This may be the moment to look at beaten-down renewables

Summary: At first glance, the renewable energy sector looks broken with cancelled projects and crashing valuations. But underneath the rubble is a reset that only the early, attentive investors will notice.

For a few years, India’s renewable-energy sector looked unstoppable. Solar and wind capacity kept rising, factories burst with expansion plans, and anything with a green label attracted investors in droves. That fever has cooled. Some projects are being rolled back, others cancelled, and many renewable stocks have lost altitude.

But this slowdown isn’t because India suddenly has too much clean energy. Far from it. The issue is that there is too much capacity on paper and too little capacity backed by real buyers, real contracts and real grid space.

Capacity only on paper

Every renewable project begins with paperwork. The developers, companies that build and run solar and wind plants, bid for government auctions run by agencies like SECI or NTPC. Winning an auction earns the developer a letter of award (LoA), often touted as an ‘order win’. The LoA is essentially permission to set up a certain amount of power capacity if everything else falls into place.

But an LoA isn’t a sale. It doesn’t guarantee that anyone will buy the power. That only happens when the order is backed by a power purchase agreement (PPAs). This is the long-term contract—usually 25 years—where the developer gets a guaranteed tariff and customer through the agencies.

And who are these customers? The state distribution companies, or discoms, that supply electricity to homes, shops, factories and entire cities. They sit at the far end of the chain. The central agencies act as a bridge in between: they sign power sale agreements (PSAs) with discoms, essentially reserving buyers for power that will be sourced from developers through PPAs.

If PSAs aren’t signed, there is nowhere for the power to go. If PPAs aren’t signed, there is no buyer at all. In either case, the project never advances beyond being an LoA listed on a website. And that is exactly what unfolded across the industry.

Too many orders, too few takers

Between April 2023 and late 2025, state agencies tendered almost 93 GW of renewable capacity. But by October this year, only about a quarter of that had secured both PSAs and PPAs. Nearly 44 GW of projects had neither, largely because discoms have pulled back from signing new commitments in anticipation of lower future tariffs.

Yet many developers rushed ahead to apply for grid connectivity (slots are given to use the power transmission network) on the back of their orders. However, many never moved forward because they lacked PPAs, leaving nearly 32 GW of grid access lying idle by late 2025. Effectively, the system had given highway space to vehicles that were never going to start their engines.

This is the core problem of oversupply: a mountain of announced capacity that fails to materialise.

The clean up

The government and regulators have now stepped in to clear this backlog. The renewable energy ministry has allowed old, unviable LoAs to be cancelled. CERC, the electricity regulator, has gone further, proposing that grid access itself should only be granted after PPAs are in place—and should be revoked if a project fails to progress. As a result, connectivity for roughly 17 GW of delayed projects was cancelled in September. The message is simple: just an LoA no longer equals future revenue.

Who gets hurt and who doesn’t

Solar module manufacturers face the harshest squeeze. Their capacity has exploded from under 20 GW in 2022 to over 100 GW today and is on track to reach 165 GW by 2027. But annual installations remain one-fifth of that number. The result is predictable: lower utilisation, lower prices and shrinking margins. Only the largest and most integrated players can survive this reset. Ultimately, these players remain dependent on developers and on whether those LoA pipelines ever convert into real, contracted projects.

EPC contractors, who build plants on behalf of developers, have a similar story. They still have healthy order books. But the nature of work is shifting. The easy projects—big plain-vanilla solar parks backed only by LoAs—are fading. Growth will now require more complex assignments: hybrid projects, storage-backed systems and round-the-clock supply, where engineering depth matters more than scale alone.

For independent power producers, the developers themselves, the picture depends entirely on contracts. Plants backed by firm PPAs are largely insulated from the turmoil. But plants stuck at the LoA stage could see their much-advertised future orders quietly vanish as regulators tighten rules.

A sector digesting its excess, not declining

Put all of this together—the backlog of projects, the congested grid and the manufacturing glut—and the recent valuation reset starts to make sense. Investors are no longer rewarding every company that announces capacity. They are looking instead for credibility: real PPAs, disciplined bidding, and balance sheets that can survive a slower, more selective cycle.

None of this changes the long-term structural opportunity. India still targets 500 GW of non-fossil capacity by 2030, and thus, demand for clean energy is not going anywhere. The country’s total electricity use is still rising—up 5 per cent last year—and coal still supplies most of it. Renewables form just a quarter to a third of actual generation despite accounting for half of installed capacity. The mismatch is not due to lower demand itself but supply mistimed with demand, which will correct with time as the reset takes place.

What has changed is the mood. The boom phase, when anything ‘green’ seemed good enough, is behind us. And that’s good news. Sobering valuations offer the chance to pick players who can endure a period of indigestion: developers with genuine contracts backed by purchasers, module manufacturers with scale and integration, and EPC companies capable of navigating the more complex projects ahead.

Want to see which clean energy players we recommend?

Clean energy isn’t a fad. It’s a long-term, structural shift. But in a sector going through a messy reset, only a handful of companies are truly positioned to benefit when the cycle turns.

At Value Research Stock Advisor, our analysts go deeper than headlines and hype. We look at business models, contracts, balance sheets and long-term competitiveness to identify which players are genuinely built for the next phase of India’s energy transition.

Find them here

Also read: The frothy renewable space still has 2 cheap outliers