 "Growth of RE to challenge conventional power in India: Moody's Investor Services")
Renewable energy contributed 35 per cent of the total power capacity addition in 2015-16 and this is likely to pressurise the conventional power operators, said Moody's Investor Services.
In a recent report, Moody's said, this scenario is a marked shift from previous compositions of new generation capacity, which were heavily dominated by coal.
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"We estimate that the share of fossil fuel based power generation capacity in India will fall to around 55 per cent by 2022 from the current 69 per cent, assuming current renewable energy expansion plans are implemented, and based on current capacity expansion plans for fossil fuel generation," said the report.
The Moody's report said implementation of the aggressive renewable energy capacities - which are planned to grow to 175Gw by 2022 compared to the current 37Gw - will be challenging, given counterparty risk issues and the need for stable policy initiatives to support long term investments.
"The most pronounced impact of a rising share of renewables in India's energy mix will be on unregulated power companies," said Abhishek Tyagi, a Moody's Vice President and Senior Analyst, "These companies are directly exposed to the market impact of environmental regulations-such as the clean energy tax-and do not receive the benefit of cost recovery from ratepayers."
The report said the credit implications for individual Indian power generators will depend on their current and future generation mix, and how they adapt to the evolving policy environment.
"Implementing India's aggressive renewable energy targets will be demanding", said Terry Fanous, Moody's Managing Director for Project and Infrastructure Finance ratings in Asia Pacific. He added that in addition to managing project construction and counterparty risk issues, expansion of renewable energy financing requires a stable and predictable policy framework that supports long term investment.
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The report also highlighted that the presence of credible distribution companies is crucial for
the successful growth of the renewable energy sector.
"While the presence of counterparty risk also applies to conventional power producers, we expect that the renewable energy sector's ability to attract the interest of overseas investors will be enhanced if counterparty risk is reduced," said the report.