In the next four years, the research and rating agency expects a 5% increase in the share of renewables in the total generation mix, from 7.7% in FY18 to 12-13% by FY22.
“The project awards so far provide a reasonably healthy visibility for RE capacity addition in FY2019 and FY2020 with the expected addition of about 8-8.5 Gw in FY2019. This apart, RE projects are likely to remain cost competitive against conventional power sources,” says Sabyasachi Majumdar, Group Head-Corporate ratings at ICRA.
Regarding the 25% safeguard duties, which have been applied to imported PV modules, and the recent Rupee depreciation against the US dollar, ICRA estimates that there will be 20-25% increase in capital cost of solar power projects. However, the impact will be offset by the nearly 20% decline in price of PV module prices, witnessed since June 2018, it adds.
According to the report, rising interest rates are putting a question mark on the viability of solar projects with tariffs under Rs 3 ($0.040) per unit. Solar project developers are facing challenges in securing connectivity and open access to the inter-state transmission network, which has resulted in the cancellation or capacity downsizing of some of the bids by the Solar Energy Corporation of India (SECI), ICRA says in its statement.
ICRA does not provide a breakdown of solar/wind ratio in its predicted 8.5 GW of new capacity. However, this April, the agency said India will see new PV capacity falling by 40% to about 4-4.5 GW in FY19, from roughly 7.5 GW in FY18.
Earlier this week, research and consultancy firm Wood Mackenzie said that India may achieve just 76% of its 175 GW renewables target by the scheduled date of 2022, as it faces myriad challenges.
“The recent cancellation of auctions risks jeopardising investor confidence. Various duties on equipment and the associated uncertainty has led to a short-term uptick in solar prices. This leads to the knock-on effect on already cash-strapped state distribution companies who are showing an unwillingness to green light high priced solar projects,” Wood Mackenzie’s solar analyst Rishab Shrestha said.