Renewable energy (RE) dominated India’s power generation capacity addition in FY21, accounting for 7.7 GW (64%) of the new 12.1 GW installations. The coal/lignite segment added 3.9 GW, according to the latest edition of the CEEW Centre for Energy Finance (CEEW-CEF) Market Handbook.
Solar (grid-scale and rooftop) installation dominated at 5.5 GW, accounting for 71% of the new RE capacity addition and 45% of the overall new power generation capacity.
Rooftop solar contributed an impressive 1.8 GW (till February 2021). CEEW-CEF attributes this to favorable policies of states such as Gujarat, which has incentivized rooftop solar for micro-, small- and medium-sized enterprises.
Solar auctions
In FY21, around 21.2 GW of RE capacity was auctioned. Grid-scale solar PV (17.3 GW) dominated the auctions, followed by wind-solar hybrid (2.8 GW) and wind (1.2 GW).
The announcement of basic customs duties on solar cells and modules drove up auction tariffs by 11% in the fourth quarter of FY21. Tariffs discovered in solar auctions held in Gujarat rose from a historic low of INR 1.99/kWh in December 2020 to INR 2.20/kWh in March 2021. A basic customs duty of 45% on solar modules and 20% on solar cells will be applicable from April 1, 2022.
Gagan Sidhu, Director, CEEW-CEF, said, “India’s RE sector, particularly solar, has shown resilience in FY21 despite supply chain disruptions caused by the Covid-19 pandemic. The discovery of a historical low in solar auction tariffs this year and the fact that key RE developer stocks significantly outperformed the market (Sensex) are encouraging signs. India must now accelerate its RE sector’s development by subsidizing credit enhancement for RE projects, developing the corporate bond market, and improving liquidity in the power market.”
Nikhil Sharma, Associate, CEEW-CEF, added, “India’s RE sector has become quite attractive for investors and project developers. While a handful of developers continue to dominate auctions, new market entrants are giving them competition by bidding aggressively. These include large public-sector companies such as NTPC Limited, SJVN Limited, and Coal India, as well as smaller, private developers and international developers such as Al Jomaih Energy and Water Co.”
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