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India - Politics, Industrials, IT and Large Caps, EMAlpha

Pankaj Sharma

India - Politics, Industrials, IT and Large Caps

Thematic (Sector/Industry)

India Energy / Thematic (Sector/Industry)

2018 is a watershed year for renewable energy in India, a) the growth has turned negative in capacity additions after several years of huge capacity addition increase in Solar, b) the wind power generation capacity additions is depressed once again after a very poor 2017. The apparent reason is significant delays in commissioning of projects because of execution challenges but there are structural issues as well and this means that there is not much certainty on how things will evolve in future.The current financial year has seen a big change in general sentiment towards renewables in India and there were instances of cancelled bids and project disputes. More importantly, we think there are important changes we will see in 2019, a) the tariffs may not be increasing in bids but the level on decline we had observed in 2017 is now firmly in the past and this trend will get stronger and tariff bids will be stabilizing, b) Financing will be a major challenge and banks are not interested in power sector with not many alternatives available.After Indian renewable energy space generated massive interest among power companies as developers and also from investors, we in all likelihood will see a more rational approach in future. It is not certain but hopefully, Govt expectation of continuously declining tariffs will become more reasonable. After a serious decline of more than 80% in solar tariffs over ten years, Govt expectation on per unit prices is continuously getting lower which  is an unrealistic assumption because of change in cost dynamics.

2018 is a watershed year for renewable energy in India, a) the growth has turned negative in capacity additions after several years of huge capacity addition increase in Solar, b) the wind power generation capacity additions is depressed once again after a very poor 2017. The apparent reason is significant delays in commissioning of projects because of execution challenges but there are structural issues as well and this means that there is not much certainty on how things will evolve in future.The current financial year has seen a big change in general sentiment towards renewables in India and there were instances of cancelled bids and project disputes. More importantly, we think there are important changes we will see in 2019, a) the tariffs may not be increasing in bids but the level on decline we had observed in 2017 is now firmly in the past and this trend will get stronger and tariff bids will be stabilizing, b) Financing will be a major challenge and banks are not interested in power sector with not many alternatives available.After Indian renewable energy space generated massive interest among power companies as developers and also from investors, we in all likelihood will see a more rational approach in future. It is not certain but hopefully, Govt expectation of continuously declining tariffs will become more reasonable. After a serious decline of more than 80% in solar tariffs over ten years, Govt expectation on per unit prices is continuously getting lower which  is an unrealistic assumption because of change in cost dynamics.

India: 2018 Is Watershed Year for Renewables with Decline in New Capacity Additions, What Is Next?