India to add more than 15 GW of renewable energy capacity annually in FY 2025 and FY 2026: India Ratings

India Ratings and Research expects India to maintain pace of renewables capacity addition owing to a significant drop in equipment prices, continued policy support, availability of liquidity, and investment plans of some of the large corporate players

India Ratings and Research (Ind-Ra) expects India’s annual renewable capacity addition to remain at 15-18 GW in FY 2025 and FY 2026. It expects 75-80% of the annual RE capacity addition, i.e., up to 14.5 GW, to come from solar and around 20% from wind. The capacity addition will be driven by a significant reduction in equipment prices, continued policy support, availability of liquidity and investment plans of some of the large corporate players in the renewable sector for growth.

“However, the execution timelines of renewable capacity addition would continue to hinge on the regulatory stance towards import duties on cell and modules, support towards domestic cells and modules manufacturing, and indigenisation push towards domestic equipment sourcing,” Ind-Ra stated.

The energy transition towards renewable capacity requires deployment and development of energy storage capacities, given the intermittent nature of the renewable energy for grid stability.

Ind-Ra expects pumped storage hydro power projects to emerge as a viable solution, given battery storage is currently economically less viable and an increase in return on equity to 17% from earlier 16.5% for pumped hydro storage as per draft CERC regulations for FY25-FY29.

Ind-Ra stated that the improvement in debtor’s position for generating companies continues with an improvement in the liquidity position of distribution companies led by timely tariff hikes, successful implementation of Late Payment Surcharge scheme, and a continued reduction in aggregate technical & commercial losses. However, a delay in reforms including regular tariff hikes, a slower-than-expected reduction in aggregate technical and commercial losses, and other operational improvements could again lead to a pile-up in receivables for generating companies.
Thermal PLFs

Ind-Ra has maintained a neutral outlook for the power sector for FY25, as it believes the overall plant load factor (PLF) of thermal power plants would continue to improve and reach closer to 70% in FY25. It stated thermal PLFs will remain healthy owing to continued higher power demand, a ramp up in domestic coal production, slower capacity additions and continued dependence on coal-based generation till the sufficient storage capacity is built up for energy transition towards renewables.

“Ind-Ra continues to see a demand-supply mismatch in the power market, which would lead to a continued uptick in plant load factors of thermal plants and elevated merchant tariffs. While solar capacity addition has picked up pace following a reduction in the module prices and renewable capacity addition is likely to remain at over 15GW annually, effective storage options still need to be developed for the renewable capacities to be able to provide round-the-clock power,” says Bhanu Patni, associate director, Corporate Ratings, Ind-Ra.

The agency expects merchant market prices to remain high in FY25 amid continued higher demand and slower thermal capacity addition..

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