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The country’s renewable sector is poised to add about 65 gigawatts capacity over the next four to five years supported by strong project pipeline and government’s policy backing.
The renewable energy (RE) sector is likely to see an investment of about ₹2.5 lakh crore to ₹3 lakh crore over the next few years, according to ICRA assessment.
Impacted by two Covid waves, the renewable sector is likely to see installation of about 11 GW this fiscal. The economics of battery storage has become a key monitorable for the sector.
The key challenges constraining the growth remain on the execution front, mainly associated with land and transmission infrastructure as well as the slow but improving progress in signing of power purchase agreements and power sale agreements by intermediate procurers with State distribution utilities.
Outlook for growth
ICRA’s outlook for the renewable energy (RE) sector is stable. The tariff competitiveness offered by the solar and wind power projects in utility auction route continued to remain superior, with tariffs remaining below ₹3 per unit, despite the upward pressure arising from the imposition of customs duty on imported cells and modules from April 2022.
Girishkumar Kadam, Senior Vice President & Co-Group Head, ICRA ratings, said, “The investment prospects in the RE sector thus are expected to remain strong, given the policy impetus with a target to reach 450 GW by FY2030 and competitive tariffs. The capacity addition in the power sector over the medium term will be driven by the RE segment, led by a strong project pipeline of close to 40 GW as on date.”
Apart from the execution related challenges, the RE developers are facing challenges arising from delays in payments from the State distribution utilities and grid curtailments as observed in few States, especially for the relatively higher tariff projects. Talking about solar developers affected by grid curtailment in Tamil Nadu, the Appellate Tribunal for Electricity (APTEL) order in August 2021 directs all State discoms, State electricity regulators and grid operators to compensate at PPA tariff.
Vikram V, Vice President & Sector Head - Corporate Ratings, ICRA, adds, “This order by APTEL is a positive for the RE sector and is expected to act as a deterrent against grid curtailment by discoms and grid operators. However, timely implementation of the order remains key, given that risk of a further challenge to the Supreme Court cannot be ruled out.”
Further, the demand outlook for the domestic solar OEMs remains favourable, with the strong policy support through imposition of BCD on imported cells and modules, the notification of the production-linked incentive (PLI) scheme and a strong project pipeline from various schemes requiring the use of domestic modules. Also, the non-inclusion of the overseas suppliers in the Approved List of Models and Manufacturers (ALMM) so far, is likely to support the demand for domestic module OEMs in the near term.
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