Long-term prospects for wind energy demand strong: ICRA

Says wind energy has better cost competitiveness compared to conventional power sources

The demand for wind energy in the country is expected to be strong in the long term even as such projects remain exposed to significant counter-party credit risks, says a report.

Rating agency ICRA today said the fundamental long-term demand outlook for wind energy is expected to remain strong, mainly supported by large requirements to meet the renewable purchase obligation (RPO) requirements.

Also, wind energy has better cost competitiveness compared to conventional power sources especially against the backdrop of scarcity and rise in fuel prices, it added.

India has an installed wind power generation capacity of more than 19,000 MW.

However, ICRA in a report said that wind energy projects remain exposed to significant counter-party credit risks, due to weak liquidity and financial position of state distribution companies.

"With continued delays in payments by state utility in Tamil Nadu, fresh investments in the state have been showing a declining trend, as reflected in a sharp decrease in the wind energy installations in the state during 2012-13," it said.

Regarding domestic wind turbine equipment makers, the agency said that their annual manufacturing capacity is estimated to be around 10,000 MW.

"This represents a significant over-capacity build-up. While this, coupled with slowdown in investments in turn has intensified the competitive pressures among the players, the market continues to be dominated by 4-5 players who cater to about 90 per cent of the demand," it added.

Besides, ICRA said the vulnerability of domestic manufacturers, eyeing export markets, has increased due to subdued demand outlook in regions like China, Europe and America.