Is India’s solar power play facing its Icarus moment?

It’s a stellar achievement. But it is beginning to strain the country’s vast electricity grid. India’s transmission infrastructure is struggling to carry all the electricity generated when the sun shines. Surplus solar power can congest the grid, while inadequate storage means excess energy cannot always be saved for use when demand rises. At the same time, fluctuations in solar power generation, depending on the time of day and weather, make it harder to balance electricity supply and demand, and maintain the grid’s frequency within the permitted range.

If operators cannot correct such imbalances, the risk of wider disruptions increases. In some instances, grid operators have asked solar farms to reduce or stop generation, a process known as curtailment, even when sunshine is abundant. No easy solution is in sight, threatening to hamper one of the world’s largest energy transition efforts—from fossil fuels to clean energy—by the world’s third-largest generator of renewable energy.

“We are seeing increasing stress on the grid, particularly in the form of transmission congestion, renewable energy curtailment, and greater balancing requirements,” said Prashant Sinha, chief executive of Resonia Ltd, a power transmission firm. “However, these operational stresses should not automatically be characterized as grid instability.” As India’s green energy drive enters its next phase, the focus has turned to strengthening the country’s electricity infrastructure.

This includes building adequate capacity to carry electricity from solar and wind farms to the power grid and then to factories, homes and other consumers. Consequently, installing new renewable energy capacity has taken a back seat. About 14.7GW of renewable energy projects were awarded in FY26, down from 40.6GW in FY25 and 47.3GW in FY24, according to rating agency Icra. The slowdown has continued this fiscal year, with only 4.7GW awarded as of 10 August.

On the other hand, 4,301 circuit kilometres (ckm) of transmission capacity was installed in the first five months of this fiscal year (April–August), according to data from the Central Electricity Authority (CEA), the country’s apex power-sector planning body. That is 58% of the 7,403 ckm target for FY27. In February last year, the CEA advised state power utilities and renewable energy implementation agencies to incorporate two-hour co-located energy storage systems, equivalent to 10% of installed solar project capacity, in future solar tenders.

On 3 September this year, the authority proposed mandating two-hour battery energy storage systems (BESS), with capacity equivalent to at least 10% of installed capacity, for all new solar and onshore wind projects commissioned after 1 July 2027. These systems can store solar and wind energy when it is generated for use later. India currently has only 8.6 gigawatt hour (GWh) of BESS capacity. Another 42.53 GWh is under construction, 38.42 GWh has been awarded, and 65.57 GWh is in the tendering process.

That amounts to 155.12 GWh of existing and planned BESS capacity, while the CEA projects a requirement of 236 GWh by 2032. India also has a it at various stages of development. These plants can absorb surplus renewable power during off-peak hours and release it when demand rises. The CEA has a roadmap to install another 100GW of pumped storage project (PSP) capacity by 2035-36. In the first six months of FY27 (April–September), India added 24.56GW of renewable energy capacity, including 20.79GW of solar and 3.11GW of wind capacity, show data from the Union ministry of new and renewable energy (MNRE).

Overall, India had 308.02GW of installed non-fossil fuel-based electricity capacity as of 30 September, including 299.24GW of renewable energy capacity. Another 183.14GW is under implementation, while 51.29GW has been tendered. India is targeting 500GW of non-fossil fuel-based power capacity by 2030. “The idea is to sustain the current momentum. We have achieved about 50GW of RE in a year. The idea should be to continue this momentum and keep on increasing from here,” MNRE secretary Santosh Kumar Sarangi said in a recent interview with Mint.

“If you go by CEA’s projection then by 2035-36, another 400GW of RE is expected to be added. And the confidence for this comes because the battery energy storage system cost has also gone down. So if more and more RE has to come then more of BESS, more of PSP will have to supplement RE,” he added. An MNRE spokesperson said the ministry’s focus was on expanding transmission infrastructure, improving forecasting and scheduling, and coordinating with the ministry of power, the CEA, state governments and utilities to minimize congestion and renewable energy curtailment.

“India’s energy transition is moving from capacity addition towards delivering reliable, affordable and round-the-clock green power,” the spokesperson said in an email reply to Mint’s queries. “We are promoting round-the-clock (RTC), firm and dispatchable renewable energy (FDRE), and solar-wind hybrid projects integrated with storage to ensure that renewable electricity is available in line with demand, including during evening and peak hours,” the spokesperson added.

