Robust demand for renewable energy projects in commercial, industrial segment: ICRA

There are strong demand prospects for renewable energy projects in the commercial and industrial (C&I) segment but regulatory risks pose challenges, said a recent report published on the Renewable Energy (RE) sector by rating agency ICRA.

The demand prospects for RE capacity addition by the C&I segment are expected to remain solid, given the improved tariff competitiveness and strong sustainability/green initiatives by C&I players to meet their energy requirements through renewables.

The C&I segment itself accounts for about 40 to 45 percent share in all India energy demand.

In a statement, ICRA said that even assuming 20 percent of the energy requirements are to be met by C&I segment through RE, the RE capacity addition requirement is estimated to remain significant at about 75 gigawatts (GW) by 2030.

Further, the grid tariffs have shown a rise and the energy charge in the same also varies widely between Rs 6-7/unit and Rs 6-10/unit for the industrial and commercial segment respectively, across the states, the report said.

The open access and banking charges/norms also vary widely with effective cost ranging between Rs 1.5 to 5/unit across key states, with an increasing trend seen due to upward pressure on cost of power supply and continued high level of cross subsidisation in the tariff structure for the discoms.

The open access charges mainly comprise Cross Subsidy Surcharge (CSS), additional surcharge, wheeling charges and banking charges as per the applicable norms by State Electricity Regulatory Commission (SERCs).

The CSS varies widely between Rs 0.7 to 2.2/unit as observed across the key states, with the removal of concessions/exemptions by SERCs which were earlier available for RE projects in third party open access route, said the report. The clarity on the extent of waiver of inter-state transmission charges for projects to be commissioned by FY 2028 also remains a positive. According to ICRA, the credit profile of the majority of the rated RE entities having third party/ group captive PPAs (Power Purchase Agreements) continue to remain supported by availability of long-term PPAs with the creditworthy C&I customers, adequate liquidity buffer, support availability from the respective sponsor groups as well as strengths arising from operating track record.

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