Why in news?

India has reached 50% of its installed electricity capacity from non-fossil fuel sources, five years before its Paris Agreement target. This milestone highlights India’s strong commitment to climate action and sustainable development.

What’s in Today’s Article?

• India Reaches 50% Non-Fossil Fuel Power Capacity
• Renewable Energy Grows, But Thermal Power Still Dominates in India
• India’s Power Grid Faces Challenges Due to Low Storage Capacity
• India Focuses on Energy Storage, But Progress Remains Slow
• Challenges Slowing India’s Renewable Energy Growth

India Reaches 50% Non-Fossil Fuel Power Capacity

• As of June 30, 2025, India has achieved a major climate milestone: 50.1% of its installed electricity capacity now comes from non-fossil fuel sources.
  • Back in 2015, non-fossil sources made up only 30% of India’s capacity, which grew to 38% by 2020.
• This achievement comes five years ahead of its 2030 target under the Paris Agreement.
• The sharp increase over the last five years is largely due to solar and wind energy growth.
• India’s total installed power capacity now stands at 485 gigawatts (GW). Out of this:
  • 185 GW comes from renewables like solar, wind, small hydro, and biogas.
  • 49 GW comes from large hydro projects.
  • 9 GW comes from nuclear energy.
• Thermal power, mostly from coal and gas, now accounts for 242 GW or 49.9%. This is a significant drop from 70% in 2015.
• India’s clean energy transition is progressing faster than expected.

Renewable Energy Grows, But Thermal Power Still Dominates in India

• India has made strong progress in expanding renewable energy, mainly through solar and wind power.
• By 2024, India became the fourth-largest country in renewable installed capacity, after China, the US, and Brazil.
• However, even though thermal power capacity now accounts for less than 50% of total installed capacity, it still produces over 70% of India’s actual electricity.
• This is because renewable sources like solar and wind are not available all the time, while thermal plants provide steady, round-the-clock power.
• To reduce thermal power’s share and meet the goal of 500 GW non-fossil fuel capacity by 2030, India will need major efforts to stabilise and strengthen its electricity grid.

India’s Power Grid Faces Challenges Due to Low Storage Capacity

• From April 2020 to June 2025, India added 95 GW of solar and wind power, making up 35% of the country’s total installed capacity.
• However, this fast growth in renewable energy has created grid stability issues because India lacks enough power storage systems like batteries and pumped hydro.
• When renewable generation is high and demand is low, the extra power cannot be stored.
• For example, on May 30, 2024, India faced its peak electricity demand of 250 GW, but grid managers struggled as renewable supply was low and thermal plants couldn’t fully cover the gap.
  • Similarly, in May 2025, erratic rains caused weak demand, making solar power prices drop to zero on some afternoons.
• These situations show how important storage is for absorbing extra renewable power and releasing it during peak demand. Without enough storage, grid instability increases and investors hesitate to fund new renewable projects.
  • By the end of 2024, India had less than 5 GW of storage capacity: 4.75 GW from pumped storage and just 110 MW from battery storage.
• Strengthening storage systems is crucial for managing India’s growing renewable energy share.

India Focuses on Energy Storage, But Progress Remains Slow

• In February 2025, the Central Electricity Authority (CEA) advised co-locating energy storage systems with new solar projects.
• The Ministry of Power also expanded its viability gap funding (VGF) scheme, now supporting 43 GWh of battery storage with ₹5,400 crore in funding.
• On the pumped hydro front, India plans to add 51 GW of capacity by 2032. To encourage investment, the government has extended the waiver on inter-state transmission system (ISTS) charges for storage projects until June 2028.
• Despite these policy moves, actual progress has been slow. Very few battery storage projects have been commissioned so far, even though bid prices have fallen.
• Challenges include high upfront costs, import duties, and strict domestic content rules. Approvals for pumped hydro projects are also delayed.
• China’s dominance in the global battery supply chain adds another layer of risk for India, especially with China’s restrictions on exporting key materials like rare earths.

Challenges Slowing India’s Renewable Energy Growth

• India’s renewable energy sector is shifting towards hybrid tenders combining solar, wind, and storage for better grid stability.
• However, around 30 GW of older projects still lack power purchase agreements (PPAs), creating cash flow issues for developers.
• Another major constraint is the limited supply of high-voltage direct current (HVDC) transformers, essential for long-distance power transmission.
• With rising global demand and few manufacturers, delays in transformer supply are affecting grid access and could slow down new capacity addition.
• Underinvestment in transmission infrastructure further adds to these challenges.