Renewable Energy PPAs for 55 GW Capacity Remain Unsigned.

Approximately 55 GW of renewable energy (RE) capacity awarded between April 2022 and October 2024 remains without signed power purchase agreements (PPAs), highlighting delays driven by a surge in bids and a mismatch between electricity demand and the project pipeline.

According to a report by JM Financial, delays stem from a sharp increase in bids—over 50 GW in FY24 compared to 14 GW in FY23 and 17 GW in FY22—alongside challenges such as project execution constraints, a lack of demand alignment with the bid pipeline, and divergent views on emerging project types like hybrid and round-the-clock (RTC) solutions.

Of the 95 GW of capacity awarded during this period, only 40 GW has secured PPAs, while 224 contracts totaling 55 GW remain unsigned. Notably, solar projects face a declining conversion rate, dropping from 44% in FY23 to 16% in FY25 year-to-date, as Discoms prioritize hybrid solutions and storage-integrated projects over vanilla solar options.

India’s RE landscape is grappling with excess capacity during peak solar hours, a factor that has further discouraged PPA signing for standalone solar projects. In contrast, wind power projects, though fewer in number, have achieved an 89% conversion rate in FY24, signaling stronger market confidence.

As of September 2024, 79 GW of RE capacity is under construction (52 GW solar, 15 GW wind, and 12 GW hybrid), with an additional 95 GW under development. This backlog has prompted Discoms to delay signing new PPAs as they await clarity on future demand and evolving technologies.

The power ministry’s proposal for 15-year PPAs for transmission projects with energy storage systems (ESS) is also influencing Discoms’ hesitancy to commit to traditional 25-year contracts. The emergence of new demand drivers like data centers and the declining costs of battery energy storage systems (BESS) are reshaping the supply mix, further complicating decision-making for Discoms.

Despite these challenges, JM Financial remains optimistic, suggesting that PPA signing rates could accelerate as Discoms adapt to changing market conditions and developers strengthen their capabilities through equity capital, policy support, and supply chain enhancements. Historically, conversion rates for RE contracts into PPAs have remained steady at around 48-50%, providing a precedent for resolution in the current backlog.

The report highlights that commercial and industrial (C&I) demand is emerging as a key driver, with open-access projects gaining traction. Discoms, however, remain cautious about their largest customer segment, uncertain about long-term demand trajectories and the shifting landscape of RE technologies.

HBL