ICRA Sees FY24 Ending On a Positive Note For RE, 20 GW Additions Projected For India

Ratings and Research firm ICRA sounded an optimistic note in their December update, with hopes that overall renewable capacity additions in FY24 will touch 20 GW. That number, made up of 12 GW of solar, 2 GW of wind besides other RE sources, becomes even better for FY25. The firm expects solar to add 20 GW, while wind adds 4 GW in FY25, helping take the country finally to 170 GW of total capacity.

Utility Scale To Lead Additions

ICRA’s December update has based these projections based on its discussions with developers and other key stakeholders, besides its own team. A strong uptick in tendering activity also indicates long term visibility for the sector. For instance, in FY24, there has already been tendering for 16 GW of RE projects, versus just 9.3GW in FY23. The highest ever till date is of course the 24.7 GW of projects that were tendered in FY20, many of which remain in limbo or on a possible revival now.

The strong revival in solar installation numbers in FY24 are underpinned by the existing ALMM exemption till March 2024, which is driving many developers to complete their projects before that date. Apparently, some projects that were stuck have also been revived on the back of the low module prices prevailing for the past few months.  While these numbers are based mostly on projections for utility scale segment, Sabyasachi Majumdar, Senior Vice President and Group Head of ICRA pointed out that it was also because it is difficult to get long term visibility on C&I projects that tend to be more opportunistic and require shorter term planning.   Majumdar expects the C&I segment’s share to stay in the 10-15% range for solar additions. ICRA’s latest update from December has focused on many aspects of renewable energy and its growth.

RTC The Key

Pointing to the key role likely to be played by RTC power, Girish Kumar Kadam, Senior Vice President and Co-Group Head of ICRA, explained the economics of RE energy capacity needed for a typical RTC project with 85% availability and 4 hour of battery backup. Wind and solar would be needed in a ratio of almost 2:1 for such projects, he pointed out, thanks to the lower PLF’s in renewable energy (Assuming 35-40% for wind and 25% for Solar).  With limited scope for reductions here, future RTC costs would be influenced significantly by storage costs accordingly, he added. With a special mention for the advantages pumped storage still holds over battery storage, be it in terms of lower capital costs, domestically available equipment and skills, established technology and of course longer lifetime. Average Bid tariffs for RTC projects at around Rs 4.50/unit remain competitive vis a vis nuclear, coal and spot power markets in exchanges. ICRA in fact has projected the share of RE generation in India’s power mix at 30% by 2030, a shade lower than the 32% projected by the Central Electricity Authority (CEA).

Better Discom Discipline Translating to Better Ratings for Developers 

ICRA’s December update pointed out that most state discoms, despite not being out of their financial challenges yet, have been far more disciplined (timely) in their payments to generators, ensuring a much healthier financial situation for them. That has led to improving ratings in turn, enabling many developers to seek funds at better rates. The ratio of ratings upgrades to downgrades has jumped sharply from 2.0 to 3.3 in FY24 so far, indicating the quantum of improvements.

Path to 2030

For ICRA, the legacy issues of land, transmission infra and domestic RE supply chain remain key to scale up RE additions to the required 40 GW per year from 2026 that will need to meet national targets for India. While predicting 20 GW for FY24 and 25GW for FY25, the firm expects RE share in generation to move up from 14% to 16%. A key factor will remain storage costs, to enable faster renewable roll outs that can actually hope to replace coal.