ICRA Expects India To Install 15 GW RE During FY2023

• ICRA has provided a positive outlook for Indian renewable energy sector in the near future, driven mainly by the solar PV technology 
• A drop in solar module prices along with positive policy support from the government are the major factors for this outlook 
• Post FY2025, it anticipates the country's tendering activity to meet 50 GW trajectory target will be the driving force for new installations 

Indian credit ratings agency ICRA sees a booming renewable energy market in India led by solar PV technology as it forecasts the country to install 15 GW in FY2023, contributing to cumulative renewable energy installations reaching 170 GW by March 2025. The latter will be an increase over the 132 GW level as of the end of October 2023. 

Analysts attribute this positive outlook majorly to the drop in module prices, along with strong policy support to the solar industry, namely the extension for the use of modules in the Approved List of Models and Manufacturers (ALMM) till March 2024, and commissioning deadline extension to hybrid solar and wind power plants. 

"The sharp decline in solar PV cell and module prices by 65% and 50%, respectively, over the past 12 months is leading to a healthy improvement in debt coverage metrics for the upcoming solar power projects," according to ICRA Vice President & Sector Head-Corporate Ratings, Vikram V. "Benefitting from this, for a solar power project with a bid tariff of INR 2.5 ($0.030)/unit and sourcing modules from domestic OEMs using imported PV cells, the average DSCR has improved by over 35 bps." 

ICRA cautions that while the going is good for the near future, developers would remain exposed to global price dynamics for imported solar PV cell and wafer prices till India develops fully integrated module manufacturing. 

Nonetheless, ICRA forecasts India's renewable energy installations to grow by around 20 GW in FY2024. A growing project pipeline will further scale up annual installations in FY2025 to 25 GW, driven mainly by the solar PV industry. 

Beyond FY2025, renewable energy capacity addition will be supported by significant improvement in tendering activity as the government targets to tender 50 GW annually till FY2027-28 (see India Releases Bidding Trajectory For RE). 

In the current fiscal year, ICRA counts the tendering agencies to have already bid out more than 16 GW with another 17 GW underway by the central nodal agencies. It should see a greater share of renewable energy-based round-the-clock (RE-RTC) projects as the country tries to mitigate the intermittency risk associated with renewables. The addition of storage is a positive move in the right direction, point out the analysts.  

According to ICRA, the tariffs discovered in the RE-RTC tenders so far remain highly competitive against the conventional sources. Recent bid tariffs were in the range of INR 4.0-4.5 ($0.048 to $0.054)/unit, well below the Rs. 5.2 ($0.062)/unit discovered in the recent medium-term bid for supply from coal-based projects. 

Recently, Indian credit ratings agency CRISIL Ratings pegged India's utility-scale solar PV capacity additions in FY2023 at 16 GW, thanks to falling module prices improving project IRRs (see Falling Solar Module Prices To Boost Indian Installations).