Record Growth Faces New Cost Realities

India's wind energy sector has achieved a record addition of 6.05 GW in fiscal year 2025-26, pushing its total installed capacity past 56 GW. This surge is credited to clearer government policies and better project execution. Key drivers identified by the Ministry of New & Renewable Energy include improved policy guidance, transmission infrastructure availability, and competitive energy pricing. States like Gujarat, Karnataka, and Maharashtra have led this expansion, supported by renewable energy policies and a rise in hybrid projects.

Record Growth Faces New Cost Realities

This record achievement makes India the second-largest global market for new wind installations in 2025, behind China. Wind power now accounts for about 21% of India's total renewable energy capacity. This progress was heavily supported by government incentives, such as customs duty benefits and waivers on transmission charges (ISTS). However, the waiver for ISTS charges expired for projects started after June 30, 2025, with a phased reduction now in place until June 2028. This change is expected to raise transmission costs by about 16%, adding ₹0.80-₹1 per kWh to the cost of power. This could affect energy prices and project profitability, especially as competitive bidding has already driven tariffs down to very low levels.

Global Standing and Grid Challenges

India's overall non-fossil fuel capacity reached 50% of its total electricity capacity by June 2025, five years ahead of schedule. While India's growth is significant, China dominates the global wind market, making up 77% of new installations in 2025. India's wind expansion is mainly in states like Gujarat and Tamil Nadu. A major challenge is integrating renewable energy into the grid, as wind and solar power are inconsistent. This requires substantial investment in transmission and better forecasting. Issues like inadequate transmission lines and monitoring can cause grid problems. The end of the transmission cost waiver specifically affects projects in remote, windy areas, potentially slowing the development of about 26 GW of planned capacity.

Underlying Financial Risks

Dependence on policy support like the ISTS waiver creates financial uncertainty. Projects started after the June 2025 deadline will face higher transmission costs, impacting their viability. Many developers rushed to complete projects before the deadline but faced delays. Aggressive bidding has already squeezed developer profit margins. Increased grid integration costs and higher penalties for failing to meet supply targets (set to rise in April 2027) add further financial pressure. These combined issues – rising costs, policy changes, and grid integration difficulties – pose significant risks to India's renewable energy goals.

Outlook Remains Positive Despite Challenges

India aims for 500 GW of non-fossil fuel capacity by 2030, and the wind sector is expected to continue growing, potentially reaching over 119 GW by 2031. Hybrid projects combining wind, solar, and storage are increasing, promising better efficiency and grid stability. Government support, including policies for hybrid energy and offshore wind, aims to attract investment. However, future growth will depend on how well the sector adjusts to higher costs after the transmission waiver ends and how effectively variable energy sources are integrated into the grid.