ICRA estimates the capacity addition in the renewable energy sector to increase to 8.8 GW in FY 2017

ICRA has estimated the solar capacity addition to increase to about 5.7 GW in FY2017 as against the 3.0 GW seen in FY2016 based on the tenders already floated and proposed for award of solar projects under various State and Central Government policies so far.

However, ICRA in its report notes that in the wind energy segment, there could be a decline in fresh capacity addition from 3.3 GW seen in FY2016 to around 2.5 GW in FY2017 because of several factors like- a) substantial reduction in preferential tariff (from Rs. 5.92 per unit to Rs. 4.78 per unit) for new wind energy projects to be commissioned in MP; and b) slowdown in signing of fresh PPAs & delays in payments by state owned utility in the state of Maharashtra.

According to ICRA the small hydro segment and biomass energy segments are also unlikely to see any significant capacity growth owing to the aforementioned constraints.

Overall, ICRA estimates the capacity addition in the renewable energy sector to increase to 8.8 GW in FY2017 as against the 6.9 GW seen during FY2016, primarily led by the higher capacity addition in the solar segment. Further, solar power is expected to remain a key driver for RE capacity addition in the medium term.

As on March 2016, the installed RE based capacity stood at 42.7 GW which accounted for 14.1% of the overall installed capacity in the country, increasing from the level of 10.5% at the end of March 2010. Within the RE segment, the wind energy segment continues to occupy a dominant share at 62.6% as on March 31, 2016 followed by solar energy contributing 15.8%, bagasse co-generation and biomass segment at 11.3% and small hydro at 10.0%.

The RE sector has witnessed a record capacity addition of 6.9 GW during FY2016, which was driven by sizeable capacity addition in both the wind and solar energy segments.

“The increasing share of RE capacity in the overall installed capacity can be attributed to increasing cost competitiveness of generation from RE sources, shorter execution cycle for wind and solar power projects as compared to conventional power projects and policy support from central and state governments to RE sector“, said Sabyasachi Majumdar, Senior Vice President, ICRA Ratings.