Transmission Constraints Emerge as the Binding Limit on India’s Renewable Expansion

Why in the News

Insufficient transmission lines have emerged as a major obstacle to India’s renewable energy expansion, with many solar projects being curtailed during daylight hours, a rating agency assessment released on 19 August 2026 found. The constraint has shifted the binding limit on India’s energy transition from how fast capacity can be built to how much of it the grid can actually carry, and new project bidding has collapsed in response.

What is curtailment of renewable power?

1. Forced reduction of output: Curtailment occurs when a power generator is forced to reduce or stop producing electricity because of oversupply and grid congestion, even though the plant is capable of generating.
2. Why solar is hit hardest: Solar output peaks in the middle of the day, when several projects on the same corridor feed in simultaneously and demand is not correspondingly high, so the surplus cannot be evacuated.
3. What it costs the generator: A curtailed unit is generation permanently lost, since sunlight cannot be stored without additional storage capacity, and the fixed cost of the asset continues to accrue against a smaller output.
4. Scale of the problem: Around 37% of renewable energy capacity at substations affected by curtailment in the northern, western and southern regions operates under short term access arrangements, and this capacity faces 30% to 50% curtailment during the day.

What is Temporary General Network Access?

1. Short term use of spare grid capacity: Temporary General Network Access (T-GNA) is a short term arrangement that allows a renewable energy project to use available capacity on the inter-State transmission system, typically for periods ranging from a single time block to about 11 months.
2. Why it is precarious: T-GNA gives no firm entitlement to evacuate power, so projects operating under it are particularly vulnerable to curtailment, which raises their operational costs and, on prolonged use, reduces the supplier’s revenues.

What is the inter-State transmission system?

1. The national transmission backbone: The inter-State transmission system is the network of high voltage lines and substations that carries power across State boundaries, planned centrally and operated as a single national grid, on which access rights are allotted separately from generation approvals.

What is a Power Purchase Agreement?

1. The contract that makes a project bankable: A Power Purchase Agreement (PPA) is the long term contract under which a distribution company or intermediary agrees to buy a defined quantity of power from a generator at an agreed tariff, and without a signed PPA a project has no assured revenue stream against which lenders will disburse.

What is firm and dispatchable renewable energy?

1. Renewable power with an assured supply obligation: Firm and dispatchable renewable energy (FDRE) is renewable generation contracted with an obligation to supply a specified quantum during specified hours, achieved by combining solar, wind and storage, so that the buyer receives a guaranteed profile rather than whatever the weather delivers.

What is round the clock renewable power?

1. Renewable supply across all 24 hours: Round the clock (RTC) power is a contracting structure in which the developer commits to supply renewable energy across every hour of the day at a specified availability, again by combining complementary sources with storage.

How severe is the curtailment, region by region?

1. The affected regions: Curtailment at substations has been recorded in the northern, western and southern regions, the three regions carrying the bulk of India’s solar and wind capacity.
2. Share on temporary access: Around 37% of renewable capacity at affected substations across these three regions operates under T-GNA.
3. The daily loss: Capacity operating under T-GNA faces 30% to 50% curtailment during daylight hours.
4. Western region: About 55% of the affected capacity in western India was under T-GNA, and peak curtailment reached 8,617 MW as of 6 August 2026.
5. Northern region: The corresponding peak curtailment figure for the northern region was 5,573 MW.
6. What the concentration means: The western region, which hosts the largest solar and wind clusters, is also the region most dependent on temporary access, so the two vulnerabilities compound rather than offset.

Why has new capacity bidding collapsed even as construction continues?

1. Construction pipeline remains large: More than 150 GW of renewable projects were under construction as of 30 June 2026.
2. Awards have fallen sharply: After 40.6 GW was awarded in 2024-25, awards fell to 14.7 GW in 2025-26 and stood at only 4.7 GW through 10 August 2026.
3. Contracts awarded but not signed: Between 40 GW and 45 GW of capacity with bids already awarded remained without signed PPAs as of April 2026.
4. Delays in firming PPAs: Delays in converting awarded bids into signed PPAs are identified as an impediment independent of the transmission constraint.
5. Land acquisition: Land acquisition for both generation sites and transmission corridors continues to stall projects.
6. Distribution company finances: The financial position of distribution companies limits their willingness to sign long term purchase obligations at all, since a new PPA adds a fixed payment liability to a stressed balance sheet.
7. The bidding mix is changing: New bidding is shifting toward firm and dispatchable renewable energy and round the clock power, which require storage and therefore carry a higher tariff than plain solar.

Is the binding constraint on India’s energy transition generation capacity or grid capacity?

1. The generation side is not the problem: More than 150 GW is under construction and renewable energy including large hydro is projected to account for more than 35% of electricity generation by 2029-30, against 22% in 2024-25.
2. The evacuation side is: Capacity is being commissioned faster than transmission corridors are being built, which is why up to half of the output of projects on temporary access is being discarded during the hours it is generated.
3. The market has already priced the constraint: New awards fell from 40.6 GW to 4.7 GW in eighteen months, which is the developer response to a corridor that cannot carry what is already built.
4. Storage is the second missing input: Timely execution of intra-State and inter-State transmission infrastructure, along with greater storage capacity, is identified as critical to sustaining renewable additions, because a line that is congested at noon is idle at night.
5. Why this reframes the target: A target expressed in installed capacity measures what has been built, while a target expressed in share of generation measures what actually reaches consumers, and curtailment is precisely the gap between the two.

How is transmission and renewable infrastructure financed in India?

