ICRA, Investment Information and Credit Rating Agency of India Limited, stated that, delays in payment to Renewable Energy (RE) developers is a major obstacle to the sector’s expansion, other than delayed progress in negotiating power purchase and sale.
The Senior Vice President and Co-Group Head of ICRA (Investment Information and Credit Rating Agency of India Limited) Ratings, Mr. Girish Kumar Kadam stated, “The investment prospects in the RE sector are expected to remain strong, given the policy impetus with a target to reach 450 GW by the financial year 2030, and competitive tariffs. The capacity addition in the power sector over the medium term will be driven by the RE segment, led by a strong project pipeline of close to 40 GW as of date.”
Further, he added, ” The key challenges constraining the growth remain on execution front, mainly associated with land and transmission infrastructure as well as the slow but improving progress in signing of power purchase agreements (PPAs) and power sale agreements (PSAs) by intermediate procurers with state distribution utilities (discoms).”
Aside from execution issues, RE developers are dealing with delays in payments from state distribution utilities and grid curtailments. This scenario has been observed in few states, particularly for projects with higher tariffs.
In their report, ICRA said, “The timely commissioning of new capacities remains important to meet the growing demand from the developers, given the current capacity constraints. its outlook for the domestic RE sector is stably supported by the continued policy support from the Government of India, strong project pipeline, and superior tariff competitiveness offered by wind and solar power projects both in the utility and the open-access segments.”
With strong policy support through the imposition of BCD (basic customs duty) on imported cells and modules, the notification of the production-linked incentive (PLI) scheme, and a strong project pipeline from various schemes requiring the use of domestic modules, the demand outlook for domestic solar OEMs (original equipment manufacturers) remains positive, according to Icra.
The fact that international vendors have yet to be included to the Approved List of Models and Manufacturers (ALMM) is expected to boost demand for domestic module OEMs shortly, according to the report.
The policy push is intended to increase domestic OEMs’ cost competitiveness, and it has prompted new capacity announcements of more than 15 GW from several OEMs, as well as the arrival of new companies.
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