Karnataka is the new national leader in renewable energy generation, US-based Institute for Energy Economics and Financial Analysis (IEEFA) said on Tuesday.

It has overtaken Tamil Nadu that had long been India's top renewables market.

With a population of more than 60 million, Karnataka has a total of 12.3 gigawatts (GW) of renewable capacity installed till March, after having added five GW in 2017-18 alone, it said.

IEEFA's report "Karnataka's Electricity Sector Transformation", talks about a trend driven by state and national energy policies that have encouraged less reliance on imported energy and how declining costs have helped build momentum around the uptake of renewables, especially solar.

"Tamil Nadu until this year was the frontrunner in the race to renewables and still leads in wind energy capacity," IEEFA's Director of Energy Finance Studies Tim Buckley told IANS.

The report notes that solar tenders in Karnataka have seen near record low bids of Rs 2.82-3.06 per kilowatt-hour (kWh) ($41-44/MWh), materially less than the average Rs 3-5/kWh for domestic thermal power tariffs and the Rs 5-6/kWh tariffs required for imported coal fired power.

And it points out that in June, Karnataka introduced reverse auctions for wind-powered electricity, with an upper cap of Rs 3.45/kWh, following the success of similar auctions in Gujarat and Tamil Nadu in 2017, when tariffs fell by as much as 50 per cent to as low as Rs 2.43/kWh.

In a "likely pathway" for Karnataka, based on IEEFA modelling through 2028, the report says Karnataka is set to move from being a net importer of electricity to having a net balance, and it could become a net exporter, a possibility currently constrained only by insufficient interstate grid capacity.

Renewables will account for 23 GW or 60 per cent of capacity (43 per cent of generation), up from 12.3 GW or 46 per cent in 2017/18.

Hydro, which accounts for 3.6 GW or 13 per cent of current capacity, continues to provide much-needed dispatchable energy to balance the state's growing, but variable wind and solar.

Thermal power's market share, currently at 10 GW (38 per cent of capacity and 49 per cent of generation), will remain steady, but "needs to better incorporate more flexible, peaking capacity".

IEEFA conducts research and analyses on financial and economic issues related to energy and the environment.