority chairman Rakesh Nath suggesting that determining buyer demand before bidding begins can help reduce the risk of stalled projects.
India’s ambitious renewable energy transition hinges on addressing the current impasse. Increasing capacity alone is insufficient unless demand from states is also stimulated. Aligning the interests of all stakeholders is critical for ensuring a smooth and sustained shift towards clean energy. The central government must actively engage with states to resolve their concerns, ensuring that the nation’s green energy aspirations do not remain unrealised.