India’s Renewable Power Transition: Trends & Challenges
Renewable sources are now the most cost-competitive option for new electricity generation, and policy reforms are actively shaping a more investment-friendly and competitive market.
February 02, 2026. By News Bureau
The global energy and infrastructure sectors are rapidly moving toward achieving carbon neutrality (net-zero). Renewable sources are now the most cost-competitive option for new electricity generation, and policy reforms are actively shaping a more investment-friendly and competitive market. For India, this transition is particularly significant due to challenging national goals, such as reaching 500 GW of renewable capacity by 2030 and executing the Green Hydrogen Mission. Navigating this shift requires adherence to international compliance standards, establishing regulatory predictability and infrastructure modernisation.
National Progress and Energy Milestones
India’s rapid economic expansion necessitates increased power generation capacity to sustain it. Meeting this escalating demand for power requires augmentation of existing infrastructure, investing in novel technologies and implementing innovative solutions for energy generation and transmission.
India has achieved two significant milestones demonstrating consistent movement toward a secure, self-reliant, and clean energy future viz:
(a) Total Installed Capacity: As of September 30, 2025, PIB Press Release dated 29.10.2025 indicated that the country’s total installed electricity capacity surpassed 500 GW, reaching 500.89 GW. This is due to sustained policy support and capital investment over several years.
(b) Non-Fossil Fuel Contribution: Non-fossil fuel (comprising renewable energy, hydro, and nuclear) now contribute 256.09 GW, i.e., over 51 percent of the aggregate installed capacity. India has now fulfilled one of the key COP26 Panchamrit commitments i.e. to meet 50 percent of its energy requirements from renewable energy five years ahead of the 2030 deadline.
Government Initiatives and Regulatory Mechanisms
The government has established a clear and ambitious clean energy trajectory, targeting 500 GW of non-fossil energy capacity by 2030, which is another COP26 Panchamrit goal. Several initiatives are viz:
(a) National Green Hydrogen Mission (2023): This aims for an annual production of 5 MMT of green hydrogen by 2030. The Strategic Interventions for Green Hydrogen Transition (“SIGHT”) program provides financial incentives for the domestic manufacturing of electrolysers and the production of green hydrogen.
(b) Transmission System Plan: CEA’s report of December 2022 on “Transmission System for Integration of over 500 GW RE Capacity by 2030” portrays the transmission system roadmap for reliable integration of 537 GW RE capacity by 2030.
(c) Domestic Manufacturing Promotion: The Production Linked Incentive (PLI) scheme, specifically the National Programme on High Efficiency Solar PV Modules, was launched to bolster the manufacturing of solar modules and batteries in India.
(d) Investment Liberalisation: Foreign Direct Investment (FDI) is permitted at 100 percent in the renewable energy sector under the automatic route. This liberalised framework has led to increase in foreign investment in non-conventional energy sources, reaching $12.67 billion as of March 31, 2025.
In addition, specific regulatory mandates are steering the energy sector toward clean energy viz:
(a) Renewable Purchase Obligations (“RPO”): The Draft Electricity (Amendment) Bill, 2025 proposes to make the RPO percentage fixed by State Electricity Regulatory Commissions (“SERC”) subject to a minimum threshold prescribed by the Central Government, thereby enforcing a uniform national RPO mandate. Statutory recognition for Virtual Power Purchase Agreements (“VPPA”) is being pursued through draft CERC (Power Market) (First Amendment) Regulations, 2025 dated 17.06.2025., which will assist corporate entities in meeting RPO compliance standards.
(b) Renewable Consumption Obligation (“RCO”): Introduced through a 2022 amendment to the Energy Conservation Act, 2001 (“EC Act”), this grants the Ministry of Power (“MoP”) independent authority to impose RE consumption mandates.
(c) Energy Storage Obligation (“ESO”): Recognising the importance of Energy Storage Systems (“ESS”) for grid stability during periods of high renewable energy penetration, ESS has received statutory recognition through the Electricity (Amendment) Rules, 2025 dated 19.09.2025 and are also proposed to be included in the Electricity Act, 2003 through the Draft Electricity (Amendment) Bill, 2025. Standards for the ESO were laid down in July 2022 along with National Framework for promoting ESS being introduced in August 2023 and the MoP rolling out a Scheme for Viability Gap Funding (“VGF”) in March 2024 to support the development of 4,000 MWh of BESS capacity.
(d) Waiver of Inter-State Transmission (“ISTS”) Charges: Charges for the transmission of electricity generated from RE sources, ESS, and Green Hydrogen/Green Ammonia have been waived by various orders issued from time to time by MoP.
