According to the rating agency, while the government's wind power bidding programme provides visibility to support capacity additions over the next four years, the renegotiation or cancellation of power purchase agreements (PPAs) by few states will be a major challenge.
The ministry of New and Renewable Energy (MNRE) proposes to issue bids for 5,000 MW by March next year followed by 10,000 MW each in FY 2019 and FY 2020, so as to achieve the cumulative wind capacity target of 60,000 MW by FY2022.
While this significantly improves the tariff competitiveness of wind energy as against conventional energy sources, the viability of such tariffs remains a challenge, ICRA explained.
"This would depend upon the availability of long-tenure debt at cost competitive rates, capital cost, plant load factor (PLF) level and ability of the developer to identity locations with high generation potential," ICRA Ratings sector head and Vice President Girishkumar Kadam said.
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"This is following the significant decline in wind energy tariffs discovered through the competitive bidding route," Kadam added.
ICRA further said the advisory issued by the MNRE to the state utilities against such actions as well as the orders issued by some state governments in this regard, are favourable for the developers.
"However, many of the feed-in tariff-based PPAs with relatively high tariffs as against the average power purchase cost of the state-owned discoms in the wind energy sector may remain exposed to a risk of forced back-down or grid curtailment as observed in few states in the past," ICRA said.
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