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.