Challenges and Way-Forward
A key systemic challenge for India’s power sector is the financial distress of Distribution Companies (“Discoms”). This typically arises from the disparity between the cost of power supply and the revenue collected, driven by subsidies, operational inefficiencies, and inflexible cost structures, et al. This challenge persists despite the Supreme Court (BSES Rajdhani Power Ltd. & Anr. v. Union of India & Ors., 2025 INSC 937) holding that electricity tariffs must be cost-reflective to ensure the financial viability of the power sector. The current requirement for multiple licensees to maintain separate networks in the same service area also leads to cost duplication and excess expenditure.
The Draft Electricity (Amendment) Bill, 2025, addresses some of the aforesaid challenges by proposing measures such as:
(a) Reducing cross-subsidies.
(b) Exempting Discoms from the Universal Supply Obligation (“USO”).
(c) Explicitly allowing distribution licensees to supply electricity using either their own network or a shared network, subject to appropriate charges and SERC regulation.
Further difficulties arise from long-term coal power contracts that require Discoms to pay for unused capacity even when renewable alternatives are cheaper. Financial shortages also compel Discoms to curtail solar and wind power, even though regulatory provisions mandate “must-run” status. Despite the Courts reinforcing the liability of Discoms to make payments to generators even if Discoms are suffering from financial hardship, states have undermined investor confidence by renegotiating or cancelling renewable Power Purchase Agreements.
India’s proposed ease of doing business regime is also taking a hit due to apparently overlapping but dual compliance regimes qua RPO and RCO. The definition of ‘designated consumers’ under the EC Act does not align with ‘obligated entities’ under the RPO framework. In addition, there are different compliance standards qua source fungibility, group compliance, penalty provisions etc. Because of this structural mismatch, it is hard to fully align the two systems. An entity may face separate and potentially inconsistent obligations under both regimes. As a result, industries would need to maintain parallel compliance systems for RCO and RPO, leading to duplicative compliance burdens that undermine regulatory efficiency. Therefore, while some State Commissions have taken steps to align their RPO mandates with RCO requirements under the EC Act, a national level equitable re-alignment in terms of applicability and compliance mandates is necessary.
In addition, land acquisition remains a legally intricate process, governed by the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. Primary legal risks include protracted acquisition timelines, disputes over compensation, and the necessity for clear title verification. Although the Draft Electricity (Amendment) Bill, 2025 seeks to streamline procedures qua RoW and compensation issues with respect to the electric lines, land acquisition for renewable energy projects remains a significant challenge. Implementing strategies such as expanding pre-cleared renewable zones and establishing Geographic Information System (GIS)-based approval systems (as demonstrated in Rajasthan) could help streamline these processes.
Conclusion
India’s power sector is at a decisive juncture. Success critically depends on addressing long-standing regulatory barriers, notably in grid infrastructure development, land acquisition processes, and ensuring contractual certainty. With well-designed policies, India has the potential to become a global leader in both clean energy and carbon reduction, while simultaneously guaranteeing reliable and affordable power for all citizens.
National Progress and Energy Milestones
India’s rapid economic expansion necessitates increased power generation capacity to sustain it. Meeting this escalating demand for power requires augmentation of existing infrastructure, investing in novel technologies and implementing innovative solutions for energy generation and transmission.
India has achieved two significant milestones demonstrating consistent movement toward a secure, self-reliant, and clean energy future viz:
(a) Total Installed Capacity: As of September 30, 2025, PIB Press Release dated 29.10.2025 indicated that the country’s total installed electricity capacity surpassed 500 GW, reaching 500.89 GW. This is due to sustained policy support and capital investment over several years.
(b) Non-Fossil Fuel Contribution: Non-fossil fuel (comprising renewable energy, hydro, and nuclear) now contribute 256.09 GW, i.e., over 51 percent of the aggregate installed capacity. India has now fulfilled one of the key COP26 Panchamrit commitments i.e. to meet 50 percent of its energy requirements from renewable energy five years ahead of the 2030 deadline.
Government Initiatives and Regulatory Mechanisms
The government has established a clear and ambitious clean energy trajectory, targeting 500 GW of non-fossil energy capacity by 2030, which is another COP26 Panchamrit goal. Several initiatives are viz:
(a) National Green Hydrogen Mission (2023): This aims for an annual production of 5 MMT of green hydrogen by 2030. The Strategic Interventions for Green Hydrogen Transition (“SIGHT”) program provides financial incentives for the domestic manufacturing of electrolysers and the production of green hydrogen.
(b) Transmission System Plan: CEA’s report of December 2022 on “Transmission System for Integration of over 500 GW RE Capacity by 2030” portrays the transmission system roadmap for reliable integration of 537 GW RE capacity by 2030.
(c) Domestic Manufacturing Promotion: The Production Linked Incentive (PLI) scheme, specifically the National Programme on High Efficiency Solar PV Modules, was launched to bolster the manufacturing of solar modules and batteries in India.
(d) Investment Liberalisation: Foreign Direct Investment (FDI) is permitted at 100 percent in the renewable energy sector under the automatic route. This liberalised framework has led to increase in foreign investment in non-conventional energy sources, reaching $12.67 billion as of March 31, 2025.
