Budget expectations: Power and Renewables

21 Jan 2022 , 05:50 PM

“The renewable energy segment remains the key focus area for the Government in the power sector, amid the Prime Minister’s announcement to increase the non-fossil-fuel-based capacity to 500 GW by 2030 from 150 GW currently and meeting 50% of the energy requirement from renewable sources by 2030. This requires an annual capacity addition of 42 GW over the next eight years, necessitating multi-billion dollar investments during this period. Therefore, the availability of adequate long-term financing avenues at competitive rates remains important for achieving these targets.

Further, incentives and policy measures are required to promote investments in the energy storage segment considering the increasing share of renewables in the electricity generation mix and the need for adequate balancing sources. This apart, policy measures are required to revive the stranded gas-based projects, which would enable availability of balancing power sources.

Also, ICRA expects the funding outlay for the production-linked incentive (PLI) scheme for solar module manufacturing to be increased, given the strong interest from the prospective players under the tender issued by IREDA. This would augment the domestic module manufacturing capabilities.

The weak financial profile of state-owned distribution utilities (discoms) continues to remain a major area of concern for the power sector. Achieving a turnaround in the distribution segment remains a key factor to achieve the renewable capacity targets announced by the Government. This would require focus on improvement of operational efficiency and allowing timely pass through of cost variations via tariffs to the consumers. ICRA expects the Budget to focus on accelerating the implementation of reforms in the distribution segment including the proposed delicensing initiative. Further, the budgetary allocation is expected to be increased towards strengthening the distribution infrastructure under the “reforms-based and results-linked” scheme announced in the last Budget.

Also, ICRA expects the budgetary allocation to be increased for strengthening the transmission infrastructure (both at intra-state and inter-state level), towards evacuating power from the regions having high renewable power generation potential.”

Source: ICRA

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