The 65 GW capacity addition is expected to entail an investment of Rs 3.5 lakh crore and is seen to increase the share of renewables in the overall power generation base to 34% from the current level of 25%.
The target of having 175 giga-watt (GW) of installed renewable energy capacity set by the government will likely be achieved only in FY26 as against the target of meeting it by December 2022, analysts at Icra said.
The key reasons for the delay were cited as issues related to land acquisition and the higher period required to build associated transmission infrastructure to evacuate the electricity generated from solar and wind plants.
Since 40 GW of the 175 GW target capacity was expected to come from rooftop solar plants, limited progress on that front has also thwarted achieving the 175 GW renewables target on time. The “passive resistance” from state-run power distribution companies (discoms) towards installing rooftop solar — in the apprehension of losing revenue from discoms’ higher-paying commercial and industrial consumers — is seen as one of the major reasons why rooftop solar did not take off as planned.
On August 12, the government announced that the country’s installed renewables capacity has crossed 100 GW. Another 50 GW is currently under installation and 27 GW is under tendering. The country has also set its target of 450 GW renewables by 2030. Icra estimates that the incremental renewables capacity addition between March 2021 and March 2025 to be 65 GW, comprising 51 GW from solar, 12 GW from wind and 2 GW from other green sources.
The 65 GW capacity addition is expected to entail an investment of Rs 3.5 lakh crore and is seen to increase the share of renewables in the overall power generation base to 34% from the current level of 25%. The pace of capacity addition can be faster if the growth rate of power demand increases significantly, analysts pointed.
“The key challenges constraining the growth remain on execution front, mainly associated with land and transmission infrastructure as well as the slow but improving progress in signing of power purchase agreements and power sale agreements by intermediate procurers with discoms,” said Girishkumar Kadam, senior vice president of Icra ratings. Discoms have developed cold feet on buying power from renewable energy projects at tariffs discovered under earlier auctions after much lower prices were discovered in subsequent bids.
More than 6,000 MW of renewable energy projects bid out at auctions before February 2020 have not yet found buyers as rates plummeted to a record low of Rs 1.99/unit in December 2020. With rising prices of solar modules, which comprise about 60% of the total project expenditure for solar plants, tariffs in recent solar auctions have been around Rs 2.34/unit.