The large target by the government for renewable capacity addition and the focus on renewable purchase obligation along with falling tariffs in competitive bidding regime have led to an increase in demand for renewable energy, the ratings agency said in a report today
The recent aggressive bidding and adverse perception due to falling renewable tariffs have led to non-remunerative electricity tariffs causing a scenario of muted power demand for the private thermal power generation projects, according to research and ratings agency India Ratings which said private developers are facing more challenges in operating thermal power projects than renewable energy projects.
“In contrast, the large target by the government for renewable capacity addition and the focus on renewable purchase obligation along with falling tariffs in competitive bidding regime have led to an increase in demand for renewable energy,” the ratings agency said in a report today. It added strong counterparties for solar companies including Solar Energy Corporation of India and NTPC are providing comfort to developers on payment security but an improvement in the financial profile of distribution utilities is important for power projects to have stable revenue receipts.
The average per capita supply of electricity is lower than the national average in some states including Uttar Pradesh and Bihar. Also, with reliable and continuous supply yet to be ensured in most states, electricity demand is likely to grow across the country, driven by industrialisation. The industrial sector alone accounted for 44 per cent of electricity demand nationally in 2015-16.
India Ratings said in a falling electricity deficit scenario and excess energy tie-ups by distribution utilities, even amid high demand growth, projected generation capacity is well placed to meet the demand. “In the scenario of electricity replacing diesel in applications including diesel generators, agricultural implements and railways, the additional electricity demand can be addressed by a 6 percentage point increase in the plant load factor of thermal plants,” the report noted.
According to the estimates of India Ratings, the amount of electricity that would have been required if all vehicles had become electric in 2016-17, will indicate the quantum of demand that can arise from the electrification of road transport.