According to estimates, the electricity and renewables industry is expected to get a double-digit allocation and many programs aimed at promoting its interests ahead of the forthcoming Union Budget 2024. Moreover, as per the research carried out by CRISIL, capital spending on renewable energy might see a double-digit increase, with capacity predicted to reach 180 gigawatt by FY26, mainly due to solar energy's sustained dominance.
Additions of Renewable Energy
In FY20, the capacity of renewable energy was 72 GW; by FY22, it had grown by 35% to 97 GW. By the conclusion of FY24, the capacity stands at 130 GW.
The CRISIL research estimates that a robust executable pipeline of 75 GW will account for 75% of the additional 50 GW, with the remaining 25% coming from the rooftop and commercial and industrial (C&I) segments in FY25 and FY26. From 12 GW in FY23 to 35 GW in FY24 - a 2.5-fold increase - the capacity was put up for auction.
In addition, it is anticipated that 12 GW of additional renewable energy will come from C&I and rooftop solar, assisted by favorable regulatory reforms. Ten million homes will have solar rooftops thanks to the rooftop solar plan, which will cost Rs 75,000 crore. It is anticipated that the clearance and implementation processes would be streamlined with the establishment of the PM Surya Ghar online site. The research also stated that favorable green open access laws and a decrease in open access fees in some jurisdictions are anticipated to quicken the changeover.
Risks Associated with a Rise in the Use of Energy
The comparatively high costs associated with storage and storage-linked capacity might potentially hinder the growing use of renewable energy. Nearly 65% of capacity that was auctioned off has no power supply agreements as of April 2024. Because these projects store power during generation and release it later when needed, their tariffs are higher than those of pure solar or wind projects, according to the research.
As a result, the prices for these projects have to be contrasted with those of thermal projects, which provide a steady supply of electricity that can satisfy demand. In addition, the intermittent and unpredictable nature of renewable energy output necessitates the prompt construction of storage infrastructure.
Requirement of Significant Capital
According to the research, significant capital - roughly Rs 3 trillion - will be needed over the course of the next two years. It's also important to keep an eye on the growing involvement of domestic banks. According to the research, out of the Rs 1.8 trillion in investments made in FY24, domestic debt accounted for around 55–60% of the total.
International debt made up 15-25% of the total, equity made up 14-17%, and accruals made up 6-8%. Debt is anticipated to make up 72-76% of investments for FY26, with accruals and equity coming in second and third, respectively, at 12-14 percent.
Because of steady receivables and steady operating performance, leverage is expected to stay stable at around 6.8-7.0 times. Leverage for the operational portfolio, excluding capital expenditures (capex), is anticipated to be between 5 and 5.5 times. However, the research stated that regular monitoring will be necessary to determine whether equity raising are necessary given the increasing capex intensity.
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