FDRE Projects Could Reach Cost Parity with New Thermal Plants By 2030: Report

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 has 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 (CSTEP), 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 can monetize both a portion of surplus electricity from oversized renewable capacity and additional storage.

Already Cheaper Than Coal

FDRE projects install slightly more renewable and storage capacity than required for contracted supply; selling this surplus power plays a crucial role in reducing overall costs. FDRE—one of several types of tenders for firm clean energy—is already far cheaper than new coal when the full social costs of thermal power generation 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
• 2047 when 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.

Conditions For Competitiveness 

The study examines when and under what conditions FDRE can compete with new thermal capacity, 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 during specific, often peak hours aligned with distribution companies’ (discoms) demand patterns. This is 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.

Challenges in FDRE Tenders 

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

The report stresses that FDRE is not intended to replace all other clean energy solutions. Because FDRE guarantees firm delivery, it is naturally more expensive than standalone solar, wind, or storage when a round-the-clock supply is not required. The authors emphasise that a balanced approach—deploying FDRE where demand profiles justify it and expanding lower-cost renewables 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,” said 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 burden. When air pollution and climate-related 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 across all scenarios.

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

Beyond costs, scaling FDRE would increase India’s GDP by1.8% 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.