Firm and Dispatchable Renewable Energy Could Reach Cost Parity With New Thermal Plants in India by 2030: New report

December 9, 2025, New Delhi—India can secure reliable, round-the-clock clean power at costs competitive with new thermal plants by 2030 under realistic market conditions, with the possibility of achieving cost parity as early as 2025 under more favourable circumstances, a new report found.

The study, Budgeting for Net Zero: Powering India’s Reliable Clean Energy Future by the International Institute for Sustainable Development (IISD) and the Center for Study of Science, Technology and Policy, finds that firm and dispatchable renewable energy (FDRE)—hybrid projects combining solar, wind, and battery storage—can match or undercut the cost of new thermal power plants when developers are able to monetize both a portion of surplus electricity generated by oversized renewable sources and additional storage capacity.

FDRE projects install slightly more renewable and storage capacity than required for their contracted supply; selling this surplus power plays a critical role in lowering overall costs. FDRE—one of several types of tenders for firm clean energy—is already much cheaper than new coal when the full social costs of thermal power plants are considered. 

Without accounting for social costs, the study identifies three cost-parity timelines, depending on how much surplus power developers can sell into the market:

• 2025 when 100% of surplus power is monetized,
• 2030 when 50% of surplus power is monetized, and
• 2047 when only 30% of surplus power is monetized.

“Firm and dispatchable renewables are not just a clean alternative—they are an increasingly competitive source of reliable power. With thoughtful tender design and market reforms, India can tap into FDRE to meet rising electricity demand, cut long-term costs, and build a power system that is both resilient and future-ready,” said Sunil Mani, policy advisor at IISD.

The study examines when and under what conditions FDRE can compete with new thermal, whether government support is needed to accelerate deployment, and the macroeconomic impacts of scaling FDRE. It also evaluates how tender design, developer strategies, and electricity market reforms influence FDRE’s affordability.

FDRE marks an important shift in India’s clean energy procurement. Instead of simply adding variable renewable energy to the grid, FDRE tenders require developers to supply clean electricity at specific, often peak hours aligned with distribution companies’ (discoms’) demand patterns. This is becoming increasingly relevant as India’s power needs rise and discoms face higher costs from managing variability through short-term markets and limited access to flexible supply. FDRE offers one pathway to scale renewables while maintaining reliability and cost predictability for both discoms and consumers.

Although early FDRE tenders have faced challenges—such as uncertainty around the optimal renewable–storage mix and the monetization of surplus power—9.7 GW of FDRE capacity is already under construction, and bid prices closely match the cost projections in the study.

The report stresses that FDRE is not meant to replace all other clean energy solutions. Because FDRE guarantees firm delivery, it is naturally more expensive than standalone solar, wind, or storage when round-the-clock supply is not required. The authors of the report highlight that a balanced approach—deploying FDRE where demand profiles justify it and expanding lower-cost clean energy and storage elsewhere—will deliver the most efficient outcomes for India’s evolving power system.

“FDRE can play an important role alongside standalone renewables, storage, and smarter grid management to support India’s clean energy transition,” says Dr Anasuya Gangopadhyay,  senior associate in the Climate Change Mitigation team at CSTEP.

Beyond Energy Costs: Health, climate, and jobs

The report also highlights that comparing FDRE and coal solely on energy costs ignores coal’s full societal costs.  When air pollution and climate damages are included, the effective cost of new pithead coal rises from INR 4.65/kWh to INR 13.19/kWh, making FDRE immediately cheaper in all scenarios.

In addition, FDRE provides energy security advantages: it reduces exposure to fossil fuel price volatility and can be deployed in 2–2.5 years, compared to 5–7 years for new coal plants.

Beyond costs, scaling FDRE would raise India’s GDP by 1.8% by 2050, create 64,000 net new jobs, and reduce public health costs linked to air pollution while strengthening energy security by lowering dependence on fuel imports.

The study identifies several policy options to strengthen FDRE tender design and create market conditions that support deployment, including more flexible demand-fulfilment ratios, capacity payments for storage, improved penalty structures, expanded revenue opportunities, and enhanced resource adequacy planning at the state level.

Media contacts:  

Sunil Mani, policy advisor, IISD – [email protected]

Madhulika Verma, senior communications officer, IISD: [email protected]

About CSTEP

The Center for Study of Science, Technology and Policy (CSTEP) is one of India’s leading think tanks, with a mission to enrich policy-making with innovative approaches using science and technology for a sustainable, secure, and inclusive society. Our current work is anchored in the grand challenges of our time, namely, Clean Energy Transition, Clean Air for All, and Sustainable and Secure Future for All. Our work focuses on ensuring that our ideas are born out of evidence and implementable at scale. We are continuously exploring new ideas that will play a crucial role in addressing our grand challenges. We are committed to an Ecosystem Approach and to achieving this through multiple partnerships across the ecosystem.