India is expected to add renewable energy (RE)generating capacity of 12.5 gigawatt (GW) in the year ended March 2022 and another 16GW in the year thereafter amid ongoing project pipelines of up to 55GW, estimates rating agency ICRA.
Girishkumar Kadam, senior vice president and co-group head for corporate ratings at ICRA said that the capacity additions will also be pushed up by the increased number of power purchase agreements finalised in the past six months by the Solar Energy Corporation of India (SECI). Within the renewable energy capacity, the additions will be driven by the solar segment followed by the wind and hybrid segments.
According to ICRA, the outlook for the capacity addition in the renewable energy sector also remains strong because of the competitive tariffs offered by these projects.
The commitment to climate change goals announced by the Prime Minister at the recent COP26 summit, including increasing the non-fossil power capacity to 500 GW and meeting 50 percent of energy requirement from renewable sources by 2030, further strengthen the investment prospects in the renewable energy sector.
In the first eight months of the current financial year ended November 2021, India added 8.2GW of renewable energy generation capacity, compared to 3.4GW added in eight months of FY2021.
While there are green shoots, ICRA however pointed out some risks. It said the generation capacity addition faces risks coming typically from challenges in project executions and supply chain challenges for procuring key equipment like modules and wind turbine generators.
At the same time, the average price of imported solar photovoltaic modules has surged by more than 35 percent over the past 12 months, adding pressure on capital costs for solar power projects.
The wind segment continues to witness subdued capacity addition owing to execution headwinds, financing challenges for several developers and a weak financial profile of some of the generators. ICRA anticipates investments towards renewable power transmission infrastructure and storage capabilities to be about $150–200 billion over the next eight and a half years, taking the overall investment requirement to $450–500 billion.