Lifting Of Tariff Ceilings To Favour Renewable Energy Capacity Addition


As per a CRISIL report the decision by the Ministry of New and Renewable Energy (MNRE) to remove tariff ceilings from renewable energy tenders will give the industry a much-needed boost.

Even as the government’s decision to lift tariff ceiling for renewable energy is likely to give a leg-up to capacity addition, the average tariff will continue to be competitive, mainly due to lower module cost and continued tendering of large capacities, ratings agency said.

This was a long contention by the Industry players and of the reasons players for poor participation in tenders by Solar Energy Corporation of India (SECI) and state utilities, thus reducing the pace of capacity addition.

Capacity addition dropped to 9 GW in fiscal 2019, compared with 11-12 GW over fiscals 2017 and 2018, and remained subdued through fiscal 2020 as well. According to Crisil, the move to remove the cap will give an incremental fillip of 6-7 GW over the medium term.

The Solar energy developers will now have the buffer to factor in higher risk in cases where the counter party has a weaker profile, or irradiance is low, or there are other execution hurdles. This will allow for higher bid tariffs and improve subscription to tenders. Although any positive impact will be visible once the Covid-19 pandemic ends.