India's target of 500GW renewable energy capacity by 2030 requires an annual capacity addition of around 44 GW. To meet these targets, India will require USD 190 billion to USD 215 billion of investment over the next seven years, it said.
The ratings agency estimates another USD 150-170 billion investment required for electricity transmission and distribution and energy storage for incremental renewable energy capacity.
The sizable pipelines of announced projects will likely keep financial leverage of rated renewable power companies high over the next two to three years, a credit negative, but leverage of government related issuers is likely to remain moderate over the same period, it said.
Coal-based units will continue to play a key role in power generation despite the huge renewable energy capacity expansion.
While the growth momentum in renewable energy capacity is likely to continue, coal will remain an important source of electricity in the next 8-10 years, which mitigates stranding risks for coal-based power assets, it said.
“We expect India to add 40-50 GW of coal-based capacity over the next five to six years to help meet power demand, which is likely to grow by 5%-6% annually over this period,” it added.
The utilization rate for coal-based capacity is likely to remain high at around 65%-70% despite the capacity additions.
Stable regulations and policy framework will support power companies implementing carbon transition, the agency said, adding that strong policy support has helped India increase the share of renewable energy in its power capacity mix to around 43% in FY24. Continued policy support will help India make significant progress toward its 2030 transition targets and 2070 net-zero targets, the agency said.
The Central Electricity Regulatory Commission’s tariff regulations for 2024-2029 has provided clarity on returns and cost pass-through mechanisms for generators. The regulatory consistency helps power companies transition toward cleaner energy while maintaining profitability, it said.
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