Covid-19 amplifies wind energy sector’s pain

V Rishi Kumar Hyderabad | Updated on July 02, 2020 Published on July 02, 2020

Capacity addition to remain modest at 2-2.5 GW in FY2021: ICRA

The country’s wind power sector witnessed a capacity addition of 2.1 GW in FY2020, an improvement over the 1.6 GW added in FY2019, supported by 11.3 GW of capacity awarded by the central nodal agencies and state distribution utilities, rating agency ICRA said on Thursday.

However, the actual capacity commissioned under these bids is about 2.5 GW so far, against the 7.5 GW that should have been commissioned by March 2020 as per the timelines provided. The sector continues to face execution challenges, which got aggravated by the lockdown.

Girishkumar Kadam, Sector Head & Vice President-Corporate ratings, ICRA, said: “The slow execution of the capacity awarded by the central nodal agencies and the state utilities is because of the continued execution challenges, tight financing environment and regulatory delays in tariff adoption from the regulators in the past. This apart, the developers continue to face challenges owing to the significant payment delays by the state distribution utilities (Discoms), instances of grid curtailment and pending resolution of the tariff issue in Andhra Pradesh.”

“These challenges are further augmented by the adverse impact of the lockdown imposed to control the Covid-19 pandemic on the execution of under-construction projects as well as on the revenues and cash flows of Discoms. Therefore, ICRA’s outlook on the wind energy sector continues to remain negative. The wind power capacity addition is estimated to remain modest in the range of 2.0-2.5 GW in FY2021,” he said.

Limited potential for tenders

These challenges have further led to a slowdown in the tendering activity, with no wind power project awarded post August 2019. While SECI has issued a tender for 2000 MW under Tranche IX, the reverse auction for this tender is pending.

Due to the slowdown in electricity demand growth in FY2020 and with the demand de-growth expected in FY2021 amid Covid-19, the incremental wind capacity requirement is estimated to remain lower than projected earlier for FY2021-23. The potential for new tenders in the wind power segment remains limited in the near to medium term.

“Nonetheless, long-term prospects for wind energy remains intact given the strong policy focus and improved tariff competitiveness,” an ICRA statement said.

The wind power IPPs continue to face significant delays in receiving payments from Discoms in Andhra Pradesh, Rajasthan and Tamil Nadu. The finances of Discoms have been further constrained by the adverse impact of the lockdown.

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Published on July 02, 2020
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