Renewable energy sector continues to maintain its lead over thermal power in adding new capacity to the grid.

During the first four-month period of this fiscal, renewable sector added a capacity of 1,742 MW, which included 1,305 MW, from solar ground-mounted projects and 159 MW from rooftop projects. But, the thermal sector added no capacity during the period. Only hydro sector has added 110 MW of new capacity.

While falling tariffs is aiding the renewable power, coal-fired power has been impacted by overcapacity, coal availability and long-term purchase agreement issues.

It is, thus, not surprising that the capacity addition target for the renewable sector in 2018-19 is significantly higher than the combined capacity addition target set for conventional sector comprising thermal and hydro.

The clean energy sector, comprising solar, wind, small hydro and bio power, is expected to add a total capacity of 15,602 MW in 2018-19, while the new capacity target for the conventional sector has been pegged at 8106 MW (thermal at 7,266 MW and hydro at 840 MW).

Amid some cancellations in the recent past, the Central government is planning to conduct auctions for 30 GW of solar capacity in FY19 and FY20 as part of its vision to achieve 100 GW commissioning by FY22. On the wind side, the government plans to conduct 10 GW of wind auctions each year in FY19 and FY20.

“The overall plan for renewables is to conduct 40 GW of auctions each in FY19 and FY20, which in our opinion will be a tough target to achieve. We expect that around 11 GW of renewable capacity auctioned in FY18 should be commenced in FY19 and 1HFY20,” said Ankur Agarwal, Senior Analyst (Global Infrastructure Ratings, India Ratings & Research (Fitch Group).

On the contrary, there is virtually no new thermal capacity commissioned during the first four months of this fiscal. Net thermal capacity commissioned in FY18 also stood at a very miniscule level of about 1 GW (after considering decommissioned plants).

“We expect this trend of minimal thermal capacity and higher renewable capacity addition to continue, over at least the next 3-4 years,” said Agarwal.

Low-cost energy

Renewable energy is cheaper than thermal power by at least ₹1.00-1.25 per kwh. Also, in most of the cases, renewable tariffs are fixed in nature with no escalation unlike thermal, which will only make them more attractive compared to thermal in future. The thermal sector is impacted by the problem of demand. Existing thermal power plants on a national average level are still running at plant load factors of around 60 per cent. There are no long term, 25-year PPAs in the market for last 4-5 years and there were just a very few medium term PPAs in the recent past.

We believe that not much thermal capacity will commission till FY22 at least, after which there can be some improvement in the situation, he said.

The only argument in favour of thermal is that renewable can’t make for the base load and thermal (especially gas-based) plants are more suited for it. But better battery technology, if developed in a cost-effective manner, can help renewables work as a base load going forward.