The credit outlook for wind power producers in India remains stable due to persistent energy deficits, relatively low costs compared to conventional sources, and government support through preferential tariffs and targets. While capacity additions decreased in 2013 after policy changes reduced incentives, additions are expected to increase again as larger utility-scale projects backed by institutional investors become prevalent. Counterparty risk from distribution companies remains a challenge, but effective policy implementation and improved off-taker creditworthiness would support ratings going forward.
This report on “Energy Efficiency in India: PAT Scheme - Success and Failures”, prepared by Tata Strategic Management Group, has a holistic view on the current state of energy efficiency and energy management in India. The focus of this report is on identifying key challenges faced by designated consumers in implementation of PAT Cycle I and how a collaborative effort in the right direction could ensure fast adoption of EE and robust energy management in India. It would gear India towards reducing energy intensity of the future growth, one of the prime objectives under NAPCC
The primary energy demand in India has grown from about 450 million tons of oil equivalent (toe) in 2000 to about 770 million toe in 2012. This is expected to increase to about 1250 (estimated by International Energy Agency) to 1500 (estimated in the Integrated Energy Policy Report) million toe in 2030.
The Overall generation in the country has been increased from 967.150 BU during 2013-14 to 1048.673 BU during the year 2014-15. The Category wise generation performance as follows:-
Thermal Increased by 10.83 %
Hydro Reduced by 4.16 %
Nuclear Increased by 5.47 %
Bhutan Import Reduced by 10.54 %
Overall Growth rate recorded by 8.43 %
Solar Power Scheme for Unemployed Youth and Farmers in Himachal Pradesh.Harish Sharma
Himachal Pradesh State Electricity Board Limited to ensure the sustainable growth of Renewal Power is willing to procure solar power from such power producers who wish to install distributed grid connected Solar Projects in the State of Himachal Pradesh with capacities starting 50 kW up to
5 MW.
This report on “Energy Efficiency in India: PAT Scheme - Success and Failures”, prepared by Tata Strategic Management Group, has a holistic view on the current state of energy efficiency and energy management in India. The focus of this report is on identifying key challenges faced by designated consumers in implementation of PAT Cycle I and how a collaborative effort in the right direction could ensure fast adoption of EE and robust energy management in India. It would gear India towards reducing energy intensity of the future growth, one of the prime objectives under NAPCC
The primary energy demand in India has grown from about 450 million tons of oil equivalent (toe) in 2000 to about 770 million toe in 2012. This is expected to increase to about 1250 (estimated by International Energy Agency) to 1500 (estimated in the Integrated Energy Policy Report) million toe in 2030.
The Overall generation in the country has been increased from 967.150 BU during 2013-14 to 1048.673 BU during the year 2014-15. The Category wise generation performance as follows:-
Thermal Increased by 10.83 %
Hydro Reduced by 4.16 %
Nuclear Increased by 5.47 %
Bhutan Import Reduced by 10.54 %
Overall Growth rate recorded by 8.43 %
Solar Power Scheme for Unemployed Youth and Farmers in Himachal Pradesh.Harish Sharma
Himachal Pradesh State Electricity Board Limited to ensure the sustainable growth of Renewal Power is willing to procure solar power from such power producers who wish to install distributed grid connected Solar Projects in the State of Himachal Pradesh with capacities starting 50 kW up to
5 MW.
Distributed energy resources (DERs) can provide net benefits to the electric system (e.g., congestion relief) and broader society (e.g., emission reductions). However, despite these advantages, the deployment of high penetrations of DER has proved challenging. Against this backdrop, the electric utility is often singled out as a fundamental barrier to deployment of DER assets. To overcome the perceived electric utility shortcomings, many stakeholders conclude that a completely new model is needed for the electric industry.
ScottMadden disagrees with this assessment and instead believes electric utilities maintain natural advantages that can be leveraged to deploy renewables and DER assets as well or better than some models being offered. In our 51st Phase II Roadmap, ScottMadden proposes leveraging the natural advantages of the electric utility in order to accelerate the deployment and penetration of DER assets.
