India’s renewable energy transition is central to its climate commitments. Yet the sector’s current path is creating avoidable risks. At the CII Annual Business Summit, senior executives warned that policy design has not kept pace with capacity growth. The problem is no longer ambition. It is the structure of expansion.
One concern is the geographic concentration of projects. Solar and wind capacity is clustered in Rajasthan, Gujarat, Tamil Nadu, Karnataka and Maharashtra. These five states account for nearly 70% of installed renewable capacity. Developers have rational reasons for choosing them: better solar irradiance, stronger wind speeds, land availability and policy incentives. But what is rational for a developer may not be efficient for the power system.
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The waiver of inter-state transmission system charges has added to this concentration. It lowered delivered power costs and helped early renewable investment. It also tilted siting decisions towards a few high-resource zones. Rajiv Ranjan Mishra, managing director of Apraava Energy, said India’s renewable expansion must become an all-India affair, not a five-state affair. His point is simple. Transmission infrastructure lags when generation is concentrated and demand is dispersed.
This concentration is now showing costs. Power is produced in a few states but consumed across the country. Transmission corridors are stretched. Land prices have risen in renewable-rich regions. Right-of-way disputes have delayed transmission lines. Developers also face local governance and law-and-order risks. What began as a cost advantage is now creating project delays and higher system costs.
The ISTS waiver deserves a fresh look. The issue is not whether renewable power should be supported. It is whether the support encourages system efficiency. Developers are optimising for generation cost, not total system cost. That total includes transmission, balancing, storage and grid integration. These costs decide whether renewable power remains viable at scale.
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Renewable energy bidding must reward system value
Industry executives are therefore calling for state-specific and substation-level bidding. Parag Sharma, chief executive of the Wind Independent Power Producers Association and head of Resolven, said the Central Electricity Authority’s original planning assumptions envisaged a more dispersed renewable network. Actual project development has moved away from that blueprint because bids reward the lowest tariff.
The distortion is visible at Dholera Special Investment Region in Gujarat. Dholera has land, infrastructure readiness and proximity to industrial demand. It should be an attractive renewable energy location. Yet developers hesitate because power generated there is 30-40 paise per unit costlier than in high-irradiance zones such as western Rajasthan.
Under the present bidding system, even a small tariff difference becomes decisive. A location that may reduce grid stress and serve demand centres better loses out to a cheaper generation site. This is poor system design. India needs bidding mechanisms that recognise location value, not just headline tariff.
A better approach would distribute capacity across more locations. It would reduce transmission congestion, improve grid stability and lower costs over the life of the system. Localised bidding could permit slightly higher tariffs where they avoid larger network costs. That is not a subsidy to inefficiency. It is a way to price efficiency correctly.
Electricity pricing is weakening renewable energy growth
Project siting is only one part of the problem. Renewable energy also sits inside a distorted electricity pricing regime. Cross-subsidies and under-recoveries continue to weaken distribution companies. The gap between average cost of supply and average revenue realised remains a persistent drag. Financially weak DISCOMs cannot confidently sign long-term power purchase agreements or invest in grid infrastructure.
This is not a new problem. But renewable expansion makes it harder to ignore. A power system with rising renewable capacity needs flexible grids, storage, forecasting and stronger distribution networks. These require investment. DISCOMs with weak balance sheets cannot deliver that transition.
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There is no silver bullet. But one reform is overdue: separate social policy from commercial electricity operations. Subsidies should not be hidden inside tariffs. Governments can support poor and vulnerable consumers directly through budget-funded transfers. The LPG subsidy experience shows that direct benefit transfers can make support more transparent. Electricity pricing also needs that discipline.
The sector is also dealing with underbidding and unsigned power purchase agreements. Renewable Energy Implementing Agencies helped drive capacity addition by issuing large bids in recent years. But momentum has weakened. Around 20 GW of bids were floated in 2025, against more than 50 GW annually in earlier years. Developers face uncertainty when contracts remain unsigned. DISCOMs hesitate. Investment slows.
Industry bodies have proposed extending ISTS charge waivers to projects with unsigned PPAs, particularly the roughly 42 GW pipeline, to restore viability and confidence. This may help some stranded projects. But it cannot substitute for deeper reform. India cannot build the next phase of renewable growth on tariff suppression, weak DISCOMs and congested transmission corridors.
India has done well to scale renewable capacity. The next test is harder. It must move from capacity addition to system efficiency. That means better siting, stronger grids, healthier DISCOMs and incentives aligned with total system cost. Without that shift, India’s renewable energy transition will grow in megawatts but weaken in reliability.