The renewable energy sector is expected to witness rapid progress in the next few quarters as about 25 GW of new capacity is expected to be added in the next 12-15 months, according to industry analysts.

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The installed renewable energy (RE) capacity excluding hydro energy in India will increase to about 170 GW by March 2025 from 135 GW. This will be driven by the significant improvement in tendering activity in the current fiscal with over 16 GW projects bid out so far and another 17 GW bids underway by the Central nodal agencies.

The sharp decline in solar PV cell and module prices of 65 per cent and 50 per cent respectively, abeyance of the Approved List of Module Manufacturers (ALMM) order till March 2024, and the timeline extension approved for solar and hybrid projects is expected to result in an improvement in RE capacity addition, according to rating agency ICRA.

This, along with the growing project pipeline, is likely to support the scale-up in capacity addition to 23-25 GW in FY2025, mainly driven by the solar power segment.

“The sharp decline in solar PV cell and module prices is leading to a healthy improvement in debt coverage metrics for the upcoming solar power projects. As a result of this, for a solar power project with a bid tariff of ₹2.5 per unit and sourcing modules from domestic OEMs using imported PV cells, the average DSCR (debt service coverage ratio) has improved by over 35 bps,” said Girishkumar Kadam, Senior Vice President & Group Head - Corporate Ratings, ICRA.

JMK Research projects that about 20.6 GW of new solar capacity is expected to be added in India in this calendar year 2024 (16 GW from utility-scale, 4 GW from rooftop solar, and another 600 MW from an off-grid component). There was an upsurge in tender activity for utility-scale solar projects. The wind power segment is expected to add about 4.5 GW of new capacity, likely to be added in 2024.

In the December 2023 quarter, 77 new tenders with a cumulative capacity of 34.1 GW were issued across renewable segments, which is about 21.2 per cent higher than the previous quarter, it added.

Though solar capacity addition reported a significant drop in 2023, some market challenges such as high module prices are not there when compared with 2023, said Priya Sanjay, Managing Director, Mercom India.

The average costs for large-scale systems in the December 2023 quarter witnessed a 27 per cent y-o-y decline. Thus, the absence of financial obstacles allows previously stalled projects from 2023 to potentially proceed toward commissioning now. The delayed large-scale projects, auctioned by various entities such as SECI, NTPC, NHPC, and IREDA, and granted extensions from December 2022 to June 2023, are expected to make substantial contributions to 2024 capacity additions, she pointed out.

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However, ICRA and Mercom analysts pointed out that challenges remain on the execution front with respect to delays in land acquisition and transmission connectivity, which could hamper the capacity addition prospects. The government must ensure adequate substations and transmission infrastructure to accommodate the large capacity of projects that are getting commissioned.