India’s RE Capacity Addition To Improve To 11 GW in FY2022


While there is a slowdown in renewable energy (RE) capacity addition to 7.4 GW in FY2021 from 8.7 GW in FY2020 amid the execution headwinds due to Covid-19, ICRA expects the capacity addition to improve to 10.5-11 GW in FY2022 led by a strong project pipeline of ~38 GW1. This apart, more than 20 GW RE projects are under the
tendering phase from various nodal agencies, providing visibility for capacity addition over the medium-term.


“The RE sector is expected to witness investments of INR 3.5 trillion over the next four years, increasing the share of RE capacity to 34% of the overall installed capacity by March 2025 from 25% as of March 2021 led by the solar power segment.” said Girishkumar Kadam, senior vice president and co-group head-Corporate Ratings, ICRA Limited.

The delays in signing power purchase agreements and bid cancellation in expectations of reduced tariff rates remain key challenges before the RE sector.

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Despite the rise in tariff, the solar power tariffs are expected to remain below Rs. 3.0 per unit and cost competitive, against the marginal cost of generation from thermal sources in the bottom 25% of the merit order dispatch. On the other hand, the execution challenges persist for the under-construction projects with respect to land acquisition and evacuation infrastructure, especially in the wind power segment. In this context, the Government has approved extension in commissioning timeline by 2.5 months, considering the second wave of Covid-19. Also, the Government has extended the waiver on inter-state transmission charges for wind and solar power projects commissioned till June 2025 from June 2023 earlier.


Further, the demand outlook for the domestic solar OEMs remains favourable, with the strong policy support through imposition of BCD on imported cells and modules and the notification of the production-linked incentive (PLI) scheme along with a strong order pipeline aggregating about 35-40 GW over the next three to five-year
period from various schemes requiring the use of domestic modules. Also, the delays in inclusion of the overseas suppliers in the Approved List of Models and Manufacturers (ALMM) could support the demand for domestic module OEMs in the near term.

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Vikram V, vice president and sector head-Corporate Ratings, ICRA, states, “The policy push for the promotion of domestic module manufacturing is expected to improve the cost competitiveness of domestic OEMs and has led to new capacity announcements of more than 15 GW by various OEMs. The timely commissioning of these new capacities remains important to meet the growing demand from the developers, given the current capacity constraints. Moreover, the ability of the OEMs to achieve backward integration and build economies of scale would be important to remain competitive against the overseas suppliers on a sustained basis.”

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