“Although there is a slowdown in the addition of renewable energy (RE) capacity to 7.4 GW in fiscal 2021 from 8.7 GW in fiscal 2020 amid the winds contrary to execution due to COVID-19, ICRA expects the capacity addition to improve to 10.5 to 11 GW in fiscal year 2022. a strong portfolio of projects from 38 GW, “ICRA said in a statement.

In addition, more than 20 GW RE projects are in the tender phase with various nodal agencies, providing visibility for adding capacity in the medium term, he added.

“The RE sector should witness investments of 3.5 trillion ( 3.5 lakh crore) over the next four years, increasing the share of renewable energy capacity to 34% of global installed capacity by March 2025, from 25% in March 2021, driven by the solar energy, ”said Girishkumar Kadam, Senior Vice President and Co-Group Head – Corporate Ratings, ICRA.

However, Kadam said that the delays in signing PPAs / PSAs (electricity purchase or sale contracts) as seen in the past and the cancellation of offers due to expectations of a reduction in tariff rates, remain a major challenge.

Nonetheless, given the expected increase in solar bid prices in the upcoming auctions amid rising module prices and the imposition of basic customs duties (BCD) on photovoltaic solar cells and modules imported from From April 2022, progress is expected in signing PPAs / PSAs for tenders previously awarded by central intermediary buyers, he said.

Despite rising tariffs, solar power prices are expected to remain lower 3 per unit and a competitive cost, compared to the marginal cost of production from thermal sources in the lower 25% of sending orders on merit, ICRA said.

On the other hand, execution challenges persist for projects under construction with regard to land acquisition and evacuation infrastructure, especially in the wind energy segment, he said. added.

In this context, the government approved an extension of the commissioning deadline of 2.5 months, given the second wave of COVID-19. In addition, the government has extended the waiver on interstate transportation charges for wind and solar power projects commissioned until June 2025 from June 2023 earlier, he said.

In addition, the demand outlook for domestic manufacturers of solar-powered equipment remains favorable, with strong political support through the imposition of BCDs on imported cells and modules and the notification of the incentive regime related to the production as well as a solid order book of 35 to 40 GW over the next three to five years of various schemes requiring the use of domestic modules.

In addition, delays in including foreign suppliers in the Approved Model and Manufacturer List (ALMM) could support the demand from original equipment manufacturers (OEMs) for domestic modules in the near term.

Vikram V, Vice President and Sector Head – Corporate Ratings, ICRA, said the political impetus for promoting domestic module manufacturing is expected to improve the cost competitiveness of domestic OEMs and has led to further capacity announcements over 15 GW by various OEMs.

“Timely commissioning of these new capabilities remains important to meet growing developer demand, given current capacity constraints. In addition, the ability of equipment manufacturers to achieve upstream integration and achieve economies of scale would be important to remain competitive with respect to foreign countries. suppliers on a sustained basis, ”he said.

Apart from that, the credit profile of operational RE projects remains limited by exposure to unrest in states such as Andhra Pradesh, Telangana and Tamil Nadu, with significant payment delays.

The overall contributions of dcoms to independent power producers (IPP) remained high at 11,840 crores in April 2021, down slightly from 12,270 crore in January 2021, according to data from the PRAAPTI portal.

Nonetheless, the credit profile of ICRA-rated IPP REs is supported by the presence of a liquidity buffer in the form of a debt service reserve or working capital and a profile. relatively strong sponsor.

Overall, ICRA’s outlook for the RE sector remains stable, thanks to factors such as continued political support from government, significant growth potential, presence of creditworthy nodal central agencies as intermediate buyers and price competitiveness, he said.

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