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High solar panel prices, issues with imports to impact RE capacity addition in FY23: Ind-Ra

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  • Ind-Ra believes that the energy transition in terms of increasing generation from renewable sources would continue and increase by 125-150bp annually till FY25
  • Furthermore, the impetus to fasten the energy transition would require technologies support such as battery storage and green hydrogen, to be viable for commercial scale

New Delhi: While noting that the renewable energy (RE) capacity addition increased to 10 GW in 9M FY22, India Ratings said on Thursday that it believes it is likely to moderate again intermittently on account of high solar panel prices along with issues in timely availability of imported solar panels. “Ind-Ra believes the module prices are likely to remain elevated over FY23 and given the supply chain constraints and order backlogs, the supply of modules is likely to remain constrained, impacting the capacity addition in India,” said the report.

Ind-Ra believes that the energy transition in terms of increasing generation from renewable sources would continue and increase by 125-150bp annually till FY25. Furthermore, the impetus to fasten the energy transition would require technologies support such as battery storage and green hydrogen, to be viable for commercial scale.

Implementation of reforms by discoms key to improvement

Weak financial situation of power distribution companies (discoms) reflected in their increasing overdue even after liquidity injections by the government may pose a risk to the overall power demand in the country. “The weak financial profile of discoms, reflected in increasing overdue even after liquidity injections by the government of India, is likely to keep power producers’ debtors elevated and may pose a risk to the overall demand,” said the agency.

The government assistance of Rs 3.05 lakh crore for improving discoms infrastructure, including smart metering and upgradation of systems, should result in reduction in aggregate, technical and commercial losses, although implementation remains key for discoms as observed in the past, said India Ratings. 

PLF of thermal power plants to reach closer to 60% in FY23

Maintaining a neutral outlook for the power sector for FY23, India Ratings said that the overall plant load factor (PLF) of thermal power plants would continue to improve and reach closer to 60 percent in FY23. “This is given the consistent growth in power demand and continued dependence on coal-based generation in the absence of any major increase in the capacity additions in any other sector except renewables. Furthermore, a lower-than-expected addition in FY23 in renewables would aid the PLF recovery. Ind-Ra however expects the demand growth to come back to a normal level of 6-7 percent in FY23, given a higher base,” said the report.

The impact of the third covid wave remains lower on power demand, given the less stringent curbs imposed by state governments, it added.

Coal availability poses risk to power demand: Ind-Ra

“Ind-Ra also believes that coal availability could pose a risk to the overall demand and thus PLF recovery, given the higher reliance on domestic coal as international prices remain high. The domestic coal availability to the power sector would remain dependent on an improvement in the domestic coal production and its allocation to the power sector both of which improved in 9MFY22,” said the report.

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