While maintaining a stable outlook on the solar power sector, domestic rating agency India Rating has revised upwards the outlook on the wind power sector to stable from negative for FY19 but has maintained its negative outlook on the thermal power sector.
While maintaining a stable outlook on the solar power sector, domestic rating agency India Rating has revised upwards the outlook on the wind power sector to stable from negative for FY19 but has maintained its negative outlook on the thermal power sector. Citing lack of visibility for tying up long-term power purchase agreements, the agency has maintained its negative outlook on the thermal power sector for FY19.
The agency expects favourable environment for the wind and solar energy sectors as bids are being driven by Central agencies and power purchase agreements (PPAs) are becoming favourable to developers in terms of addressing grid curtailment and termination issues. “Development of guarantee funds by states/bidders, incentives to local solar panel manufacturers and exploring of wind-solar hybrid projects and offshore wind projects indicate a sustaining growth momentum in renewable power,” it said in a report today.
India Ratings feels uncertainties in solar panel costs, unpredictable behaviour of distribution companies (discoms) and operational troubles from wind turbine manufacturers need to be addressed by renewable developers. “We believe that avoidance of downtime of solar and wind plants are critical in ensuring the predicted internal rate of returns,” the report said.
According to the agency, adequate liquidity back-ups and counterparty risks as the most critical factors for renewable projects. It, however, maintained a negative outlook on the thermal power sector for FY19, due to lack of visibility for tying up long-term PPAs.
“Existing excess power tie-up of discoms and PPAs already signed with central and state sector generating companies for buying power from 40GW under construction thermal plants, preclude the need for purchasing power from private thermal plants under long-term PPAs,” it reasoned.
India Ratings feels excess power tie-up, ahead of requirement, increases the power purchase costs for discoms. “Also, thermal plants remain vulnerable to coal and water availability; thus certainty in these two linkages is hard to come by,” it added.
Meanwhile, the agency has maintained a stable outlook on transmission projects owing to high project availability and a stable receivables period for interstate transmission assets.