India to increasingly generate power from renewable sources: Ind-Ra

Furthermore, a lower-than-expected addition in FY23 in renewables would aid the PLF recovery. Ind-Ra, however, expects the demand growth to come back to a normal level of 6-7 per cent in FY23, given a higher base. The impact of third COVID wave remains lower on power demand, given the less stringent curbs imposed by local/state governments, although any stringent lockdowns in case of the emergence of any strong COVID wave could derail the growth in power demand, the ratings agency said in a media release.

Ind-Ra also believes that coal availability could pose a risk to the overall demand and thus PLF recovery, given the higher reliance on domestic coal as international prices remain high. The domestic coal availability to the power sector would remain dependent on an improvement in the domestic coal production and its allocation to the power sector both of which improved in 9MFY22.

Furthermore, the weak financial profile of distribution companies (discoms), reflected in increasing overdues even after liquidity injections by the government of India, is likely to keep power producers’ debtors elevated and may pose a risk to the overall demand. The government assistance of ₹3.05 trillion for improving discoms infrastructure including smart metering and upgradation of systems should result in reduction in aggregate, technical and commercial losses, although implementation remains key for discoms as observed in the past.

The renewable capacity addition increased to 10GW in 9MFY22 (9MFY21: 4GW); however, Ind-Ra believes it is likely to moderate again intermittently on account of high panel prices along with issues in timely availability of imported solar panels. Ind-Ra believes the module prices are likely to remain elevated over FY23 and given the supply chain constraints and order backlogs, the supply of modules is likely to remain constrained, impacting the capacity addition in India.

Ind-Ra believes that the energy transition in terms of increasing generation from renewable sources would continue and increase by 125-150bp annually till FY25. Furthermore, the impetus to fasten the energy transition would require technologies support such as battery storage and green hydrogen, to be viable for commercial scale.

ALCHEMPro News Desk (KD)