The long-term outlook looks bleak as weakening power demand growth, deteriorating financial condition of distribution companies, and further constraints in debt financing
New Delhi: After problems such as a sharp drop in demand and construction delays, things could get worse for the renewable energy sector which might see a loss of 2 to 3 GW of capacity addition in 2020 due to the coronavirus pandemic.
Although the short-term damage has been restricted due to measures by the government such as the Rs. 90,000 crore liquidity package announced for the power sector in May, the long-term outlook looks bleak as weakening power demand growth, deteriorating financial condition of distribution companies (discoms), and further constraints in debt financing that will continue to affect the industry, said a study titled “Covid-19: Impact on Indian Renewables” by renewable energy consulting firm Bridge to India (BTI).
The firm has also revised their base capacity addition estimates accordingly, from 43 GW to 35 GW for solar and from 15 GW to 12 GW for wind.
“We understand arranging capital, especially the debt capital, will be a challenge in the short-term post COVID,” Sanjeev Aggarwal, CEO of Amplus solar told ET. He added that the pandemic has adversely impacted the finances of discoms this year. “Unless we see some structural reforms in the electricity sector, the existing stress in the distribution company finance may only deteriorate,” Aggarwal said.
“The government has done well to provide ad hoc relief to the sector. But the real threat lies to long-term prospects, which are being seriously undermined by surplus power capacity on one hand, and various financial and operational challenges on the other hand,” said Vinay Rustagi, MD of BTI.
Renewable energy companies, like other power producers, have been plagued by delays in payment by cash-strapped discoms. With a likely improvement in liquidity, they hope the distributors would start clearing the dues after receiving the Rs. 90,000 crore bailout package.
Source: energy.economictimes.indiatimes
