According to credit-rating body ICRA, the growth of the renewable energy (RE) sector was driven by the large capacity additions in the wind and solar power segments.
The RE sector in FY2017 reported a record capacity addition of over 11 GW, an increase of around 60 percent over 7.1 GW reported in FY2016, as per the provisional figures by the Ministry of New & Renewable Energy (MNRE).
"The capacity addition in wind energy was much better than our expectations due to a bunching up of commissioning in March 2017. This was due to the removal of the generation-based incentive (GBI) benefit and reduction in accelerated depreciation (AD) benefit with effect from April 1, 2017," said Sabyasachi Majumdar, Senior Vice President and Group Head, ICRA.
"These apart, Independent Power Producers (IPPs) were trying to utilise the current feed in tariff regimes in states while they were still in place - the apprehension being that in future, tariff-based bidding, as exemplified by the award of projects by Solar Energy Corporation Ltd (SECI) in February 2017, could largely replace the feed-in tariff regime," he added.
As per industry sources, the distribution utilities in states like Andhra Pradesh, Rajasthan, Karnataka and Gujarat are evaluating the competitive bidding mechanism for awarding wind power projects in the near term. In this context, the fresh capacity addition in the wind power segment could be affected in the near term (12-18 month period) and would depend upon the plans by the state-owned distribution utilities and/or SECI in terms of project awards through the bidding route and the subsequent PPA signing.
Nonetheless, the execution of the 1000 MW wind power capacity awarded under the MNRE scheme in February 2017 would support the capacity addition to some extent in FY2019.
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As for solar energy, actual capacity addition in FY2017 has remained much lower than the government's target which is due to the delays in tendering and the project award process seen in the states as well as the execution delays to some extent.
Subsequent to the bidding results for the Rewa and Kadapa solar park, the plans for tendering of solar power projects are being re-evaluated by a few states under the state policy route as well as under the National Solar Mission (NSM).
The draft guidelines for competitive bidding for solar projects have been recently issued by the Central Government. While currently there is a temporary lull in announcement of fresh bids, the magnitude of solar project awards in the past 12-18 months has been quite significant.
The backlog against these awards itself would, in ICRA's estimates, support a solar capacity addition of about 7-7.5 GW in grid connected utility segment in FY2018.