Stable outlook for solar & wind energy, negative for thermal: Ind-Ra

Ind-Ra revised outlook on the wind sector to stable from negative and maintained a stable outlook on the solar sector

Favourable policies and funding mechanism would help in sustained growth of the solar and wind sectors, India Ratings (Ind-Ra) observed in its latest report. At the same time, it maintained a negative outlook for the thermal power sector as there is no visibility on long term power purchase.

Ind-Ra revised the outlook on the wind sector to stable from negative and maintained a stable outlook on the solar sector.

“Solar and wind bids are being driven by central government agencies and power purchase agreements (PPAs) are becoming favourable to developers in terms of addressing grid curtailment and termination issues. Development of guarantee funds by states/bidders, incentives to local solar panels manufacturers and exploring of wind-solar hybrid projects and offshore wind projects indicate a sustaining growth momentum in renewable power,” said the report.

Ind-Ra, however, noted that hurdles such as uncertainties in solar panel costs, unpredictable behaviour of distribution companies (discoms) and operational troubles from wind turbine manufacturers should be addressed by renewable developers.

Another favourable development helping the renewable sector is from the bond market. Ind-Ra said developers are looking for various avenues to raise funds for growth. Timeline between project commissioning and refinancing bank loans with bonds is decreasing as investors are getting tuned to the risks in the projects and developers are looking to generate cash for growth.

The ratings agency maintained a negative outlook on the thermal power sector for FY19, due to lack of visibility for tying up long-term PPAs.

“Existing excess power tie-up of discoms and PPAs already signed with central and state sector generating companies for buying power from 40GW under construction thermal plants, preclude the need for purchasing power from private thermal plants under long-term PPAs,” said the report, “Also, thermal plants remain vulnerable to coal and water availability; thus certainty in these two linkages is hard to come by."

For power transmission projects, Ind-Ra maintained a stable outlook owing to high project availability and stable receivable period of interstate transmission assets.