India's renewable energy capacity addition expected to increase 20 GW in FY24: ICRA

India’s green energy capacity growth is expected to boost to 20 gigawatt (GW) in the financial year 2023-24 (FY24) from 15 GW in FY23, ratings agency ICRA said in its latest press release. It added that a scale-up in tendering activity and cost reflective tariffs will be key to achieving the renewable capacity target.

“ICRA predicts the RE capacity growth to rebound to about 20 GW in FY24 from 15 GW in FY23, considering the time expansion provided by the Ministry of Power for solar and hybrid projects till March 2024, a reduction of the ALMM requirement and the likely moderation in the solar PV cell and module prices, as seen recently,” said Vikram V, vice-president and sector head - corporate ratings, ICRA.

He added that the solar power segment witnessed a slowdown in bidding activity in FY23 amid elevated module prices, challenges associated with the ALMM, and the imposition of duties on imported modules. “While there is visibility on RE capacity addition in the near term, a significant scale-up in tendering activity is required to meet the notified renewable purchase obligation targets over the medium term,” he said.

The release added that while concerns remain on execution risks and input cost pressure for the RE projects, ICRA’s outlook for the RE sector remains Stable, led by strong policy support, healthy demand prospects, and superior tariff competitiveness. ICRA has projected the all-India thermal plant-load factor (PLF) level to improve to 65.1 per cent in FY24 from 64.2 per cent in FY23, led by the growth in electricity demand and limited thermal capacity addition.

The rating agency projected the full-year demand growth for FY24 at 5 per cent to 5.5 per cent, slightly lower than its expectation for the GDP growth for this fiscal, with unseasonal rains having dampened demand over the past two-and-a-half months. “However, demand is expected to recover from the second half of May 2023. Moreover, the likelihood of El Nino in FY24 may have a positive impact on electricity demand,” it said.

ICRA introduced that while anticipated demand expansion for FY24 is greater than the historical average seen over the past 10 years, it is lower than the peak of 9.6 percent reported in FY23, which was supported by a severe heat wave, a favorable base, and a revival in economic activity. The rating agency expects a sustained growth in electricity demand to improve visibility on the signing of new power purchase agreements for the thermal IPPs.