Falling Solar, Wind Tariffs Threaten SJVN’s Core Hydro Projects

The lower tariffs offered by solar and wind projects in India seem to have dented the avenues of SJVN’s pet hydroelectric power projects. The top management of the company has also taken an account of the same in its latest Annual Report for the last fiscal. In the pursuit of expanding its footprint in the renewable energy segment, SJVN, in its Annual Report for FY 2023-24, outlined its recent achievements and the current challenges faced by the company.

In its annual report, SJVN stated that the current portfolio of SJVN and its associate companies now stands at an all-time high with 89 projects aggregating 56,802 MW and three transmission lines totaling 340 km. One of the major concerns is the decreasing tariffs on solar and wind power projects, which have raised questions about the viability of hydropower projects—SJVN’s core strength. The management also opines that a breakthrough in energy storage systems could give a jolt to the avenues of hydro power projects.

Talking about the challenges and threats from other fuels in India, the annual report of SJVN said, “Initial high tariff of hydro projects-New hydro projects have higher tariff in the initial few years. It is difficult to compete with cheaper renewables and thermal power. With the tariffs of solar and wind power projects going down, viability of hydro power projects, which is the core strength of SJVN, is becoming increasingly questionable. Any technological breakthrough which makes battery storage systems for storing renewable energy economically and sustainably will may make hydro power generation unviable.”

With the passage of time, the Central Public Sector Enterprise (CPSE) has tried its hand with more solar and wind projects to increase its avenues in the expanding renewable market in the country.

The document added, “SJVN has a total capacity addition of 25,699 MW, which consists of 5,754 MW of thermal, 60 MW of large hydro, 18,485 MW in other renewables (solar, wind, and small hydro), and 1,400 MW of nuclear power added in FY 2023-24 up to March 2024. The present installed capacity of SJVN as of 31.03.2024 was 2,377 MW and 4,858 MW is under construction.”

 

The chairman in the report stated, “A total of 8,489 MU of power was generated by our operational plants, which includes 8,131 MU of Hydro Power, 207 MU of Solar Power, and 151 MU of Wind Power.” The company reported that it presently holds a portfolio of 7.24 GW, including an operational capacity of 404.5 MW, a construction capacity of 2,048 MW, and 4,790 MW in the pre-construction phase.

These steps are undertaken by SJVN to reach the set target under the National Electricity Plan, to achieve 900 GW installed capacity by 2031-32. These targets are in line with SJVN’s plan to emerge as a major contributor to power generation with a vision of an installed capacity of 25 GW by 2030. Additionally, the report highlighted certain threats to SJVN’s ambition to develop an installed capacity of 900 GW by 2031-32.

SJVN Outlook On Power Generation 

Moreover, SJVN also described a positive outlook for India’s power generation, with an expected increase in industrial production. The company has already developed eleven power stations with an installed capacity of 2,377 MW (including three hydro, two wind, and six solar projects) across the country. It has diversified its portfolio by undertaking various renewable energy projects.

For instance, “SJVN also commissioned a pilot Green Hydrogen project in Himachal Pradesh. SJVN has set a capacity addition target of 25,000 MW by FY 2030 and 50,000 MW by 2040. Additionally, at present, fifteen projects with a combined capacity of 4,858 MW are under construction, and the commissioning of these projects will aid the company in achieving strong cash flows to emerge as a stronger and bigger company.”

On the other hand, SJVN identified a major challenge in renewable energy projects as the decrease in revenue generated from wind and solar power. Despite an increase in the generation of wind and solar power by 7.07 MUs (current year: 160.90 MUs; previous year: 153.83 MUs), revenue from the sale of power from renewable projects (wind and solar power) decreased by ₹0.99 crore. This decrease is due to the accounting of a generation shortfall in earlier years concerning the Sadla Wind Power Project.

Additionally, the company recognized an impairment loss of ₹138.70 crore (previous year: nil) for its wind and solar projects. This was due to a decrease in the carrying cost of renewable energy projects (wind and solar) after an impairment assessment was conducted in line with Ind AS.

The outlook for India’s power generation remains promising with the expected increase in industrial production and the Government of India’s mission to provide 24×7 electricity to all. SJVN plays a prominent role in supplying affordable power to achieve this goal. The company has already developed eleven power stations with an installed capacity of 2,377 MW (including three hydro, two wind, and six solar projects) across the country. SJVN has diversified its portfolio by undertaking various renewable energy projects, details of which are included in this report. Following the announcement of the Green Hydrogen Policy by the Government of India, SJVN also commissioned a pilot Green Hydrogen project in Himachal Pradesh. SJVN has set a capacity addition target of 25,000 MW by FY 2030 and 50,000 MW by 2040.

Revenue from the sale of power from renewable projects (wind and solar power) decreased by ₹0.99 crore despite an increase in the generation of wind and solar power by 7.07 MUs (current year: 160.90 MUs; previous year: 153.83 MUs). This decrease is due to the accounting of a generation shortfall from earlier years concerning the Sadla Wind Power Project. Sale of energy through trading: Revenue from operations for the year includes an amount of ₹40.21 crore from the sale of power through trading (previous year: ₹0.17 crore).