 "renewable energy")
Ahead of the upcoming Union Budget 2024, reports suggest that the power and renewable sector can see a double digit allocation and a number of schemes dedicated to benefit the sector.
A report by The Financial Express, quoting a recent study by CRISIL, stated that capital expenditure for renewable power may witness a double-digit allocation, with capacity expected to reach 180-gigawatt by FY26, primarily driven by the continued dominance of solar energy.
Renewable energy additions
The renewable energy capacity stood at 72 GW in FY20 and increased by 35 per cent to 97 GW in FY22. Currently, the capacity is at 130 GW, as of the end of FY24.
According to the CRISIL study, a healthy executable pipeline of 75 GW will contribute 75 per cent of the 50 GW addition, while commercial and industrial (C&I) and rooftop segments may contribute the remaining 25 per cent in FY25 and FY26. The auctioned capacity in FY24 increased 2.5 times to 35 GW from 12 GW in FY23.
Furthermore, 12 GW of renewable energy additions is expected to come from solar rooftop and C&I, supported by favourable policy changes.
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The rooftop solar scheme has an outlay of Rs 75,000 crore to bring solar rooftops to 10 million households. The launch of the online portal, PM Surya Ghar, is expected to streamline the approval and implementation process. Additionally, supportive green open access policies and a reduction in open access charges in select states are expected to accelerate the transition, the report said.
Risks to increased energy adoption
Relatively high tariffs for storage and storage-linked capacities pose a risk to the increased adoption of renewable energy. As of April 2024, nearly 65 per cent of auctioned capacity remains without power supply agreements. The tariffs for these projects are higher compared to pure solar or wind projects, as they store power at the time of generation and discharge it later when needed, the report said.
Therefore, the tariffs for such projects should be compared to those of thermal projects, which can supply power continuously and meet demand. Additionally, the timely development of storage infrastructure is crucial for managing the intermittent and uncontrollable nature of renewable energy generation.
Requirement for substantial capital
The report stated that there is a requirement for substantial capital, around Rs 3 trillion, over the next two years.
The increase in domestic bank involvement also needs to be monitored. Investments in FY24 amounted to Rs 1.8 trillion, with domestic debt constituting a significant portion, at around 55-60 per cent, the report stated.
International debt comprised 15-20 per cent, while equity accounted for 14-17 per cent, and accruals for 6-8 per cent. For FY26, debt is expected to constitute 72-76 per cent of the investments, followed by equity and accruals, each at 12-14 per cent.
Leverage is anticipated to remain stable at approximately 6.8-7.0 times, driven by consistent operational performance and stable receivables. Excluding capital expenditure (capex), leverage for the operating portfolio is expected to be 5 - 5.5 times. However, the higher capex intensity may exert pressure, and the need for equity raises will require close monitoring, the report said.
