Delay in payments from utilities, non-compliance with renewable energy procurement targets, and non-availability of transmission infrastructure for power injection are some of the major issues Indian renewable energy developers are facing. These must be addressed on an urgent basis if the Indian government hopes to achieve 175 gigawatts of installed renewable energy capacity by March 2022.
Ratings agency ICRA has released a report stating that while the government’s policies and market conditions are very well suited for rapid growth in the renewable energy sector, several major challenges remain for the project developers.
According to the agency, the sharp fall in solar tariffs is the result of falling module prices, a sharp increase in the number of project developers, and the jump in number of competitive auctions. As we have reported earlier, solar power tariff bids have fallen 73% since the launch of the National Solar Mission in 2010.
The highest tariff some of the earliest projects still receive is Rs 17.91/kWh, while the lowest and most recent auction saw tariff bids of Rs 2.44/kWh.
The Indian government has already increased its procurement target for solar power to 8% by 2022. However, many states are yet to align their own targets with this national target. States where solar installations are high often have transmission constraints forcing them to cut back on solar power procurement. Additionally, many states still prefer thermal power over solar and wind power as tariffs of majority of older renewable energy projects are higher than coal-fired power plants.
ICRA expects that under a conservative scenario the cumulative capacity requirement for solar and wind to meet the renewable purchase obligation will be 65 gigawatts between 2018 and 2022. This results in an installed capacity of 122 gigawatts by March 2022, significantly short of the 175 gigawatts target.
Current installed capacity for wind and solar power is 32 gigawatts and 12.5 gigawatts, respectively. However, given the large number of solar power auctions in the last few months, ICRA expects a higher capacity addition from solar this year compared to wind energy.