The renewable energy (RE) sector has witnessed a record capacity addition of 6.9 GW during FY2016, which was driven by sizeable capacity addition in both the wind and solar energy segments, which stood at 3.3 GW and 3.0 GW respectively. As a result, the share of installed RE based capacity increased to 14.1% of the overall installed capacity in the country as on March 31, 2016 from the level of 13.2% as on March 31, 2015. “The increasing share of RE capacity in the overall installed capacity can be attributed to increasing cost competitiveness of generation from RE sources, shorter execution cycle for wind and solar power projects as compared to conventional power projects and policy support from central and state governments to RE sector”, says Mr. Sabyasachi Majumdar, Senior Vice President, ICRA Ratings.
The wind capacity additions were driven by the IPP segment with its focus on feed-in tariff based PPAs and by the non-IPP segment with the re-introduction of the accelerated depreciation benefit. A major portion of the wind energy capacity addition during FY2016 was driven by new projects in the state of Madhya Pradesh (MP), given the attractive tariff (which was highest among all the major states with large wind energy potential at Rs. 5.92 per unit) being offered in the state in the period leading up to March 31, 2016. The capacity additions in the solar segment were driven by favorable policy support both by Central Government as well as at State level, improving regulatory framework and reduction in capital costs for solar power projects resulting in improved cost competitiveness. In contrast to wind and solar energy, other segments namely small hydro and biomass energy segments have not seen much capacity addition, mainly because of significant execution challenges in case of small hydro projects; and issues pertaining to availability and pricing of fuel and in some cases inadequate revision of tariffs in relation to increase in fuel costs for the biomass segment.
Based on the tenders floated and proposed for award of solar projects under various state and central government policies so far, ICRA estimates the solar capacity addition to significantly increase to about 5.7 GW in FY2017 as against the 3.0 GW seen in FY2016. However, in the wind energy segment, ICRA notes that there could be a decline in fresh capacity addition from 3.3 GW seen in FY2016 to around 2.5 GW in FY2017 because of several factors. These factors include, substantial reduction in preferential tariff (from Rs. 5.92 per unit to Rs. 4.78 per unit) for new wind energy projects to be commissioned in MP and slowdown in signing of fresh PPAs & delays in payments by state owned utility in the state of Maharashtra. “Overall, ICRA estimates the capacity addition in the RE sector to increase to 8.8 GW in FY2017 as against the 6.9 GW seen during FY2016, primarily led by the higher capacity addition in the solar segment. Further, solar power is expected to remain a key driver for RE capacity addition in the medium term”, says Mr. Sabyasachi Majumdar, Senior Vice President, ICRA Ratings. In spite of aforementioned favorable factors, transmission challenges and counterparty credit risks affecting signing of PPAs and timely payments could pose challenges for the sector. Further with the concerns on the viability of the competitively bid tariffs in the solar energy sector, actual solar capacity addition would hinge on timeliness in achieving the financial closure by IPPs, as well as in signing of PPAs with the buyers, viz. the State-owned utilities.
Your email address will not be published. Required fields are marked *
Notify me of follow-up comments by email.
Notify me of new posts by email.
Sign me up for the newsletter!
MINI IS BEAUTIFUL – NATIONAL PAINTING EXHIBITION ON 1ST TO 3RD MARCH 2019
Shakti Pumps Delivers Stellar Performance In Nine Months fy19 with a 26% Jump in Revenues
Shoppers Stop launches KENDALL + KYLIE Designer Handbags in India
Indian Overseas Congress, USA strongly condemns the fatal terrorist attack on its Jawans
Children Welfare Centre High School and religious heads mourn the death of martyrs
2014 The Global Indian New Network (TGINN)