Energetica India nº91 July August 2020

Long term prospects for Renewables remain in-tact; Near term headwinds amid the COVID impact on discoms’ finances The renewable energy-based capacity is estimated to reach to 120-125 GW by December-2022, with the solar capacity constituting 50% of the overall capacity followed by 38% from wind power segment and the balance 15% from other sources. While this is lower than the capacity target of 175 GW set by the Government of India, the incremental capacity addition is estimated to be healthy at 35-38 GW with investment outlay of more than Rs. 2 lakh crore over the next two and half years. The policy focus on renewable energy by Government of India (GoI) continues to remain strong and this coupled with an improved tariff competitiveness of re- newable energy – particularly solar and wind energy, long term demand pros- pects for renewable energy (RE) remain in-tact. In the last five-year period since FY 2016, renewable energy share in the installed power generation capacity has grown significantly from 13% (36 GW) as on March 2015 to 23% (88GW) as on June 2020. Within the renewable energy segment, pace of solar energy capacity addition has been faster than other re- newable sources. The same has been mainly in the utility IPP segment, which has been driven by significant project award activity both under National So- lar Mission as well as State Solar poli- cies across the key states. With this, the share of solar segment in renewable en- ergy capacity as on June 2020 remains the highest i.e. at 43%, followed by 40% by wind energy and rest by other renew- able energy sources (such as biomass, bagasse & waste to energy). The wind power sector has however witnessed a subdued capacity addition over the last 3 year period since FY 2018, following a change in tariff route for the project awards i.e. from feed-in tariff to bid driv- en coupled with the execution head- winds as well. Going forward, the renewable ener- gy-based capacity is estimated to reach to 120-125 GW by December-2022, with the solar capacity constituting 50% of the overall capacity followed by 38% from wind power segment and the bal- ance 15% 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 35-38 GW with investment outlay of more than Rs. 2 lakh crore over the next two and half years. Within the renewable segment, the utility scale solar segment is expect- ed to be very close to the 60 GW capaci - ty target set by GoI, though there is likely to be shortfall in the rooftop solar and the wind power segments. The tariff competitiveness both for solar and wind energy in utility scale projects also remains superior from the ultimate off-takers being state owned distribution utilities. Bid tariffs in auction route for award of solar and wind energy projects have continued to remain well below Rs. 3/kwh for last 3 year period. On the contrary, average power purchase cost for state owned distribution utilities re- mains well above Rs. 4/kwh in most of the states. Further, there has been an increasing focus by MNRE through Solar Energy Corporation of India Ltd (SECI) to award hybrid renewable projects, so - lar projects with peak & off-peak tariff as well as round-the-clock (RTC) availabil- ity based renewable projects recently in last six month period. Tariff discovery in auction rounds for such projects also remains favourable for the off-takers both in terms of competitiveness of tariff as well as mitigating the concern w.r.t. intermittency / variability of renewable generation to a large extent. From the viability perspective for IPPs, tariff viability will be critically dependent upon a)capital cost, b) PLF level, and c) long tenure debt availability at cost com- petitive rate. For utility scale renewable projects both in wind and solar segment, long tenure availability of debt with ma- turity of 17/18 year post CoD over the last 2-3-year period has also support - energetica INDIA- July-Aug_2020 31 Girish Kumar Kadam Vice President, Sector Head - Corporate Ratings, ICRA Ltd