“Battery energy storage systems and pumped storage hydropower will play a critical role in balancing the variability of renewable energy.” While solar power will continue to be complemented by wind, small hydro and other renewable energy sources, the spokesperson said “timely signing of power purchase agreements and power sale agreements, along with effective project implementation, will also be essential to translate awarded capacity into operational projects”.

The spokesperson also noted that the CEA’s March 2026 transmission plan envisages transmission infrastructure to integrate more than 900GW of non-fossil capacity by 2035-36. “India’s energy transition is entering a more demanding phase. The focus is no longer limited to adding renewable capacity; it is equally about ensuring the grid can integrate and deliver that clean power when and where it is needed,” said Simarpreet Singh, CEO of Hartek Power, an engineering, procurement, and construction company focused on the power and solar sectors.

India moved from treating solar power as a rural-electrification technology and a corporate social responsibility initiative to making it a central pillar of its energy system. However, for several years solar power remained expensive with no real progress in terms of installation. The Jawaharlal Nehru National Solar Mission launched in January 2010 provided some support, starting with modest targets of 1GW of grid-connected solar in Phase I and enhancing it to a 100GW solar target for 2022.

The Solar Parks Scheme, introduced in 2014, brought about much of the push for solar power as it aimed to resolve a key bottleneck: land. Instead of every developer separately acquiring land, obtaining clearances and building transmission connections, solar parks could provide common roads, substations and transmission infrastructure. The scale-up thereafter was extraordinary—from about 2.8GW of installed solar capacity at the end of March 2014 to 168.04GW as on 31 August 2026.

Of this, about 124GW were ground-mounted projects, 32.6GW were grid-connected rooftop solar units, 4.8GW were solar components in hybrid projects, and 6.6GW off-grid solar. The launch of the PM Surya Ghar Muft Bijli Yojana in February 2024, the flagship scheme to install 30GW of rooftop solar capacity at a cost of about ₹1 crore, also contributed to a pickup in solar installation. However, it has not added to grid strain because it primarily caters to households, and only excess power can be sold to the discoms.

By 2018, India’s investment of $20 billion in adding solar power capacity was greater than the investment in all fossil-fuel electricity generation combined, according to the International Energy Agency. In 2022, around $15 billion was invested in Indian solar capacity, marking a revival from Covid-hit FY21. More broadly, India’s clean-energy investment reached $68 billion in 2023, almost 40% above its 2016–20 average, while in 2024 an extraordinary 83% of power-sector investment, about $100 billion, went to clean energy.

According to Ember, a Norway-based think tank focused on energy transition, transmission constraints led to the loss of 300 GWh of clean electricity in India in the first quarter of 2026 (January–March), particularly at grid pooling stations in the northern and western regions. On 30 March alone, India lost 34 GWh of clean generation, equivalent to the daily electricity use of about 5 million urban middle-class households, Ember said in a report in May.

The analysis also found that total renewable energy curtailment in Q1 2026 reached around 470 GWh, of which 300 GWh stemmed directly from transmission constraints. The northern region accounted for 178 GWh and the western region for 122 GWh. The southern region recorded none, reflecting better synchronisation between generation and grid expansion. Duttatreya Das, Ember’s energy analyst for Asia, said India’s renewable energy curtailment arising from transmission constraints is beginning to reach “materially significant levels”.

Inadequate transmission capacity has left about 40GW of power purchase agreements (PPAs) and power sale agreements (PSAs) unsigned, according to the Ember report. This 40GW of capacity, mostly solar, lacks integrated storage and is therefore less attractive to electricity distribution companies, or discoms, as the power is unavailable in the evening when demand is usually higher, the report added.

“Curtailment is no longer a hypothetical. It is already visible in high-renewable states, and instances of low or near-zero midday power prices on the exchanges are becoming more frequent,” said Simarpreet Singh of Hartek Power. “These carry real financial consequences for developers, particularly where curtailed generation goes uncompensated.” India has met only about 80% of its annual transmission targets over the past five years, according to Ember.

As a result, the target for the inter-state transmission system, which is crucial for evacuating power from solar-rich states to other states, has increased from 15,382 circuit kilometres to 25,146 ckm for FY27. Ember added that about 20 GW of renewable energy capacity is likely to face connectivity delays of more than four months in FY27 because of slow installation of transmission capacity. Inadequate energy storage has also led to an oversupply of solar power, primarily between 11 am and 3.30 pm, forcing discoms into distress sales on power exchanges, according to executives with power developers.

