Storage-linked renewable tenders accounted for 68% of auctioned capacity in FY25: Ind-Ra
New Delhi: Storage-linked and hybrid tenders constituted about 68 per cent of the total renewable energy capacity auctioned in FY25, according to India Ratings and Research (Ind-Ra), which said expansion of India’s energy storage capacity has become essential to ensure firmness and flexibility of power supply amid the ongoing energy transition.The agency said renewable energy, which forms the bulk of new capacity additions, presents challenges due to its intermittent and cyclical nature. Ind-Ra said ensuring uninterrupted power supply and sustaining the momentum of the green energy transition are key challenges as power demand continues to rise.Ind-Ra said storage capacity addition could help address the mismatch in renewable energy supply patterns, particularly solar, where there is high supply during the day and a steep fall in the evening. However, storage-linked renewable projects face risks, including ability to meet demand during changing load profiles, revenue uncertainty from excess generation, battery performance and replacement costs, supply chain challenges, and low tariffs that may affect project viability.“Ind-Ra expects the storage-linked renewable energy capacity additions to garner momentum in the near term based on auctions and storage requirements for renewable transition. The demonstration of design capacity to meet the obligations under power purchase agreements (PPAs) and the ability to sell excess energy generation are key monitorable in PPAs with tailored supply obligations. Renewable resource variability risks also pose challenges in designing the mix of wind, solar and storage capacity for such PPAs,” said Vishal Kotecha, Director, Ind-Ra.The agency said as the share of renewable energy in the generation mix increases, managing intermittency and variability will be critical to ensuring uninterrupted supply. It added that the issue will intensify with additional renewable capacity additions.Ind-Ra estimates that by 2032, the share of solar and wind power during solar hours could lead to surplus supply at the national level, as thermal plants will have to operate at minimum technical load. This surplus will need to be stored to manage the expected shortfall during non-solar hours.The agency said merchant tariffs during solar hours are expected to remain low, due to significant solar capacity additions and mandatory minimum load for thermal generation. Ind-Ra observed that the divergence between solar and non-solar hour merchant tariffs has widened over the last two years due to increased solar penetration.Ind-Ra noted a shift in the nature of renewable energy tenders toward hybrid and storage-linked formats, aimed at managing intermittency and variability. These projects typically require higher capacity utilisation, with backend renewable generation capacities ranging from 1.5x to 3.5x of the contracted capacity, while storage sizing depends on supply obligations and penalty provisions.Ind-Ra estimates excess generation from these projects could range from 6 per cent to 25 per cent, which can be sold on the merchant market or to a third party depending on PPA provisions. The agency said the unpredictability of revenue from excess generation could significantly affect overall project profitability.
