India’s renewable energy paradox: More capacity, but not enough grid to deliver power

The growing risk is no longer simply whether India can build enough renewable capacity. It is whether that capacity can be connected and its electricity delivered when needed. In an October 12 report, S&P identifies state-level transmission networks as a critical weakness that can delay projects, disrupt generators’ cash flows and leave distribution utilities dependent on expensive peak-hour power.

“We view generation as the strong link in India’s ambitious plans to achieve 500 GW of renewable capacity by 2030,” the ratings agency said. Its assessment points to a different challenge for the next stage of the transition as building power plants is not enough without the networks and storage needed to use their output. Transmission constraints accounted for 60% of that loss. Curtailment means renewable output is reduced because the system cannot accommodate it, whether because of network restrictions or insufficient flexibility to absorb the electricity.

At the national level, S&P puts the curtailed energy at about 1–1.5% of renewable generation. But that relatively modest aggregate figure masks much sharper losses at individual projects, particularly during their early stages. For a developer, the financial damage depends on the restrictions affecting its own plant, not the national average. “Inadequate intra-state transmission or lagged connectivity to the state grid has curtailed renewable generation, which can have significant cash flow impact on generators,” S&P said.

Without further investment in these networks, the agency warned, curtailment risk could increase as more renewable capacity comes online. India’s transmission problem has 2 distinct layers The report does not describe the entire transmission system as equally underprepared. Interstate networks, which move electricity across state boundaries, are relatively well developed, with investment largely undertaken by public-sector utilities such as Power Grid Corporation of India.

S&P expects Power Grid’s capital spending to rise to about Rs 2 lakh crore over the next five years, compared with around Rs 90,000 crore in the preceding five years. That represents a substantial expansion of investment in the interstate system. The weaker link lies within states. These networks connect renewable assets to the wider grid, providing the infrastructure needed to carry electricity away from generating sites—a process the power sector calls evacuation.

A stronger interstate network cannot fully resolve the problem if a plant’s connection through the state system is missing or inadequate. Responsibility for this infrastructure sits largely with state transmission companies. Many have weak financial positions and depend on state governments whose finances are already stretched, limiting their ability to keep network development aligned with the pace of generation investment.

Delayed lines hold up revenue, not just electricity Funding constraints are only part of the problem. Transmission projects also face persistent execution difficulties, particularly right-of-way issues involving access to the land needed for power lines. These frequently delay commissioning by four to 12 months, while supply-chain disruptions can create further setbacks, according to S&P. Transmission projects now typically take three to four years to commission.

Renewable generators, in turn, can face commissioning delays of one or two quarters because the infrastructure required to connect them is not ready. The financial consequences extend to both sides of the connection. Transmission companies and renewable developers begin earning returns on their projects only after commissioning, so delays postpone cash inflows even after investment has been committed.

Once a renewable project starts operating, continuing curtailment creates another source of cash-flow uncertainty. This makes transmission readiness a financial issue as well as an engineering one. The report does not quantify the effect on project internal rates of return or lenders’ willingness to finance projects, but it identifies delayed commissioning and unstable generation cash flows as the immediate risks.

PM-Dhara puts Rs 1.86 lakh cr behind the missing infrastructure The government’s response is PM-Dhara, or Developing Harmonized and Accelerated Renewable-Energy Access. According to the report, the Rs 1.86 lakh crore scheme, announced on September 30, 2026, targets the transmission and storage gaps holding back renewable integration. Its main component is Rs 1.36 lakh crore over five years for intra-state transmission connectivity, with evacuation infrastructure intended to support 135 GW of renewable capacity.

A further Rs 50,000 crore is planned for battery storage infrastructure over the same period. The government will directly finance Rs 54,000 crore of the overall outlay. The scale is considerably larger than earlier efforts. S&P says the first two phases of the Green Energy Corridor programme integrated less than 50 GW of renewable capacity over about a decade, with combined transmission investment of roughly Rs 22,000 crore—about one-sixth of the transmission spending planned under Dhara.

But the agency cautions against treating a larger funding envelope as a complete solution. “However, it’s not only about funding. Another problem is execution challenges,” the report said, pointing to the risk that right-of-way disputes and supply-chain disruptions will continue to delay projects. Grid upgrade runs beyond 2030 deadline Dhara’s central difficulty is timing. The scheme is expected to be fully implemented only by 2032–33, after the 2030 capacity target discussed in the report.

S&P expects renewable additions to continue running ahead of grid connectivity in the meantime. “In our view, the planned new capacity and spending may not be enough to close the gap by 2030,” the agency said. The investment should gradually improve conditions, but it will take several years to translate into operating infrastructure. That distinction matters when assessing progress. Installed capacity measures how much generating equipment has been built; it does not, by itself, establish how much electricity the system can absorb and deliver.

India could therefore expand its renewable fleet substantially while still facing congestion, delayed connections and restrictions on output. That is the integration gap highlighted by S&P’s assessment. Batteries can absorb surplus renewable electricity during periods of network congestion or low demand and discharge it later, when demand is higher. This improves flexibility and reduces the need to curtail generation.

Battery projects typically take six to 18 months to commission, substantially less than transmission projects. Dhara’s planned support for an additional 50 GWh of storage could therefore provide relief before the longer network-building programme is completed. Storage is not free of execution risk, however. S&P says aggressive tender pricing has already contributed to project cancellations. Tariffs that prove economically unviable can also create difficulties after contracts have been awarded, preventing low winning bids from translating into completed projects.

Better integration could save discoms Rs 1,250 cr a year For renewable generators, the first benefit of stronger networks and storage would be more stable cash flows as curtailment and connection delays decline. State electricity distribution companies, or discoms, could benefit by reducing their reliance on costly electricity purchases during peak periods. According to Ember’s estimates cited by S&P, renewable electricity can save discoms about Rs 1 per unit even after accounting for storage costs.

Many discoms pay close to Rs 10 per unit during peak periods, illustrating the expense of meeting demand when cheaper supply is unavailable. Assuming 250 charge-discharge cycles annually, the 50 GWh of storage planned under Dhara could generate savings of about Rs 1,250 crore a year. S&P says that would be equivalent to around 12.5% of its estimated combined earnings before interest, taxes, depreciation and amortisation for 18 of India’s largest discoms in fiscal 2025.

These are potential savings based on the report’s operating assumptions, not an assured annual outcome. Next test is delivery, not just capacity S&P considers Dhara well directed, with the potential to improve renewable generators’ operating stability and strengthen state utilities’ finances. But it expects the benefits to emerge gradually, with storage offering earlier relief and the larger transmission gains arriving later in the decade.

The main challenge is connecting renewable power to the grid. India can build more solar and wind projects, but it also needs enough transmission lines and battery storage to deliver electricity when required. Until state power networks improve, moving and using the electricity generated will remain a major hurdle.