For more information, please visit www.scottmadden.com.
The Evolving Role of the Power Sector RegulatorLeonardo ENERGY
Highlights:
* Catalogues the objectives of power sector regulators and the challenges, opportunities and interdependencies.
* Examining the current and future landscape is critical to the development of low-carbon electricity systems.
* Regulation needs to evolve in a transparent, open manner.
* This will reduce risk, maximize learning and facilitate a healthy environment for clean energy investment.
* Deploying low-carbon electricity systems requires decisive action from power sector regulators.
The agricultural sector in the country is distressed, water scarcity being a major reason. The agrarian
distress is also intertwined with the woes in the power distribution sector. Of major importance to
development, solving these deeply connected issues will require a holistic approach. The recently
announced KUSUM scheme by the Ministry of New and Renewable Energy (MNRE) attempts to address
some of these issues.
KUSUM is presented as a scheme that primarily aims at benefiting farmers.
The government’s “Power for All” programme is an ambitious plan, which depends a lot on the development of capacity expansion in power supply chain, developing coal resources and logistics and increasing technological interventions.
CII-PwC report titled Round-the-Clock Power Supply: A Key Milestone says that the Indian Power Sector depend upon the availability of power that on other hand depend on two factors—adequate electricity generated and development of supporting infrastructure for the supply of electricity.
Solar in India have its own importance. It's the best opportunity for investors and this presentation explores it. If you need any further info please feel free to contact me. Viraj
Distributed energy resources (DERs) can provide net benefits to the electric system (e.g., congestion relief) and broader society (e.g., emission reductions). However, despite these advantages, the deployment of high penetrations of DER has proved challenging. Against this backdrop, the electric utility is often singled out as a fundamental barrier to deployment of DER assets. To overcome the perceived electric utility shortcomings, many stakeholders conclude that a completely new model is needed for the electric industry.
ScottMadden disagrees with this assessment and instead believes electric utilities maintain natural advantages that can be leveraged to deploy renewables and DER assets as well or better than some models being offered. In our 51st Phase II Roadmap, ScottMadden proposes leveraging the natural advantages of the electric utility in order to accelerate the deployment and penetration of DER assets.
For more information, please visit www.scottmadden.com.
The Evolving Role of the Power Sector RegulatorLeonardo ENERGY
Highlights:
* Catalogues the objectives of power sector regulators and the challenges, opportunities and interdependencies.
* Examining the current and future landscape is critical to the development of low-carbon electricity systems.
* Regulation needs to evolve in a transparent, open manner.
* This will reduce risk, maximize learning and facilitate a healthy environment for clean energy investment.
* Deploying low-carbon electricity systems requires decisive action from power sector regulators.
The agricultural sector in the country is distressed, water scarcity being a major reason. The agrarian
distress is also intertwined with the woes in the power distribution sector. Of major importance to
development, solving these deeply connected issues will require a holistic approach. The recently
announced KUSUM scheme by the Ministry of New and Renewable Energy (MNRE) attempts to address
some of these issues.
KUSUM is presented as a scheme that primarily aims at benefiting farmers.
The government’s “Power for All” programme is an ambitious plan, which depends a lot on the development of capacity expansion in power supply chain, developing coal resources and logistics and increasing technological interventions.
CII-PwC report titled Round-the-Clock Power Supply: A Key Milestone says that the Indian Power Sector depend upon the availability of power that on other hand depend on two factors—adequate electricity generated and development of supporting infrastructure for the supply of electricity.
Solar in India have its own importance. It's the best opportunity for investors and this presentation explores it. If you need any further info please feel free to contact me. Viraj
Wind energy in Tamil Nadu - Business Feasibility Report - PreviewProtekan
The "Wind Energy in Tamil Nadu - Business Feasibility Report" was developed by Protekan, a renewable energy consulting and advisory firm. The report provides in depth analysis of the wind energy market in Tamil Nadu. The primary objective of this report is to serve as a useful guide for companies and investors interested in venturing into the fast evolving wind energy IPP business in Tamil Nadu. This report was last updated in September 2012.
