Why India Needs Power Grid Modernisation for Renewable Energy Growth

A sustained expansion of clean energy initiatives over the past decade has brought significant changes to India’s electricity supply mix, with non-fossil sources now accounting for a quarter of annual power generation. However, integrating this growing capacity reliably into the world’s third-largest power system requires addressing critical transmission bottlenecks, insufficient energy storage, and rigid power purchasing models.

What Happened

India’s clean energy transition has reached key milestones, driven by financial incentives, competitive auctions for price discovery, and modern electricity trading platforms. Non-fossil energy sources contributed 25 per cent of the nation’s annual electricity generation and briefly exceeded 50 per cent during daytime hours in July 2025 and July 2026. Despite this growth in generation, grid management faces substantial hurdles. Existing transmission infrastructure remains largely inflexible and designed for one-way flows, while line construction lags behind the rapid deployment speed of wind and solar installations. Additionally, prevailing market structures compensate producers only for energy supplied, rather than the wider grid-support services required for stability.

Key Highlights

• Non-fossil power accounts for one-fourth of annual electricity generation in India and briefly surpassed 50 per cent during daylight peaks in July 2025 and July 2026.
• India operates just 1 gigawatt of battery storage to support approximately 60 gigawatts of wind and solar capacity, compared to 4 to 13 gigawatts of storage deployed across Australia, China, and the United States.
• Surplus daytime renewable power is currently being curtailed even as electricity demand surges after sunset due to inadequate storage and thin reserve capacity.
• Most electricity remains locked in 25-year bilateral contracts, limiting wholesale market liquidity and escalating integration costs.
• Current tenders use technology-specific auctions rather than cross-technology procurement based on overall system needs.

Why This Matters

According to analysis from the Council on Energy, Environment and Water (CEEW), pursuing a high-renewable pathway is necessary for India to meet growing electricity demand reliably at the lowest possible cost. Without structural modernisations, the country risks stranded power generation assets, stalling clean energy investments, and costly technological lock-ins. When power systems cannot store or transport clean energy, solar and wind power must be curtailed during peak production hours, leaving utilities unable to utilise capacity during post-sunset demand spikes. Ultimately, modernisation efforts affect end-users ranging from rural enterprises and farmers using solar equipment to residential consumers seeking dependable, affordable electricity.

What to Watch Next

Experts highlight four key operational and regulatory interventions to safeguard grid reliability:

• Advanced Grid Technologies: Accelerating the reconductoring of existing lines to increase capacity, enabling flexible operations across state-owned thermal fleets, requiring grid-forming inverters via grid codes, and co-locating battery storage with renewable installations.
• Market Redesign: Introducing short-term capacity markets starting with centrally-allocated thermal capacity, expanding trading instruments such as Contracts-for-Difference pilots, and creating mechanisms that directly reward capacity, dispatchability, and flexibility.
• Procurement Reforms: Transitioning from isolated technology auctions toward integrated, cross-technology bidding where utilities procure capacity, stability, and flexibility over 10- to 15-year planning horizons under guidelines from the Ministry of Power and the Central Electricity Regulatory Commission.
• Grid Digitalisation: Enhancing distribution company visibility through smart meters, rolling out time-varying tariffs, and providing unified consumer apps that display real-time pricing and consumption data.

Frequently Asked Questions

Why is renewable energy being curtailed in India?

Surplus renewable energy generated during the day is curtailed because grid storage capacity is limited and transmission systems lack the flexibility to absorb and shift daytime power to meet evening demand spikes.

How does India’s energy storage compare internationally?

India has 1 gigawatt of battery storage supporting roughly 60 gigawatts of wind and solar installations. In contrast, markets like Australia, the United States, and China maintain between 4 and 13 gigawatts of storage for comparable integration needs.

What role do distribution companies play in grid modernisation?

Distribution companies serve as key operational nodes. Digitalising distribution via smart meters and transparent consumer applications enables utilities to monitor grid load, manage rooftop solar and electric vehicle integration, and offer time-varying tariffs.

Source: Based on analysis published by the Council on Energy, Environment and Water via Business Standard.