Policy flip-flops will have renewable energy target missing by over 42%

MUMBAI: Faced by many a regulatory challenge, policy flip-flops and also a steep fall in tariffs, the country is likely to miss the renewable energy target of 175 GW by 2022 by a wide margin, says a report.

According to a weekend report by Crisil, this target is set to be missed by a full 42 per cent as the industry has been witnessing fast waning interest from developers since the past fiscal.

Renewable energy capacity may increase by just 40 gw to 104 gw in 2022 from 64.4 gw in 2019, thanks to the lingering policy uncertainty and tariff glitches. That would be a good 42 per cent short of the government target of 175 gw,” the agency says in the note.

The report notes that as much as 26 per cent of the 64 gw of projects auctioned by the Centre and the states have received no or lukewarm bids, while another 31 percent are facing delays in allocation after being tendered.

Thus, despite the increase in tendering volume, not only has allocation of projects slowed down, but both undersubscriptions and cancellations of awarded tenders have also increased, says the agency.

As per the report, the ratio of auctioned or awarded projects to tendered projects plunged to 34 in fiscal 2019 from 77 over fiscals 2016 and 2017.

“The unstable policy environment poses big risks for the renewable energy targets. This is evident in the growing incoherence between the policy thrust on the one hand, and the actual action by implementation agencies like the Solar Corporation of India and state discoms, on the other,” it says.

The ongoing issue of tariff renegotiation in Andhra has also acted as a deterrent for most developers.

As of July 2019, the Andhra discoms alone owed Rs 2,600 crore to developers, part of which was due to ongoing tariff dispute and the resultant delays in payments. Such prolonged payment delays and disputes not only set a negative precedent, but also put at risk existing and planned investments, the agency warns.

Similarly, Rajasthan’s new draft solar and hybrid policy proposes an additional annual levy of Rs 2.5-5 lakh per mw on all projects that sell power to entities outside the state.

“Should this be implemented, it could be highly detrimental for the growth the sector given that Rajasthan is one of the most soughtafter states for solar power plants,” it warns.

Besides this, tariff caps is becoming a new challenge for developers to navigate.