India’s Renewable Energy Capacity Addition Down 28% Year-On-Year For Q2 2017

India witnessed a poor show in the first quarter of current financial year in the renewable energy sector, as if it were an indicator to what lies in the remaining quarters.

The Ministry of New and Renewable Energy reported that 1,059 megawatts of renewable energy capacity was added during the April-June 2017 quarter, down 28% from the 1,465 megawatts capacity added during the same period a year back.

The low capacity addition was somewhat expected by some industry stakeholders due to several reasons, and indications are that such a ‘poor’ show could continue for the rest of the financial year as well.

Gamesa chairman in India had recently warned of sluggish growth in the wind energy capacity addition due to several changes in the policies and behavior of utilities.

India has shifted from a feed-in tariff regime to competitive auctions for wind energy, the largest contributor to India’s renewable energy sector. The policy implemented by the central government has been emulated by several state governments which have now refused to sign power purchase agreements with completed and nearly completed wind energy projects at feed-in tariffs.

This has slowed down the commissioning of wind energy projects, and the projects allocated in this year’s auction will be commissioned at least after 12 months.

Market conditions on the solar front are turning for the worse as well. Tariffs for several solar power projects are being renegotiated. More than a dozen utility-scale solar power projects ready to be commissioned in the state of Uttar Pradesh were forced to revise the tariffs they had secured through competitive bidding two years back.

Some 1.2 gigawatts of solar power capacity in the state of Jharkhand remains stranded more than one year after the competitive auction, as the power utility refuses to sign power purchase agreements it feels are costly.

Such delays not only shake the confidence of developers, investors and banks in the market but also delay commissioning of projects that impact the macro growth of the sector.