RE-RTC Tariffs Outshine Coal Bids at Rs. 4.0-4.5 Per Unit, Says ICRA

In a recent webinar focusing on India’s renewable energy landscape, ICRA, a leading investment information and credit rating agency, highlighted the growing competitiveness of round-the-clock (RTC) renewable energy projects compared to conventional thermal power. Vikram V, Vice President & Sector Head – Corporate Ratings at ICRA, stated that the share of RTC projects is expected to rise in upcoming bids.

The tariffs discovered in Renewable Energy – Round-the-Clock (RE-RTC) tenders have proven to be highly competitive, with recent bid tariffs ranging between Rs. 4.0-4.5 per unit. This is notably lower than the Rs. 5.2 per unit discovered in a recent medium-term bid for supply from coal-based projects. According to Vikram V, the returns for winning developers in RTC bids are linked to the cost of the storage component, in addition to the costs associated with wind and solar components.

ICRA’s presentation emphasized the importance of round-the-clock supply from renewable energy sources, given the intermittency associated with renewable energy generation. The use of wind and solar power projects complemented with energy storage systems, particularly pumped hydro storage (PSP) capacity, was highlighted as key to achieving reliable, continuous power supply.

The presentation projected a significant increase in the share of renewable energy, including large hydro projects, in India’s overall electricity generation. The estimate indicated a rise from 23% in FY23 to around 40% in FY30. ICRA stressed that achieving India’s target of installing 500 GW of renewable energy capacity by 2030 requires addressing challenges such as smoother land acquisition, enhancing transmission infrastructure, and establishing a robust domestic renewable energy supply chain.

In the context of solar power projects, the sharp decline in solar PV cell and module prices over the past 12 months was noted. This has resulted in improved debt coverage metrics for upcoming solar power projects, offering short-term benefits to developers. However, developers remain exposed to fluctuations in imported solar PV cell and wafer prices until fully integrated module manufacturing units are established in India.

ICRA also acknowledged the improved discipline of state distribution utilities (discoms) in making payments to power generators, including Renewable Energy Independent Power Producers (RE IPPs). The implementation of late payment surcharge (LPS) rules in June 2022 has led to discoms in key states clearing dues within three months from the billing date. The sustainability of this positive trend is contingent on continued improvements in the financial profile of discoms, which, in turn, depend on the implementation of reform measures by the states.

As India continues its march toward a cleaner and more sustainable energy future, the rise of RTC renewable energy projects marks a significant milestone in the country’s transition to a low-carbon economy.