Renewable energy business recovers but capacity auctions face challenges

NEW DELHI: Renewable energy capacity additions have clawed their way back to well above their pre-Covid levels in the October-December 2020 quarter, according to a report from the CEEW-Centre for Energy Finance (CEEW-CEF).

However, while the restoration of supply chains has aided the recovery, capacity auctioned during the period took a hit due to challenges faced by the Solar Energy Corporation of India (SECI) in finding buyers for previously tendered capacity. 

According to CEEW-CEF, RE capacity additions increased by 59 per cent to 1.9 GW during the quarter compared to Q1  of FY21.

Generation, meanwhile, increased 20 per cent year-on-year. In contrast, coal capacity additions declined compared to Q2 and stood 20 per cent lower than renewable energy additions. Solar (grid-scale and rooftop) continued to dominate the RE category and accounted for 73 per cent of the capacity added in Q3 FY21.

“The performance of the RE sector in this quarter has further reiterated the promise the sector holds. To meet the 450 gigawatts renewables target, India needs investments worth more than $200 billion for generating capacity alone. Significant additional funds will be required for supporting infrastructure such as storage and transmission,” said Arunabha Ghosh, CEO, CEEW. 

However, the quarterly capacity auctioned fell to 2.97 GW in Q3 FY21 versus 4.4 GW and 3.2 GW auctioned in Q1 FY21 and Q2 FY21 respectively.

According to the report, this may be because SECI has not found adequate buyers for previously tendered higher tariff capacities.

Nikhil Sharma, Associate, CEEW-CEF, said, “SECI needs to ensure power purchase assurance with discoms to attract bidders and provide an upside of the rapidly declining tariffs to discoms to regain momentum.”

India also discovered its lowest ever RE tariff at the GUVNL auction held during the quarter.