India’s Renewable Energy Challenge: Clearing the 40 GW PPA Backlog

India’s ambitious push toward a cleaner, greener energy future has made it one of the largest markets for renewable energy globally. Yet, a critical bottleneck threatens to derail this momentum: over 40 GW of renewable energy capacity remains stranded due to unsigned Power Purchase Agreements (PPAs).

The Bottleneck: Projects Without Buyers

Despite strong investor interest and successful auctioning of renewable capacity—particularly solar and wind—a large number of projects are facing a peculiar challenge: they have no committed offtakers. These are not failed bids or poorly structured projects. These are operational or soon-to-be-operational assets, awaiting finalization of PPAs with state distribution companies (discoms) or Power Sale Agreements (PSAs) with central procuring agencies.

The issue has grown acute enough to trigger intervention from the highest levels. Union Minister for New and Renewable Energy Pralhad Joshi recently acknowledged the backlog and emphasized the Centre's engagement with states and discoms to expedite agreement signings. According to him:

“We are working with state governments and discoms. While the March parliamentary session slowed down interactions, we are actively resuming efforts. We are confident that Renewable Purchase Obligations (RPOs) and growing demand will push states toward timely PPA signings.”

Why Are States Hesitating?

A few key factors are at play:

• Financial Health of Discoms: Many state discoms are reluctant to take on additional long-term purchase commitments due to cash flow concerns and legacy losses.

• Pricing Mismatches: Some state utilities are hesitant to lock into tariffs that may not align with their current portfolio or market expectations.

• Short-Term Market Preference: The growing spot and real-time markets offer flexibility that long-term PPAs cannot, pushing some utilities to delay commitment.

Why This Matters

For project developers and investors, this delay creates serious uncertainty. Without signed PPAs, financial closures become risky, returns remain speculative, and project timelines suffer. Moreover, India risks falling short of its climate and energy transition goals, despite having the capacity ready to deploy.

This challenge also impacts global investor confidence. India's renewable energy sector has been a magnet for foreign direct investment (FDI), green bonds, and climate-aligned finance. But PPA delays are raising red flags about execution risk and regulatory certainty.

The Path Forward

There are several reasons for cautious optimism:

• Enforcement of Renewable Purchase Obligations (RPOs): With stricter RPO implementation on the horizon, states will have to increase their green power procurement.

• Centre-State Collaboration: Minister Joshi has indicated plans to personally meet with Chief Ministers to push for resolution.

• Policy Tools in Play: Mechanisms like bundling renewable with thermal power, centralized procurement models, and tariff pooling may help mitigate discom concerns.

Conclusion: Unlocking the Green Potential

The current backlog of 40+ GW underscores a systemic friction in India’s renewable energy journey. But it also presents a timely opportunity to strengthen institutional coordination, enhance procurement frameworks, and build investor confidence through predictable market design.

If India can resolve this quickly, it will not only free up billions in clean energy investments but also reaffirm its leadership in the global energy transition.