Renewable projects more attractive in India: PwC-Mytrah

Renewable energy projects are financially more attractive and market-led in India as compared to other countries, says a PwC-Mytrah report on clean energy sector.
India's renewable energy development is commercially led and demand driven, unlike in Europe which offers subsidies or bears losses incurred in displacing existing coal or nuclear power, it said.
"The renewable energy sector offers not just a major growth opportunity but one that is financially attractive and market-led in relation to other countries," said the report on 'Renewable energy's transformation of Indian electricity landscape'.
The capital and operating costs of wind or solar projects are far lower in India, due to inherent cost advantage, lower balance-of-system costs, and extensive competition.

"Government support in terms of incentives, infrastructure and investment promotion has made it possible to plan big. The move to larger scale projects and learning effect has allowed use of new technologies and efficient designs to push down the costs," said PwC's Kameswara Rao.
"Lower costs, short development period, and no threat of fuel risk or stranded capacity makes renewable energy attractive to power utilities. Lower costs means an investor in India can set up more projects than say in EU to diversify risks," he said.

According to the report, solar auctions in India are delivering remarkable outcomes, and the winning tariff for a 500 MW bid held earlier this month is about 50 paise per kWh below previous record lows of recent months.

This comes from further decline in international module prices and cost-effective global finance. Equally, it is due to low development risk offered by the solar park, and lower payment risk attributed to the procurement structure. So, even as tariffs have declined, renewable energy presents a profitable growth opportunity for investors.
However the study added that there are challenges too. The main buyers are distribution utilities, some of which are financially distressed and present risk of delayed payments. This could improve over time as states take up and implement provisions of the recent UDAY scheme announced by the government revive the power sector.

Also, limitation in transmission capacity poses risk of curtailment, which cuts into profitability of renewable energy projects, the report said.
"These challenges, however, are being worked upon such as through the green energy corridor, broader distribution sector reforms, and use of better forecasting and scheduling systems. Also, market creation has not been easy, but as costs decline and as the externalities are better understood, the mind-set is changing," Rao said.