India’s renewable energy capacity likely to touch 120-125 GW by December 2022: ICRA

V Rishi Kumar Hyderabad | Updated on July 29, 2020

Capacity addition this fiscal to be subdued at 7.5-8 GW due to Covid-19

India’s cumulative renewable energy capacity is likely to be 120-125 GW by December 2022, aided by strong project pipeline in the utility solar and wind energy segments, according to rating agency ICRA.

The capacity addition in the renewable energy (RE) sector is expected to remain subdued at about 8 GW in FY2021 given the continued execution challenges amid Covid-19, because of disruption of supply chain as well as labour availability issues.

Interacting with the media over a webinar on Wednesday, Sabyasachi Majumdar, Senior Vice-President and Group Head - Corporate Ratings, ICRA, said: “The renewable energy-based capacity is likely to reach 120-125 GW by December 2022, with the solar capacity constituting 50 per cent of the overall capacity, followed by 38 per cent from the wind power segment and the balance from other sources. While this is lower than the capacity target of 175 GW set by the Centre, the incremental capacity addition is estimated to be healthy at 33-38 GW, with investment outlay of more than ₹2-lakh crore over the next two-and-a-half years.”

There has been some liquidity relief for RE independent power producers (IPPs) in a few States, with discoms (distribution companies) clearing payments using proceeds from the liquidity support scheme under the Atmanirbhar Bharat package.

The sector continues to remain plagued by issues such as delays in land acquisition, receipt of evacuation approvals, regulatory delays in tariff adoption and obtaining financial closure in a tight financing environment. Nonetheless, the overall medium- to long-term investment outlook for the renewable energy sector remains strong, supported by highly competitive tariffs, policy support and new schemes such as peak supply, round-the clock supply and RE plus thermal blending, which mitigates the risk of intermittent RE supply to some extent.

“ICRA expects this (the capacity addition) to be supported by a large pipeline of projects awarded by Central nodal agencies and State distribution utilities (discoms) and likely improvement in execution timelines. Within the renewable segment, the utility scale solar segment is expected to be very close to the 60GW capacity target set by the Centre, though there is likely to be a shortfall in the rooftop solar and the wind power segments,” Majumdar added.

Liquidity support scheme

Renewable IPPs have been facing significant delays in receiving payments, especially from discoms in Andhra Pradesh, Rajasthan, Tamil Nadu and Telangana. The discoms’ finances have been further constrained by the adverse impact of the lockdown imposed to control the Covid-19 pandemic. To address this, the Centre has announced a liquidity support of ₹90,000 crore for the discoms, in the form of loans against receivables, from the Power Financial Corporation and the Rural Electrification Corporation, under the Atmanirbhar Bharat package.

Girishkumar Kadam, Sector Head and Vice-President - Corporate ratings, ICRA, said: “On the positive side, the discoms in States like Andhra Pradesh and Telangana have now started clearing past dues to the renewable IPPs, using the proceeds from the liquidity support scheme. While this is a positive short-term measure, providing liquidity relief to the affected IPPs, a sustainable improvement in discom finances, remains crucial for future investments in the RE sector, which is linked to the improvement in operating efficiency of the discoms and aligning the tariffs in line with the cost of supply for the discoms by the respective State electricity regulators. This apart, a favourable resolution of the tariff issue for wind and solar power projects in Andhra Pradesh remains important for sustaining investments in the renewable energy sector.”

Published on July 29, 2020

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