Wind projects underperform, but firms' credit quality holds steady: Crisil

Last year marked the weakest performance in five years, with only 20 per cent of wind power capacity meeting or surpassing the P90 level

More than 60 per cent of India’s wind assets have fallen short of their P90 benchmark over the past five financial years, according to Crisil Ratings. The so-called 'P90 benchmark' reflects the plant load factor (PLF) that a project is expected to achieve 90 per cent of the time, based on historical resource availability.

 

What is affecting the underperformance includes lower-than-expected wind speeds, influenced by climate change and shifting weather patterns, Crisil said.

 

Last year's wind power output also marked its weakest performance in five years, with only 20 per cent of wind capacities meeting or surpassing the P90 level. Nearly 45 per cent of wind assets underachieved by more than three percentage points, Crisil’s analysis showed.

 

Even a one percentage point shortfall in actual generation versus P90 can reduce debt servicing cushions by 3-5 per cent and cut return on equity by 1-2 per cent. Prolonged underperformance, particularly in wind projects, could undermine investor confidence in the sector.

 

What does this mean for credit quality?  

 

Despite weaker wind generation, the credit quality of developers has held steady. Crisil noted that leading companies have maintained a debt-to-Ebitda ratio of 5-5.5 times, which provides a cash flow cushion of 1.2-1.3 times for debt servicing. Liquidity buffers, typically covering one to two quarters, have further cushioned developers against financial stress.

 

“The leading developers have maintained a comfortable operating leverage (ratio of debt to Ebitda for operational assets) of 5-5.5 times, ensuring adequate cash-flow cushion (against debt servicing) of 1.2-1.3 times on an average, to absorb the impact of lower-than-expected generation. This, along with liquidity of 1-2 quarters, has mitigated any credit shocks,” said Ankush Tyagi, associate director, Crisil Ratings.

 

How is solar power balancing the picture?

 

However, Crisil noted that the underwhelming performance of wind assets has been offset by the growth of solar power. Solar’s share in India’s renewable energy mix rose to over 65 per cent in fiscal 2025, up from about 50 per cent in fiscal 2020. Unlike wind, solar assets have delivered more consistent results, with 77 per cent of them meeting P90 benchmarks last year, in line with the five-year average.

 

“...With more solar coming into the renewable sector, the blended variation in the sector’s actual operating Ebitda4 (wind and solar combined) against Ebitda at the P90 level was less than 10 per cent,” said Ankit Hakhu, director, Crisil Ratings.

 

Why is wind power still important?

 

While solar energy is becoming a larger contributor to the balance of the grid, wind energy still has an important part to play. Solar energy is generated during the day, while wind contributes during evenings and at night, as well as through monsoons when solar generation drops off.

 

Together they offer steadier output through the day and seasons, driving interest in hybrid solar-wind projects (with storage). Crisil expects such hybrid projects to make up over 40 per cent of renewable capacity growth in the next three years.