Strong demand prospects for renewable energy projects: ICRA

New Delhi: The demand prospects for RE (Renewable Energy) capacity addition by the Commercial & Industrial (C&I) segment are expected to remain solid, given the improved tariff competitiveness and strong sustainability/green initiatives by C&I players to meet their energy requirements through renewables.

The C&I segment itself accounts for about 40 to 45 per cent share in all India energy demand. In a statement, ICRA said that even assuming 20 percent of the energy requirements are to be met by the C&I segment through RE, the RE capacity addition requirement is estimated to remain significant at about 75 GW by 2030.

As per the recent report published by ICRA on the RE sector, Girishkumar Kadam, Senior Vice President & Co-Group Head – Corporate ratings at ICRA, said, ''from the C&I off-taker's perspective, cost of sourcing of RE through open access remains at discount to grid tariffs after factoring the applicable open access charges.'' The grid tariffs have shown a rise and the energy charge in the same also varies widely between Rs 6-7/unit and Rs 6-10/unit for HT industrial and commercial segment respectively, across the states, he added.

Nonetheless, the regulatory risk remains a challenge for open access-based RE projects due to dependency on open access and banking requirements, he stated.

The open-access and banking charges/norms also vary widely with effective costs ranging between Rs 1.5 to 5/unit across key states, with an increasing trend seen due to upward pressure on the cost of power supply and continued high level of cross-subsidisation in the tariff structure for the discoms, he said.

The open-access charges mainly comprise Cross Subsidy Surcharge (CSS), additional surcharge, wheeling charges and banking charges as per the applicable norms by State Electricity Regulatory Commission (SERCs).

The CSS varies widely between Rs 0.7 to 2.2/unit as observed across the key states, with the removal of concessions/exemptions by SERCs, which were earlier available for RE projects in third party open access route, it stated.

Vikram V, Vice President & Sector Head – Corporate Ratings, said a recent directive by the Supreme Court for the non-applicability of additional surcharge for captive projects, however, remains positive for captive RE projects.

The clarity on the extent of waiver of inter-state transmission charges for projects to be commissioned by FY 2028 also remains positive, he added.

According to ICRA, the credit profile of the majority of the rated RE entities having third party/ group captive PPAs (Power Purchase Agreements) continue to remain supported by the availability of long-term PPAs with the creditworthy C&I customers, adequate liquidity buffer, support available from the respective sponsor groups as well as strengths arising from the operating track record.

Further, it noted that the outlook for the RE sector remains stable, aided by the strong policy thrust, improved tariff competitiveness of both solar & wind energy as well as the supportive regulatory framework. (With inputs from India's premier news agency PTI)

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