ICRA Sees FDRE, RTC Projects As Key Drivers Of India’s RE Growth

ICRA Sees FDRE, RTC Projects As Key Drivers Of RE Growth

A recent report by the Investment Information and Credit Rating Agency (ICRA) foresees a rise in renewable energy capacity in the next six years in India. It is estimated that the share of renewable energy (RE), plus large hydro, in all-India electricity generation, will increase to over 35% in FY2030 from 21% in FY2024.

ICRA foresees firm and dispatchable renewable energy (FDRE) and round-the-clock (RTC) projects becoming key drivers of capacity addition in renewable energy. It also highlights the increasing importance of the availability of round-the-clock (RTC) and firm and dispatchable supply from RE (FDRE) to achieve this share. This can be achieved through the use of hybrid RE projects complemented by energy storage systems.

ICRA in its report mentioned, “FDRE/RTC projects are expected to drive tendering and capacity addition in the sector, given their competitive tariffs and assured supply. The viability of these projects remains linked to capital costs, wind PLFs, and merchant tariffs. Surplus power generation from oversizing exposes developers to merchant tariffs.”

The RTC tenders by central nodal agencies include an annual availability requirement of 75-85%, with time block-wise availability of 50%. For the FDRE (peak) tender, the requirement is a capacity utilization factor of 40%, along with the availability of 90% of capacity during the peak period (4 hours) of the day. The FDRE (load curve) tenders require a monthly demand fulfillment ratio (DFR) of at least 80% for each 15-minute time block.

The central nodal agencies, along with Railways Energy Management Company Limited (REMC), have bid out close to 10 GW of RTC/FDRE projects. The tariffs discovered in these tenders largely vary between Rs. 4.0/unit and Rs. 5.0/unit, depending on the tender conditions for supply. The tariffs discovered in the SECI FDRE tenders are relatively high compared to other FDRE tenders due to the load curve requirement for each 15-minute time block, which varies across the 12 months.

The RTC/FDRE requirements can be met by oversizing wind and solar capacity by 2.50-3.5 times over the contracted capacity, along with energy storage. The proportion of wind and solar capacities and storage capacity depends on the demand profile/availability needs of the buying entities. These projects are expected to remain key drivers of capacity addition in the RE sector.

The returns for winning developers under RTC/FDRE bids remain linked to capital costs associated with the wind and solar components, along with the cost of storage. The recent reduction in battery prices is a positive development for developers. Also, the viability is highly sensitive to wind PLFs, given the higher variability compared to solar PLFs, and to tariff realization from the sale of surplus power in the merchant market due to surplus power generation from capacity oversizing.