New renewable energy capacity addition grew 73% year-on-year in the third quarter this fiscal

India added 3,316 MW of new non-hydro renewable energy capacity from solar, wind, biomass and other RE sources during the third quarter of FY2021-22, which is 73% more than just 1,914 MW installed in the same period last year, according to the latest edition of the CEEW Centre for Energy Finance (CEEW-CEF) Market Handbook released today. However, compared to the preceding quarter, new non-hydro RE capacity additions fell by 27% on account of intensifying supply chain constraints.

Solar energy, at 3,072 MW, comprised 93% of the total RE capacity added during the quarter, driven partly by a 142% rise in rooftop solar installations to 700 MW. This growth in new capacity was registered despite a 40% jump in the prices of solar PV modules to INR 21/Watt-peak, over the last year, stated the report. An increase in the cost of raw materials and supply chain constraints resulted in rising solar PV module costs.

“The increase in new RE capacity addition in Q3FY22 is in line with the government’s vision of sustainable growth in the coming years. This also comes at a time when the budget speech highlighted energy transition and climate action as key pillars of future economic development. Although we have seen robust volumes of finance flow towards the transition in recent months, much more is needed simply because India’s targets are so ambitious. The budget proposal to issue sovereign green bonds can help plug this gap. If it also helps spur the development of the domestic corporate green bond market, then it could turn out to be a force multiplier,” said Gagan Sidhu, Director, CEEW-CEF.

“Despite high solar module prices and the imminent basic customs duty, the tariff discovery continued to trend downwards this quarter, with the lowest tariff discovered at INR 2.17/kWh. From an RE capacity addition perspective, the share of RE in total installed capacity is increasing continuously to reach nearly 27% during this quarter. While the pace of RE capacity addition is appreciable, it is highly dominated by solar energy and can be a threat to the power grid’s stability going forward. Exploring alternatives such as hybridising two RE technologies or blending RE with conventional resources is crucial for ensuring a stable power supply,” said Ruchita Shah, Research Analyst, CEEW-CEF.

The CEEW-CEF Handbook further highlighted that sales of electric vehicles jumped by more than 250% to over 1.3 lakh during the Q3 FY21 compared to around 34,000 units in the third quarter of last fiscal. The surge in petrol prices, introduction of new models along with incentives under the Faster Adoption and Manufacturing of Electric and Hybrid vehicle (FAME-II) scheme contributed to the growth in sales of zero-emission vehicles, especially of electric two-wheelers.