Renewable energy sector outlook supported by strong project pipeline, superior tariff and continued policy support: ICRA

Renewable energy sector outlook supported by strong project pipeline, superior tariff and continued policy support: ICRA

The continued policy support by the ICRA has supported ICRA's outlook in the sector of renewable energy (RE). India's strong project pipeline and superior tariff competition offered by solar and wind power are a plus for the government Projects - in both the utility and open access segments. The solar and other renewable energy sources also offer competitive tariffs. Wind power projects under the utility auction route remained superior with tariffs remaining below Rs. 3.0 despite the increasing pressure from customs duties on imported cells or modules. April 2022. April 2022.

Further commenting, Mr. Girishkumar Kdam, Senior Vice-President & Head of the Co-Group, ICRA ratings said: "The..." Given the policy stimulus with a goal to increase investment in the RE sector, it is expected that they will remain strong. Competitive tariffs and a target of 450 GW in FY2030 Over the medium term, the capacity addition in power sector The RE segment will drive the market, with a strong pipeline of projects totaling close to 40GW1 at this point. These are the key challenges The execution side of growth is the most restrictive, with land and transmission infrastructure being the main culprits. Besides the slow but steady progress made in signing power purchase and power sale agreements Intermediate procurers working with state distribution utilities (discoms) A better financing environment The positive effect of the recent softening in interest rates for RE projects during the past 12-18 month period was for the good Sector.

The delays in implementation are another challenge for RE developers. Payments from the state distribution utilities or grid curtailments are not common in all states, but they can be observed in a few, especially for the Projects with higher tariffs. A petition was filed by solar developers who were affected by grid curtailment. In August 2021, Tamil Nadu received a favorable order from the Appellate Tribunal of Electricity (APTEL). The same was stated The state utility of Tamil Nadu's actions in issuing backdown orders for commercial transactions was'mala fide. The APTEL ruled in favor of the payment of compensation to solar IPPs at 75% PPA tariff. The APTEL also issued Directions to all state discoms, state electric regulators, and grid operators. They are to state that any curtailment in RE is prohibited. Plants that are not required for grid security shall be compensated under the PPA tariff.

This is why Mr. Vikram V (Vice President & Sector Head- Corporate Ratings), ICRA adds: "This order from APTEL." This is a positive sign for the RE sector, and it is expected to deter grid curtailment by grid operators and discoms. Operators. It is important to implement the order on time, as there is a risk of another challenge. The Supreme Court cannot be excluded. Further, payments to operating projects are still delayed.

The presence of strong intermediate procurers such as SECI or NTPC in key states has led to state discoms. Supporting the addition of new capabilities led by strong payment security mechanism in form of Letter of credit, payment guarantee fund, and tri-partite agreement between Central government, State government and RBI.

The strong policy support has also helped to ensure that the demand outlook for domestic solar OEMs is positive. BCD is imposed on imported cells and modules. Notification of the production-linked incent (PLI). scheme, and a strong pipeline of projects from different schemes that require the use domestic modules. It is also likely that the Approved List of Models and Manufacturers (ALMM), has not included overseas suppliers. In the short term, this will support domestic module OEMs. Expect the policy push to increase cost. The competitiveness of domestic OEMs has resulted in new capacity announcements exceeding 15-GW by different parties OEMs and the entry of new players It is important that these new capabilities are commissioned promptly in order to meet the needs of customers. Given the existing capacity limitations, developers are seeing a growing demand. The OEMs have the capability to To remain competitive in the face of global competition, it would be crucial to achieve backward integration. On a regular basis, overseas suppliers.