The renewable energy sector has achieved only 26% of the target set for FY24, reaching 25 GW out of the planned goal – EQ

In Short: The renewable energy sector in India has reached 25 GW of installed capacity, which accounts for only 26% of the target set for the financial year 2023-24. Despite significant growth, the sector faces challenges in achieving the desired targets due to various factors such as policy uncertainties, land acquisition issues, and financing constraints.

In Detail : The new capacity addition in the renewable energy sector during the first half of this fiscal was lower than what was achieved in the year-ago period and only little over one fourth of the new capacity planned for the full fiscal.

During H1 of this fiscal, the renewable sector added 6.6 GW of new capacity, including 5 GW from solar power and 1.55 GW from wind power segment. H1 FY24 capacity is lower when compared with the year-ago period addition of 8.2 GW, highest H1 capacity till date.

Meanwhile, Union Ministry of New and Renewable Energy has set a target to achieve a total new capacity of about 25 GW in FY24. The new capacity addition in the renewable energy sector stood at 7.4 GW, 15.5 GW and 15.3 GW in FY21, FY22 and FY23, respectively.

“While this is below the annual capacity addition required to achieve our 500 GW non-fossil target by 2030, a couple of things have changed recently. First, a national bidding trajectory of 50 GW of renewable energy (RE) capacity annually for five years was announced in March 2023. This has made a tangible difference quite quickly,” Gagan Sidhu, Director, CEEW-Centre for Energy Finance, said.

“During the first half of FY24, 13.1 GW of RE capacity has been auctioned, which is far more than the 9.9 GW auctioned in the whole of FY23. However, the actual capacity addition in H1 FY24, which stood at 6.6 GW, is still at levels seen in the past two years,” he adds.

Will the renewable energy sector be able to achieve the desired target of 25 GW in FY24? Sidhu says capacity addition in any given year is ultimately based on actions taken in previous years, as there is always a lag between the auctioning of capacity and capacity addition.

“Even though the addition has picked up pace in H1 2024, it is more important to keep a watch on the pace of auctioning. Specifically, will it match the bidding trajectory targets? Second, it will be equally important to keep a watch on the rate at which the bids translate into actual capacity addition on the ground, as bidding is only a part of the equation,” he said.

According to ICRA, renewable energy capacity addition is expected to reach about 20 GW in FY24. It expects improvement in capacity addition in both solar and segments.

“FY24 would see highest annual capacity addition ever achieved in the renewable energy sector. While the solar segment would cross the previous peak annual capacity addition reported in FY23. The improvement in solar power capacity is driven by the reduction seen in solar PV cell and module prices, the relaxation of ALMM requirement and also supported by the time extension provided by the Ministry of Power for solar and hybrid projects till March 2024,” Vikram V, Vice President & Sector Head – Corporate Ratings, ICRA, said.

The new capacity addition in the wind segment is expected to remain below the peak achieved in FY17, though improving over the previous five years, supported by policy changes.