India is on course to fall “well short” of its 2022 renewable energy goals, said analysts from a major financial ratings agency just weeks after Prime Minister Narendra Modi pledged to more than double its long-term targets.
Developers are rapidly “losing interest” in the Indian renewables sector amid multiple policy challenges, warned CRISIL, which currently expects the nation to miss by 42% its target of having 175GW installed by 2022.
The Indian government has repeatedly insisted it is on course to hit the 175GW figure – which includes 100GW of solar and 60GW of wind – and Modi at September’s New York climate summit said the country would aim for 450GW, without giving a timeframe.
CRISIL said in a note that India’s current trajectory is for the addition of just 40GW between 2019 and 2022, bringing the total to 104GW.
The country is facing issues both with the massive auction programme needed to spur the build-out, and with project execution once they are allocated, said the Indian ratings agency, a unit of S&P Global.
“The sector has witnessed a material waning of developer interest... A sizeable 26% of the 64GW of projects that were auctioned by the centre [national government] and states received no or lukewarm bids, and another 31% faced delays in allocation after being tendered,” said CRISIL’s analysts.
The agency added that “the unstable policy environment poses a big risk for the country’s renewable energy targets. This is evident in the growing incoherence between the policy thrust on RE, on the one hand, and the actual action by implementation agencies like the Solar Corporation of India (SECI) and state distribution companies, on the other”.
The key renewables state of Andhra Pradesh has emerged as an exemplar for India’s renewable challenges, after the local government decided to retroactively change already-agreed power deals with projects, to the dismay of the central government.
Viability of developers’ planned projects is being hammered by ever-lower tariff caps, warned CRISIL, which added that the wind sector has particular issues.
There is hardly any bidding for fresh wind energy projects today.
“Wind energy projects, meanwhile, are facing even greater turbulence. Their viability has reduced following the shift from fixed tariffs to competitive bids, and also because of an increase in capital costs with bleeding original equipment manufacturers no longer discounting equipment.
“The result is, there is hardly any bidding for fresh wind energy projects today.”
The Indian government needs to address each of the major issues facing the sector to get back on track, said CRISIL.