In addition, specific regulatory mandates are steering the energy sector toward clean energy viz:
(a) Renewable Purchase Obligations (“RPO”): The Draft Electricity (Amendment) Bill, 2025 proposes to make the RPO percentage fixed by State Electricity Regulatory Commissions (“SERC”) subject to a minimum threshold prescribed by the Central Government, thereby enforcing a uniform national RPO mandate. Statutory recognition for Virtual Power Purchase Agreements (“VPPA”) is being pursued through draft CERC (Power Market) (First Amendment) Regulations, 2025 dated 17.06.2025., which will assist corporate entities in meeting RPO compliance standards.
(b) Renewable Consumption Obligation (“RCO”): Introduced through a 2022 amendment to the Energy Conservation Act, 2001 (“EC Act”), this grants the Ministry of Power (“MoP”) independent authority to impose RE consumption mandates.
(c) Energy Storage Obligation (“ESO”): Recognising the importance of Energy Storage Systems (“ESS”) for grid stability during periods of high renewable energy penetration, ESS has received statutory recognition through the Electricity (Amendment) Rules, 2025 dated 19.09.2025 and are also proposed to be included in the Electricity Act, 2003 through the Draft Electricity (Amendment) Bill, 2025. Standards for the ESO were laid down in July 2022 along with National Framework for promoting ESS being introduced in August 2023 and the MoP rolling out a Scheme for Viability Gap Funding (“VGF”) in March 2024 to support the development of 4,000 MWh of BESS capacity.
(d) Waiver of Inter-State Transmission (“ISTS”) Charges: Charges for the transmission of electricity generated from RE sources, ESS, and Green Hydrogen/Green Ammonia have been waived by various orders issued from time to time by MoP.
Challenges and Way-Forward
A key systemic challenge for India’s power sector is the financial distress of Distribution Companies (“Discoms”). This typically arises from the disparity between the cost of power supply and the revenue collected, driven by subsidies, operational inefficiencies, and inflexible cost structures, et al. This challenge persists despite the Supreme Court (BSES Rajdhani Power Ltd. & Anr. v. Union of India & Ors., 2025 INSC 937) holding that electricity tariffs must be cost-reflective to ensure the financial viability of the power sector. The current requirement for multiple licensees to maintain separate networks in the same service area also leads to cost duplication and excess expenditure.
The Draft Electricity (Amendment) Bill, 2025, addresses some of the aforesaid challenges by proposing measures such as:
(a) Reducing cross-subsidies.
(b) Exempting Discoms from the Universal Supply Obligation (“USO”).
(c) Explicitly allowing distribution licensees to supply electricity using either their own network or a shared network, subject to appropriate charges and SERC regulation.
Further difficulties arise from long-term coal power contracts that require Discoms to pay for unused capacity even when renewable alternatives are cheaper. Financial shortages also compel Discoms to curtail solar and wind power, even though regulatory provisions mandate “must-run” status. Despite the Courts reinforcing the liability of Discoms to make payments to generators even if Discoms are suffering from financial hardship, states have undermined investor confidence by renegotiating or cancelling renewable Power Purchase Agreements.
India’s proposed ease of doing business regime is also taking a hit due to apparently overlapping but dual compliance regimes qua RPO and RCO. The definition of ‘designated consumers’ under the EC Act does not align with ‘obligated entities’ under the RPO framework. In addition, there are different compliance standards qua source fungibility, group compliance, penalty provisions etc. Because of this structural mismatch, it is hard to fully align the two systems. An entity may face separate and potentially inconsistent obligations under both regimes. As a result, industries would need to maintain parallel compliance systems for RCO and RPO, leading to duplicative compliance burdens that undermine regulatory efficiency. Therefore, while some State Commissions have taken steps to align their RPO mandates with RCO requirements under the EC Act, a national level equitable re-alignment in terms of applicability and compliance mandates is necessary.
In addition, land acquisition remains a legally intricate process, governed by the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. Primary legal risks include protracted acquisition timelines, disputes over compensation, and the necessity for clear title verification. Although the Draft Electricity (Amendment) Bill, 2025 seeks to streamline procedures qua RoW and compensation issues with respect to the electric lines, land acquisition for renewable energy projects remains a significant challenge. Implementing strategies such as expanding pre-cleared renewable zones and establishing Geographic Information System (GIS)-based approval systems (as demonstrated in Rajasthan) could help streamline these processes.
Conclusion
India’s power sector is at a decisive juncture. Success critically depends on addressing long-standing regulatory barriers, notably in grid infrastructure development, land acquisition processes, and ensuring contractual certainty. With well-designed policies, India has the potential to become a global leader in both clean energy and carbon reduction, while simultaneously guaranteeing reliable and affordable power for all citizens.
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