The Centre’s decision to remove the tariff ceiling from renewable energy tenders will give the beleaguered industry a much-needed leg-up. Capacity addition in renewables dropped to 9 GW in fiscal 2019, compared with 11-12 GW over the 2017 and 2018 fiscals, and remained subdued through fiscal 2020 as well.
The allocation rate fell from almost 75-80% over fiscals 2016 and 2017 to 35-40% over fiscals 2018 and 2019, and is likely to be even lower at 20% in fiscal 2020.
Miren Lodha, director, Crisil Research said, “We estimate an incremental fillip of 6-7 GW from the removal of tariff ceiling over the medium term. Solar energy developers will now have the leeway to factor in higher risk in cases where the counter-party has a weaker profile, irradiance is low, or there are other execution hurdles. This will allow for higher bid tariffs and improve subscription to tenders, though positive impact is expected to materialise only after the pandemic ends.”
Crisil Research, however, expected solar weighted average tariff to remain in the current ₹2.50-2.60 per unit range as lower module cost, larger scale of projects, and continued tendering activity in the segment continue to spur competition among players.
As for wind energy tenders, though tariffs have remained sticky at the ₹2.8 per unit mark, viability remains a concern as the sector grapples with execution challenges on the ground.