Source: Backgrounder, Infrastructure Financing.docx

1. Why bank lending failed: Commercial banks funded 25 to 30 year infrastructure assets with one to three year deposits, and this asset liability mismatch produced stressed assets crossing Rs 10 lakh crore in Indian banking by 2017.
2. National Bank for Financing Infrastructure and Development: Established in 2021 under a dedicated Act of Parliament as India’s first dedicated infrastructure development finance institution, providing non recourse long term financing with 20 to 30 year tenors that match infrastructure asset life.
3. Its scale: As of December 2025 it had sanctioned approximately Rs 3.03 lakh crore and disbursed approximately Rs 1.09 lakh crore.
4. Partial Credit Enhancement: It partially guarantees bonds issued by infrastructure companies and special purpose vehicles, upgrading their credit rating from BBB to AA or AAA so that insurance companies and pension funds can participate, with the first such facility sanctioned in February 2026.
5. Sector specific development finance institutions: REC and PFC finance power generation, transmission and distribution by raising long term bonds and lending to State electricity boards and private power companies.
6. POWERGRID InvIT: The first Infrastructure Investment Trust in the power sector, set up in 2020, with proceeds channelled into new and under construction transmission projects.
7. How an InvIT recycles capital: The sponsor transfers only the right to collect revenues for a defined concession period and receives upfront capital which it reinvests in new projects, while ownership is never transferred and the asset reverts at the end of the concession.
8. The SEBI safeguard: SEBI requires a minimum of 80% of InvIT assets to be in completed operational projects, which protects investors from construction risk, and InvITs may raise debt up to 49% of asset value.
9. Infrastructure Risk Guarantee Fund: Announced in the 2026-27 Budget, it provides partial guarantees to lenders financing infrastructure projects, covering a portion of the loss on default so that lenders extend credit where they previously refused, while the partial cover preserves due diligence incentives.
10. Sovereign green bonds: Issued by the Government of India since 2022-23 with proceeds ring fenced for renewable energy, clean transport and sustainable water management, establishing a sovereign benchmark for long term green paper.
11. The recycling logic: The architecture is designed so that the government builds, the asset stabilises and generates revenue, the asset is monetised through an InvIT, and the capital returns to fund the next tranche of the National Infrastructure Pipeline without a fresh budget allocation each cycle.
12. Monetisation targets: The National Monetisation Pipeline 2.0, announced in February 2026, targets Rs 16.72 lakh crore including private sector investment of Rs 5.8 lakh crore over 2025-26 to 2029-30, nearly three times the first pipeline’s target.

Challenges to India’s Renewable Energy Expansion

1. Transmission build lags generation build: A solar park can be commissioned in about a year while a high voltage corridor takes several years, so the two cannot be commissioned in step. e.g. peak curtailment in western India reached 8,617 MW as of 6 August 2026 on capacity that was already generating.
2. Temporary access gives no firm evacuation right: Projects on T-GNA can be curtailed at the system operator’s discretion, which makes their revenue unpredictable and their debt harder to service. e.g. around 37% of affected capacity across three regions runs on T-GNA and faces 30% to 50% daytime curtailment.
3. Storage capacity is inadequate to absorb the midday surplus: Without batteries or pumped hydro the same corridor is congested at noon and underused at night. e.g. the shift in new bidding toward firm and dispatchable and round the clock contracts is itself an admission that plain solar without storage no longer clears.
4. Distribution company finances limit offtake: Loss making distribution utilities avoid signing new long term purchase obligations irrespective of tariff. e.g. 40 GW to 45 GW of awarded capacity remained without signed PPAs as of April 2026.
5. Right of way and land acquisition for transmission corridors: Transmission lines cross many districts and require sustained land and forest clearances along the whole route. e.g. land acquisition is named alongside transmission constraints as an independent impediment to project completion.
6. Geographic concentration of resource: Solar and wind resources are concentrated in a few States while demand centres lie elsewhere, so the transition is dependent on long distance evacuation. e.g. the western and northern regions together account for the two largest curtailment figures recorded.
7. Tariff pressure from cheap early bids: Projects awarded at very low tariffs in earlier competitive rounds have thin margins that curtailment erases entirely. e.g. the collapse of awards from 40.6 GW in 2024-25 to 4.7 GW through August 2026 shows developers withdrawing rather than bidding lower.
8. Grid stability with high variable renewable share: A grid carrying more than 35% renewable generation needs inertia, frequency response and balancing reserves that thermal plants currently supply. e.g. must run thermal capacity has to be retained and paid for even as it operates at low plant load factors.
9. Module and cell supply chain dependence: Domestic content requirements raise capital costs while imported modules expose projects to trade policy shocks. e.g. changes in duty on imported solar cells and modules have repeatedly reset project economics after bids were submitted.
10. Delayed payments to generators: Payment delays by distribution utilities strain developer working capital independently of curtailment. e.g. the late payment surcharge rules had to be framed specifically to enforce a payment discipline that contracts alone did not achieve.

Conclusion

India’s renewable programme has moved past the point where generation capacity is the constraint, and the evidence for that is a 150 GW construction pipeline coexisting with up to 50% daytime curtailment on capacity that is already running. The market has responded not by building more but by bidding less, with awards falling from 40.6 GW to 4.7 GW in eighteen months, and by shifting toward firm and dispatchable contracts that price the constraint into the tariff. Whether renewable energy reaches more than 35% of generation by 2029-30 now depends on the execution of intra-State and inter-State transmission lines and on storage capacity, not on the pace of solar commissioning.

“[2022, GS3, 15 marks] Do you think India will meet 50 percent of its energy needs from renewable energy by 2030 ? Justify your answer. How will the shift of subsidies from fossil fuels to renewables help achieve the above objective? Explain.”