India set for another record year of solar capacity additions, despite challenges

India is on track to achieve another record year of solar power capacity installations amid a strong order pipeline, even as persisting challenges led to sharply lower year-on-year additions in the first three months of this year.

India installed 7.8 GW of solar capacity, including grid-connected and off-grid, in the January-March period, compared with 8.5 GW last year, according to Ankita Chauhan, senior analyst at S&P Global Commodity Insights, adding that the country is on track to reach 27 GW of additions by the end of 2025. This compares with 24.6 GW of additions in 2024, which was a record high for annual installations.

The capacity additions seen during the first three months were significantly impacted by several challenges, according to a report by Mercom India Research, published May 20.

Several projects slated for January-March commissioning were postponed due to insufficient substation capacity and transmission infrastructure, land acquisition challenges and delays in signing power purchase agreements, the report said.

Also, a significant shortage of domestically manufactured modules, combined with elevated prices, created hurdles for developers during the period, the report said.

The Indian government implemented the Approved List of Models and Manufacturers regulation on April 1, 2024, mandating the procurement of solar modules from manufacturers featured in the list. This is one measure India has taken to reduce imports from China.

India added about 14.5 GW of total capacity during January-March, with renewable capacity additions accounting for 9.9 GW of the total and coal-fired accounting for 3.5 GW, Commodity Insights said in a report in April.

India has set itself a huge target of adding 500 GW of renewable energy, with solar capacity additions expected to play a significant role but is also looking to add at least 80 GW of coal-fired capacity during the period to meet growing demand.

Strong electricity demand

India's electricity demand is forecast to grow at an average 6.3% annually over the next three years, stronger than the 2015-2024 average growth rate of 5%, the International Energy Agency said in a report earlier this year.

During January-March, electricity demand rose by only 3.5% year over year, according to the S&P Global report, with the muted demand growth attributed to higher-than-normal temperatures during the first two months of the year, which led to lower-than-expected heating demand from urban centers.

Almost four out of five units of electricity generated during January-March came from coal-fired power plants, depicting heavy reliance on thermal capacities, the Commodity Insights report said.

During the first three months of the year, the western Indian states of Rajasthan and Gujarat led the large-scale solar installations, accounting for nearly two-thirds of the total additions, the Mercom report said.

As of March, India's total installed solar capacity stood at 105.6 GW, according to the latest data by the country's Central Electricity Authority in April. As much as 16.81 billion units were generated from solar during March this year, compared with 12.23 billion units in March 2024, the data showed. One unit is one kWh.

Meanwhile, the renewable pipeline stands at 156 GW, with projects in various stages of development, the Commodity Insights report said.

About 44%, or 87 GW, of the pipeline consists of solar PV projects, followed by hybrid wind-solar projects at 75 GW and onshore wind at 15 GW, the report said. The majority of the project pipeline, an estimated 110 GW, is scheduled to be commissioned during 2025–27, it added.

"However, challenges in land acquisition, grid access, as well as supply chain volatilities, can be expected to result in delays in commissioning schedule," the report said.

The average cost of large-scale solar projects rose 1% year over year during the January-March period, the Mercom report said, adding that tenders totaling 14.4 GW were announced during the period, down 53% year over year.