Ratings agency ICRA expects bidding activity for renewable energy projects to gradually shift over the medium term from standalone wind or solar bids to hybrid projects blended with other sources for round-the-clock (RTC) and peak supply.

This is given the competitive tariffs discovered and the fact that hybrid projects enable efficient grid integration of renewables. Further, the bid out pipeline for the awarded projects as on date remains strong at about 50 GW, and this in turn, is expected to result in a recovery in capacity addition to about 11-12 GW in FY2022.

Girishkumar Kadam, Sector Head & Vice President, Corporate Ratings, ICRA, said, “The RE sector has witnessed aggregate project awards of ~78 GW under the tariff-based competitive bidding route across wind, solar and hybrid projects so far. Within this, the solar power segment has occupied a dominant share of 79 per cent in the bid-out projects, while wind and hybrid share stood at 16 per cent and 5 per cent respectively. The Covid-19 pandemic induced lockdown restrictions slowed down the RE capacity addition to 2.2 GW in H1 FY2021 against more than 4 GW reported in H1 FY2020.”

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“The execution is expected to improve in the second half of FY2021. With the easing of supply chain challenges, capacity addition for the full FY2021 is expected to be about 7.5-8.0 GW comprising 5.5-6.0 GW from solar and 1.5 to 2.0 GW from wind,” he said.

Overall, ICRA expects the RE capacity to reach about 160 GW by March 2025 with a combination of standalone solar & wind projects and hybrid projects, with incremental capacity addition of 74 GW during April 2020-March 2025 and estimated investment of more than ₹4-lakh crore.

The discom finances have been further constrained by the sharp decline in revenues during the lockdown period in H1 FY2021. In this context, the government had announced the liquidity support scheme of ₹90,000 crore, now increased to ₹1.2-lakh crore.

Vikram V, Associate Head & Assistant Vice President - Corporate Ratings, ICRA, said, “The sector outlook remains negative, given the regulatory challenges persisting for RE IPPs in the state of Andhra Pradesh, execution headwinds for the under-construction projects and concerns on the financial health of the discoms.”

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The rating agency estimates the share of RE to increase to 34 per cent by 2025 from 24 per cent as of March 2020;the overall power generation capacity is estimated to be 470 GW by March 2025.

The share of solar-based capacity within the RE capacity is expected to increase from 40 per cent as of March 2020 to 57 per cent as of March 2025, and the share of wind-based capacity is expected to decrease from 43 per cent as of March 2020 to 33 per cent as of March 2025.

Despite the adverse impact of Covid-19 on electricity demand,the credit profile of RE IPPs remained largely stable supported by must-run status, adequate liquidity buffer and realisation of payments under the liquidity package for discoms.

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