Page 51 - Policy Economic Report - October 2025

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

The sector has entered that phase, where the focus is shifting from capacity expansion to capacity
absorption. We are now dealing with grid integration, energy storage, hybridisation, and market
reforms, the real foundations for a 500 GW plus non-fossil future. In that sense, the recent moderation
in capacity addition is a recalibration, a necessary pause to ensure that future growth is stable,
dispatchable, and resilient.

India’s RE Growth Remains Among the Fastest in the World, Driven by Multi-Pathway Expansion

Over 40 GW of awarded renewable projects are presently in advanced stages of securing PPAs, PSAs, or
transmission connectivity a clear reflection of the sector’s robust pipeline of committed investment. The
reality is that India’s renewable market has outpaced the pace of its grid and contractual institutions, a
challenge common to all countries undergoing large-scale energy transitions.

In this context, enforcement of Renewable Power Purchase Obligation by states/ DISCOMs, upgrading
the transmission lines for evacuation of power and use of technology for grid integration remain top
priorities before going ahead with large scale bids for RE.

In the current year, Central Renewable Energy Implementing agencies (REIAs) have done bids for 5.6
GW, while State agencies have done bids for 3.5 GW. Additionally Commercial and Industrial Consumers
are likely to add nearly 6 GW of renewable energy capacity in calendar year 2025. Thus, capacity
addition of RE is progressing through multiple pathways and not necessarily through REIA led bids alone.

Global headwinds have also played a role: supply-chain disruptions, fluctuating module prices, and
tighter financing conditions have slowed commissioning timelines. Yet India continues to add 15–25 GW
of new renewable capacity annually — a rate that remains among the fastest in the world.

A Deliberate Policy Pivot

Over the past two years, policy attention has consciously shifted from pure capacity growth to system
design. Tenders for RE power with energy storage or peak power supply now dominate auctions,
signaling a move toward firm and dispatchable green power. Battery Energy Storage Systems (BESS) are
being integrated at both grid and project levels, marking the emergence of a new market. Domestic
manufacturing, incentivised through the Production-Linked Incentive (PLI) scheme, Domestic Content
Requirement, imposition of duties, implementation of ALMM, and duty exemptions for capital
equipment, is reducing import dependency and creating industrial depth.

In addition, the recalibration of GST structures and ALMM provisions represents a strategic
consolidation phase, aligning fiscal policy with the twin objectives of domestic value chain depth and
technology assurance. Far from being disruptive, these adjustments are designed to stabilise costs,
enhance module reliability, and promote scale efficiencies in India’s maturing solar manufacturing
ecosystem. Concurrently, the trajectory of battery storage deployment is advancing through viability
gap–funded projects, sovereign tenders, and emerging storage obligations, establishing the foundation
for firm, dispatchable renewable capacity. These measures signal a shift from expansion-led growth to a
more resilient, quality-driven, and system-integrated renewable energy architecture.

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