Delays in expanding the inter-state transmission system (ISTS) infrastructure are among the key reasons behind rising under- subscription of renewable energy (RE), which is five times higher in 2024 compared to 2023 calendar year.
These findings are part of a report by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research & Analytics.
A tender is considered under subscribed when the awarded capacity is less than the capacity tendered. In 2024, around 8.5 GW of capacity in utility-scale renewable energy tenders was under-subscribed, five times higher than in 2023, the report pointed out.
“This trend can be attributed to several factors, including complex tender designs (such as demand following FDRE), aggressive bidding during reverse auctions, and delays in readiness of ISTS infrastructure,” it added.
The ISTS transmission infrastructure is overstressed, with a shortage of connectivity margin at ISTS substations.
According to a November 2024 report by JM Financial, roughly 55 GW of RE capacity, awarded between April 2022 to October 2024, is waiting for signing of power purchase agreements (PPAs) with issues such as surge in bids as well as mismatch between electricity demand and bids pipeline leading to the delay.
The brokerage analysed 357 RE projects with 95 GW of capacity, awarded during April 2022 to October 2024, to understand what is causing delays in signing of PPAs. It takes roughly 8-10 months for a PPA to be signed.
Around 224 contracts with a total capacity of 55 GW, awarded during FY23 to YTD FY25 (April-October) are still waiting for PPAs to be signed. PPAs were signed for 40 GW capacity, JM Financial added.
Evacuation infrastructure
For ISTS-based utility-scale renewable energy tenders, delays in the readiness of the ISTS transmission infrastructure are raising concerns among developers, the report said.
Without sufficient transmission system availability at the central transmission utility (CTU) level to align with PPA timelines of 18-24 months, developers are becoming increasingly cautious about bidding on new projects, leading to further under subscription.
From 2020 to 2024, a total of 38.3 GW of utility-scale renewable energy capacity was cancelled. This represents about 19 per cent of the cumulative RfS issued capacity during the same period. Tender cancellations peaked in 2023, with energy storage systems (ESS)-based RE tenders accounting for two-thirds of cancelled capacity.
The gap between the tendering, allotment and project realisation will likely widen until the market streamlines and transmission infrastructure develops. Blending the tariffs monthly or quarterly may partly address the PSA signing challenges, but the Ministry of New & Renewable Energy (MNRE) is still preparing its wide-scale implementation.
Owing to the gap in tender issuance and transmission infrastructure, the average annual tender cancellation rate will rise marginally in the short term, the report projected.
Cancellation rate
However, with enhanced streamlining of the tendering process and transmission augmentations planned by the Central government, the cancellation rate will stabilise in the closing years of the decade, it added.
JMK Research estimates the average annual tender cancellation rate until 2030 will be about 25 per cent. Consequently, considering the yearly bidding trajectory of 50 GW, project realisation challenges will cumulatively affect 75 GW of utility-scale renewable energy tendered capacity until 2030.
The growth of utility-scale renewable energy tendering has surged significantly after 2022, reaching about 73 GW in 2024, primarily driven by the central government’s goal to auction at least 50 GW of RE projects annually.
However, the ongoing issues of delays in power sale agreement (PSA) signings, under subscriptions and cancellations in 2023 and 2024 have underscored the persistent challenges in realising utility-scale renewable energy projects, it added.