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ICRA revises year-end outlook for renewable energy sector to negative

31 Dec 2019 Evaluate

Ratings agency ICRA has revised its year-end outlook for India's renewable energy (RE) sector from stable to negative. It pointed out that the sector is facing headwinds because of the long delays in making payments by the state-owned distribution utilities (discoms), delays in projects bid out over the past two years, difficulties in acquiring land for projects, securing transmission connectivity and financing in a timely manner.

Given the ongoing challenges, ratings agency expects renewable energy capacity addition to remain at about 8.5-9 GW for FY2020, which is similar to the capacity added in FY2019. It also said the headwinds related to payment delays, uncertainty over resolution of tariff issue for projects in Andhra Pradesh, as well as execution and financing related challenges for under-construction projects have impacted investor sentiments in the sector. It noted that this is reflected from the slowdown in tendering of wind and solar PV projects by 37 percent to 10.6 GW in 9 months CY2019 from 16.7 GW in the corresponding period of previous year. Moreover, it said many of bids called by central nodal agencies remained under-subscribed.

According to the report, the capacity addition in FY2020 will be primarily driven by the solar power segment. However, it said compared to 5.6 percent in FY15, the share of RE based generation in the overall generation mix at all India level is rising, as seen from an increase to 9.2 percent in FY2019. Besides, it said the share of RE is expected to reach closer to 10 percent in FY2020, owing to the large sized capacity addition witnessed in the wind and solar power segments during this period, driven by policy support from the central and state governments as well as the significantly improved tariff competitiveness of wind and solar power vis-a-vis conventional power sources.

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