The capacity addition in wind energy during the current fiscal will remain at about 2,800 MW (2.3 gigawatt), a growth of 20 per cent over the previous year, driven both by the IPP and non-IPP segments.
While the IPP segment was encouraged by satisfactory feed-in tariff based PPAs in key wind energy rich states and cost competitiveness with conventional power, the non-IPP segment derived benefits from the accelerated depreciation norms, said ICRA.
The rating agency is of the view that demand drivers for wind energy sector remain favourable in the long run because of strong policy support from the Central and state governments in key states as well as the cost competitiveness of wind based energy vis-a-vis conventional energy sources. However the sector faces regulatory challenges arising out of wide variance in renewable purchase obligation norms and weak compliance of power utilities and absence of enforcement mechanism in most of the states.
Based on study of RPO compliance during FY2014 by utilities in 14 states which account for 65 per cent of all India energy demand, utilities in only five states have fully met the RPO targets, while compliance by others remained at 60 per cent.
ICRA is of the view that the UDAY scheme for distribution companies is a significant positive for the power sector and estimates that if the scheme is implemented, the aggregate relief to discoms is likely to be around Rs 88,000 crore per year by FY2019 which translates into a reduction in losses by Rs 0.95 a unit on an all -India basis.