Storage-backed renewable energy accounts for one-third of capacities auctioned in 2024

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Storage-based renewable energy (RE) project volumes rose to 11 gigawatts (GW) in 2024, accounting for around one-third of the total capacities auctioned by central agencies during the last calendar year.

With government’s thrust on promoting more firm and dispatchable RE (FDRE) as well as solar coupled with energy storage, the installed capacity for storage-backed RE projects is likely to hit 25-30 GW by March 2028, Crisil Ratings said in a report.

Storage-backed RE projects provide an effective solution for the intermittent nature of RE generation. Such projects, which include FDRE, solar with energy storage, etc, supply power when required, supporting grid stability.

For instance, such projects can provide green power on a monthly or hourly schedule or during peak hours in the morning and evening.

Installed capacity of storage-backed RE in India is likely to increase to 25–30 GW by FY28 from almost nil in the last fiscal year, the ratings agency said.

The incremental capacity will account for more than 20 per cent of the total RE capacity to be added over the next three years, driven by the Centre’s push to make renewables more sustainable, it added.

The Centre’s push is reflected in the high volume of these projects in recent tender auctions, forming around 25 per cent, or roughly 11 GW, of the total capacity awarded through tenders by central agencies in 2024 CL as against around 11 per cent, or about 2.5 GW, in CY 2023.

“Given the high energy requirements, these projects need an average oversizing to the extent of about 2.5 times of contracted capacity. This has resulted in a cumulative capacity pipeline of around 34 GW,” it added.

That said, almost the entire capacity awarded through these tenders is either in development or in a nascent stage of construction, which exposes these to risks inherent in project implementation.

“Risks in these projects typically manifest in the form of delay in securing off take agreements, funding and execution. But we believe these risks to commissioning with material overruns would be low to moderate – with off-take and funding risks being low,” Crisil explained.

Further, the proactive approach by developers, especially towards land and connectivity requirements, augurs well limiting the construction risks, it added.

Ankit Hakhu, Director, Crisil Ratings, said “Off-take risk is low for nearly half of the upcoming capacity as these have secured long-term (around 25 years) power purchase agreements (PPAs) at a fixed tariff, which also provides revenue visibility. For the remaining half, the risk is elevated as their tariffs4 are about 55 per cent higher compared with vanilla RE projects, which could delay signing of PPAs.”