Strong project pipeline supports renewable energy sector outlook: ICRA

Tariff competitiveness of wind and solar power projects in utility auction routes remained intact despite the imposition of customs duties from 2022 onwards

ICRA predicts a stable outlook for the Indian renewable energy (RE) sector. With continued policy support from the government, a strong project pipeline, and significant tariff competitiveness offered by wind and solar projects — both in the utility segment and the open-access segment — this sector appears well-positioned, stated the rating agency.

Solar and wind power project tariffs in the utility auction route continued to remain competitive, while prices remained below INR 3 per unit. ICRA noted that the market remained competitive despite a 25 percent and 40 percent basic customs duty imposed from April 2022 on imported cells and modules, respectively.

According to Girishkumar Kadam, senior vice president, and co-group head at ITCRA, investors can expect a continued boom in the RE sector thanks to government policies targeting 450 GW by 2030 and competitive rates.

The RE segment will drive capacity additions over the medium-term, with close to 40 GW of projects pipeline, he stated further.

In its report, the ICRA noted the main constraints to growth remain on the execution front, mainly land acquisition and transmission infrastructure. 

In addition, the slow but improving pace of signing power purchase and power sale agreements over time by intermediate procurers with state-run utilities (discoms) will pose challenges.

ICRA also stated that softening of interest rates along with an improving financing environment has been positive for the RE sector over the past 12 to 18 months.

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