MUMBAI: Renewable capacity addition in the current fiscal is expected to be subdued at 8 GW given the continued execution challenges amid COVID-19 pandemic, says ICRA.
According to the ratings agency, India’s renewable capacity is expected to reach 125 GW of by December 2022, nearly 28 per cent lower than the government’s target of 175 GW by the period.
“The capacity addition 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.
This has added to the woes of the sector which is plagued by issues such as delays in land acquisition and receipt of evacuation approvals, regulatory delays in tariff adoption and obtaining financial closure in a tight financing environment,” the agency said.
That said, 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 renewable energy plus thermal blending, which mitigates the risk of intermittent RE supply to some extent, it noted.
“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 wind power segment and the balance from other sources,” ICRA’s Sabyasachi Majumdar said.
He further said that while this is lower than the capacity target of 175 GW set by the government, the incremental capacity addition is estimated to be healthy at 33-38 GW with investment outlay of more than Rs 2 lakh crore over the next two-and-a-half years.
“This will be supported by a large pipeline of projects awarded by central nodal agencies and state discoms and likely improvement in execution timelines,” he added.
Within the renewable segment, the utility scale solar segment is expected to be very close to the 60 GW capacity target set by the government, though there is likely to be a shortfall in the rooftop solar and the wind power segments, Majumdar noted.
According to ICRA, renewable power producers have been facing significant delays in receiving payments, especially from discoms in the states of Andhra Pradesh, Rajasthan, Tamil Nadu and Telangana.
Finances of discoms have been further constrained by the adverse impact of the lockdown imposed to control the coronavirus pandemic.
To address this, the government announced a liquidity support of Rs 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 Aatmanirbhar Bharat package.
Meanwhile, 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 discoms finances remains crucial for future investments in the RE sector, which is linked to 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,” ICRA’s Girishkumar Kadam said.