India will need to boost its share of renewable energy to 16%-18% from 10% of the country’s total electricity generation if it wants to achieve a target of 175-gigawatts clean energy capacity by 2022, according to Moody’s Investors Service.
The country is targeting a five-fold increase in renewable energy capacity to 450 Gigawatts by 2030. Despite missed targets, India reported a healthy 20% growth in renewable energy generation over the past five years. Specifically, wind and solar generation grew at a compound annual growth rate of 20% in fiscal years 2015-20, increasing their share of electricity generation in India thanks to declining development costs, strong policy support, and investor interest in the sector, the global ratings agency said.
India still depends on coal for total power generation, with it accounting for 73%-77% of total generation in the last five fiscal years. However, advances in technology have led solar tariffs to drop to around Rs 2/kilowatt hour (2 US cents), which is a record low and around 30% lower than the cost of thermal power.
Although Indian renewable energy companies failed to meet generation targets in the previous two fiscal years, they will be able to withstand the impact of this underperformance because of large and diversified portfolios, Moody’s added.
“About 15%-20% of Indian wind and solar projects did not meet capacity utilization targets in fiscal years 2019 and 2020 because of wind generation curtailments and lower irradiance for solar projects, which were responsible for 56% and 68% of the underperformance respectively,” said Abhishek Tyagi, vice president and senior analyst at Moody’s.” As a result, rated renewable energy companies’ EBITDA (Earnings Before Interest Depreciation and Amortization (EDITDA) declined 2%-5.6% in fiscal 2020.”
“Nevertheless, all rated issuers have undertaken multiple projects, and thus their credit quality benefits from portfolio diversification, which reduces the impact of individual projects,” adds Tyagi.
Moody’s analyzed 176 projects totaling 11,462 MW across five rated companies—Greenko Energy Holdings , ReNew Power Private Limited , Adani Renewable Energy (Rj) Limited, Azure Power Energy Ltd, and Azure Power Solar Energy Private Limited.