Power prices fell below ₹0.05 per unit 31 times in the first quarter of FY27, hitting zero on 1 May, according to data from the Indian Energy Exchange. In the year-earlier first quarter, power prices had dropped below ₹0.05 per unit six times. “When solar supply floods the grid, it results in lower price discovery on energy exchanges as observed on the IEX day-ahead market, where mid-day prices fell to between ₹0 and ₹0.30/kWh on several days in late May and early June 2025,” said Anujesh Dwivedi, partner, Deloitte India.

“At the same time, several solar generators are forced to curtail power during afternoon hours due to lack of grid connectivity through GNA, and when enough temporary-GNA is not available to evacuate power from RE-rich areas,” Dwivedi added. General network access (GNA) is a regulatory mechanism that allows power generators and distributors to access the national transmission grid without a specific point-to-point contract.

Zero prices on the exchange are “a symptom of generation success running ahead of storage infrastructure”, added Sanjeev Aggarwal, founder and chairman, Hexa Climate Solutions, a renewable power generator. “It is a loud, clear market signal that we urgently need to shift this excess energy to the evening peak. It isn’t a demand problem; it is a grid-balancing and storage problem.” The decline in power prices comes despite rising electricity demand.

India’s peak power demand hit a record 270.8GW on 21 May and is expected to reach 272GW this fiscal year. The power ministry projects peak demand to rise further to 300GW in FY28. Noting this dichotomy, Sanjeev Sanyal, a member of the Economic Advisory Council to the Prime Minister (EAC-PM), said in a recent working paper that India’s power demand is not only large but also extremely volatile even within the duration of a single day.

“On 21 May 2026, India’s power grid set an all-time record. At 3:45 pm, the peak demand met reached 270. 8GW. As striking as the quantum of the load was the speed of its change. At 8 am on the same day, demand sat at 224.1GW. In less than eight hours, the grid took on an additional load of 46.7GW, more than the entire British grid drew at its peak in all of 2025,” stated the working paper titled ‘The Duck and The Camel: Tracing the Net Load on the Indian Power Grid’, co-authored by Sanyal and Satvik Dev, joint director, EAC-PM.

Peak demand and peak power prices often occur at different times of the day, and the gap between them has become an important feature of the modern Indian grid, the authors stated. And the best way to smooth these fluctuations, they added, is to store electricity when it is abundant and release it when it is scarce. Sanyal and Dev noted that power prices fell to near zero per unit during peak solar hours but hit the price cap of ₹10 per kWh in the evening, when solar power is unavailable.

“As a consequence, the peak-to-trough spread within a single average day has widened from ₹5.27/KWh in 2023 to ₹8.60/KWh in 2026, a 63% increase in absolute terms," they said in their working paper. The spreads would have been higher if not for the price cap imposed by the Central Electricity Regulatory Commission from April 2023, they added. The bulk of India’s electricity is sold under long-term power purchase agreements at fixed schedules outside the exchange.

Only about 13% of the country’s power is traded on the market. To ensure predictable revenue for power generators, the Electricity (Amendment) Bill, 2025 proposes promoting ‘contracts for difference’ (CfD). Under this arrangement, a power generator and a buyer agree on a fixed reference price, known as the strike price. If the market price falls below that level, the buyer pays the difference to the generator.

If it rises above the strike price, the generator refunds the difference. Sanyal and Dev made a case for incentivising flexibility, noting that energy storage, demand response and the ability to ramp up power generation quickly are precisely the resources whose value lies in intraday price spreads. A market dominated by long-term energy contracts gives power generators little opportunity to monetise that value.

Empowering the regulator to design market products is one of the institutional preconditions for expanding storage capacity, they said, insisting that the most direct response to the flexibility problem is to give legal standing to storage systems. Currently, most power market transactions are based on power purchase agreements, but sector experts say demand is growing for new procurement models, CfD being a key alternative.

In a notification issued in March, MNRE approved a pilot CfD scheme, designating the Solar Energy Corporation of India (Seci) as the nodal agency for 500 megawatt (MW) of capacity supplying 1,500 MWh of renewable electricity daily during non-solar hours. “India now needs to deepen short-term and real-time markets, bring discoms more actively into dynamic procurement, and scale policy moves such as Seci’s 1,500 MWh CfD-based peak-supply tender much faster,” said Shashank Sharma, founder and CEO, Sunsure Energy, a commercial and industrial-focused renewable energy developer.

“For developers, the message is equally clear: the old model of plain-vanilla solar spilling excess power into the exchange is giving way to hybrid, storage-backed assets that shift clean power into evening peaks, support the grid and hedge merchant exposure.”The alchemy of black gold: inside India’s multi-billion-dollar push to turn coal into cheap industrial gas