Policy stability with the re-election of NDA govt to support capacity growth in renewable energy sector: ICRA

With the re-election of the NDA, the Central government is expected to continue the policy focus on augmentation of RE based capacities, mainly wind and solar.

May 28, 2019 10:05 IST India Infoline News Service

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The policy support by the central government, as well as improved cost competitiveness, has increased the share of renewable energy (RE) based capacity in the overall installed power generation capacity to 21.8% as on March 31, 2019, from 12.9% as on March 31, 2014. Similarly, the share of RE based generation in the overall generation mix at all India level increased to 9.2% in FY19 from 5.6% in FY15. With the re-election of the NDA, the Central government is expected to continue the policy focus on augmentation of RE based capacities, mainly wind and solar.

Sabyasachi Majumdar, Senior Vice President & Group Head - Corporate ratings, ICRA, says, “The re-election of the NDA government is a positive development for the RE sector and would provide policy stability for the sector. The support for schemes such as KUSUM, roof-top and off-grid solar applications is expected to continue under the new government, along with support for the growth of domestic manufacturing in the solar power segment. However, improvement in the transmission infrastructure, especially in the inter-state network for supply of wind and solar power from high generation potential regions in the western and southern regions to other regions, will remain critical.”

The project awards by the central nodal agencies and state distribution utilities in CY2017 and CY2018 provide a reasonably healthy visibility for RE capacity addition in FY2020 with expected addition of about 11-12 GW in FY2020. This is expected to increase the share of RE in the all India generation to about 10% by FY2020, as per ICRA’s estimate.

However, renewable IPPs, especially wind and solar energy plants, are facing challenges in terms of a mixed trend with respective to collection pattern from state distribution utilities, with deteriorating receivable position in a few states. “As a result, serious efforts are required by the utilities towards improving the operating efficiencies and this coupled with timely subsidy support as well as adequate tariff revisions by the state regulators remain extremely critical for a sustained improvement in the financial performance, going forward”, Majumdar added. 

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