India experienced a notable slowdown in net power generation capacity additions during the third quarter of 2026 (July-September), with additions falling by 37.5% year-on-year compared to Q3 2025. This marks the lowest quarterly increase in capacity over the past five quarters, according to an analysis by the Institute for Energy Economics and Financial Analysis (IEEFA).
Key Drivers Behind the Decline
The primary factors contributing to this sharp decline include a deceleration in fossil fuel-based capacity additions and significant retirements of existing plants. While a weak monsoon and high power demand pushed thermal plants to consume more coal, new capacity growth struggled.
Fossil Fuel Constraints
- Coal Additions: New coal capacity additions saw a reduction.
- Gas and Diesel Retirements: A substantial 978MW of gas capacity and 301MW of diesel capacity were retired in Q3 2026. India continues to phase out gas-based power due to high and volatile liquefied natural gas (LNG) prices, limited domestic gas allocation, and intense competition from cheaper coal and renewable energy sources. The ongoing West Asia crisis further underscored the risks associated with reliance on imported fossil fuels, rendering many gas plants economically unviable or underutilized. These retirements accounted for approximately 61% of the total 2,089MW retired during the quarter.
Renewable Energy Slowdown
Despite being the largest contributor, solar capacity additions also saw a decline, adding 8,899MW—a 25.2% quarter-on-quarter (QoQ) drop from Q2 2026. Wind power was the only generation source to increase its net capacity additions QoQ, rising 30.4% to 1,758MW. Overall, the quarter was characterized by reduced solar and coal additions, alongside the aforementioned gas and diesel capacity reductions.
State-Level Impact and Curtailment Issues
Capacity additions slowed across most major states, with seven out of eight recording a QoQ decline. Maharashtra saw the steepest fall, with additions declining by 77% from Q2 2026, while Tamil Nadu's additions dropped by 56% QoQ. This slowdown in Tamil Nadu coincided with reports that its Green Energy Corporation Limited had paused inviting fresh applications for solar and wind projects since March 2026, awaiting a new policy for Battery Energy Storage Systems (BESS). Karnataka was the sole state to register an increase in capacity additions this quarter, rising 48% QoQ.
Another significant challenge for states is renewable energy curtailment. In September 2026, approximately 378 million units (MUs) of renewable energy were curtailed (314MUs solar, 64MUs wind). Gujarat recorded the highest curtailment at 187.76MUs, followed by Rajasthan at 110MUs. These issues are largely attributed to transmission constraints, limited BESS capacity, and insufficient grid flexibility.
Glimmers of Growth
Despite the quarterly slowdown, the long-term momentum for renewable energy deployment in some states remains strong. Uttar Pradesh, for instance, surpassed 10GW of installed renewable capacity in 2026, with its quarterly additions rising 168% year-on-year. Andhra Pradesh also saw a nearly four-fold increase in annual renewable energy capacity additions from FY2024-2025 to FY2025-2026, driven by its Integrated Clean Energy Policy, improved transmission connectivity, and faster approvals.