The capacity addition in the renewable energy (RE) sector is expected to remain subdued at about 8 GW in FY21, notes ICRA in a statement.
This is in view of the 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 continues to remain 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. 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.
Cumulative RE capcaity by December 2022 is likely to be in the range of 120-125 GW, which would be lower than the government target of 175 GW.
According to Sabyasachi Majumdar, Group Head & Senior Vice President – Corporate ratings, ICRA, says, “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. While this is lower than the capacity target of 175 GW set by the Government of India (GoI), 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 half years. ICRA expects this 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 60 GW capacity target set by GoI, though there is likely to be a shortfall in the rooftop solar and the wind power segments.”
IPPs in the RE sector have been facing delays in payment receipts from discoms, especially in states like Andhra Pradesh and Rajasthan.
The renewable IPPs have been facing significant delays in receiving payments, especially from discoms in the states of 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 GoI announced a liquidity support of Rs. 900 billion for the discoms, in the form of loans against receivables, from the Power Financial Corporation (PFC) and the Rural Electrification Corporation (REC) under the Atmanirbhar Bharat package.
Notes Girishkumar Kadam, Sector Head & Vice President – Corporate ratings, ICRA, “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 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. 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 RE sector.”
Source of featured photograph: Sterling and Wilson
