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India is set to significantly boost its wind energy capacity, expecting an addition of nearly 25 GW between fiscals 2025 and 2028, compared to approximately 9 GW added between fiscals 2021 and 2024, according to CRISIL Ratings. This expansion will require an estimated capital expenditure of Rs 1.8–2 lakh crore.
The anticipated increase is driven by the growing role of wind energy in balancing the grid and providing renewable power throughout the day, complementing solar energy, which is primarily generated during daylight hours.
Key factors contributing to this growth include a rise in auctions for wind and hybrid projects, the development of transmission infrastructure to wind sites, improved financial profiles of wind original equipment manufacturers (OEMs), and viable tariff bids in recent times.
Between fiscals 2014 and 2018, India added wind capacity at a rate of approximately 3.0 GW per year. However, this pace slowed to 1.7 GW between fiscals 2018 and 2023 due to limited high wind potential sites and reduced returns for developers after aggressive bidding.
To revitalize the wind sector, the government has introduced several policies and initiatives, including a target to auction 50 GW of renewable projects annually, with 10 GW allocated to standalone wind projects. Since fiscal 2023, around 5 GW of standalone wind projects have been auctioned, compared to about 3 GW in fiscals 2021 and 2022.
Hybrid and storage-linked project auctions have also increased, rising from 4 GW in fiscals 2021 and 2022 to nearly 18 GW in fiscals 2023 and 2024. According to Ankit Hakhu, Director at CRISIL Ratings, these projects will drive higher wind additions, with wind power comprising 30-50% of their capacity.
The easing of supply-side constraints through improved transmission connectivity and better financial health of wind OEMs is also supporting wind capacity additions. The government aims to increase connected wind capacity from around 50 GW in December 2022 to 75 GW by March 2025 and 100 GW by December 2027.
Improved credit metrics for leading OEMs, reflected in their enhanced interest coverage ratios, further support this growth. Additionally, project viability has improved, with average tariffs stabilizing around Rs 3.2 per unit in fiscals 2023 and 2024, expected to continue into fiscal 2025.
Varun Marwaha, Associate Director at CRISIL Ratings, noted that these tariffs are likely to be viable and profitable for developers given the expected project costs over the medium term. However, the estimates are sensitive to the progress of transmission infrastructure construction and fluctuations in steel and cement prices, which could impact project costs and tariff viability.