India renewable energy sector opportunity analysisRajesh Sarma
“India Renewable Energy Sector Opportunity Analysis” Report gives detailed overview on the following aspect related to renewable energy sector in India:
Significance of Renewable Energy for India
Renewable Energy Potential & Installed Capacity by Source
Government Support & Incentive Framework
Current Scenario of Decentralize/Off Grid Renewable Energy
Emerging Sources of Renewable Energy: Hydro, Geothermal & Tidal energy.
Policy & Regulatory Framework
Jawaharlal Nehru National Solar Mission
Future Outlook for Renewable Energy
Will Demand for Power Slowdown in India? -In-depth Analysis by Mirdul AminMirdul Amin Sarkar
The Demand for Power will not slowdown in India due to increasing penetration of per capita electric consumption, increasing industrialization, growing middle class and consumer base in India.
It is expected that the Demand for electricity will increase at a CAGR of 7% to 1,894.7 TWh over FY07–22 in India.
Credit outlook for India’s Wind Power Producers Remains Stable’-09-02-2013
1. 1
Policy Hiccups Not-withstanding, Credit Outlook for
India’s Wind Power Producers Remains Stable
The credit outlook for the wind power generators remains stable due to persistent energy
deficits, relative cost competitiveness compared with conventional sources, government
impetus to wind power through preferential feed-in tariffs, renewable purchase
obligation targets, benefit from extension of 80IA and recent revision of tariffs by the
State Electricity Regulatory Commissions (SERC).
While yearly wind generation capacity additions increased at a healthy pace from 1485 MW in
FY09 (refers to period April 01 to March 31) to 3197 MW in FY12, the policy changes in 2011-
12 led to a significant drop in capacity additions to just 1,699 MW in FY131
; this drop is
attributable to change in government policy - removal of Accelerated Depreciation (AD)
benefit and lack of clarity on continuation of Generation Based Incentive (GBI).
Year wise Capacity addition of wind based generation capacity(MW)
1
Total installed capacity of renewable energy in India was 28,068 MW as on March 31, 2013, with wind energy
contributing a major share at 19,051 MW.
1658
1485 1565
2349
3197
1699
0
500
1000
1500
2000
2500
3000
3500
FY08 FY09 FY10 FY11 FY12 FY13
RatingsAugust30,2013
2. Ratings
Credit Outlook for India's Wind Power Producers Remains Stable 2
However CARE Ratings believe the wind turbine operators to deliver stable performance and
capacity additions to pick up going forward due to:
Changing construct of business - utility scale windfarms: With the phasing out of AD, going
forward the growth in wind based generation capacity shall be primarily driven by the Independent
Power Producers (IPPs). Majority of the IPPs that are operating windfarms are backed by established
financial investors having a long-term investment horizon. These companies are focused on improving
efficiencies and are utilizing more scientific tools in assessment of potential of wind sites and in
selection of equipments which in CARE’s opinion augurs well for achieving the envisaged operating
performance levels.
Higher operating efficiencies: While the cost of setting of wind power projects has gone up from
Rs.5.50 crore/MW to around Rs.6.30 crore/MW in the recent years mainly on account of increase in
the cost of critical components, the equipment designs are better thereby delivering higher
efficiencies even at low wind sites. Over a period of time larger megawatt scale equipment, which
deliver better performance have come into existence which is likely to translate into improvement in
operating efficiencies.
Regulatory and policy push: CARE Ratings believes that there is a continued commitment by the
state governments to improve share of renewable power in the overall power mix. While there may
be intermittent policy upheavals as seen recently, long-term outlook for wind power continues to be
strong.
o SERCs in various states have announced an increase in the preferential feed-in tariff rates to
reflect the increase in the cost structure. Furthermore, the states like Maharashtra have adopted a
wind-zone-based tariff to align the tariff with potential generation capacity of wind sites in
different wind speed zones in the state. Despite an increase in the tariffs of the wind-based
projects, it still remains competitive in the states of Tamil Nadu, Gujarat and Karnataka, compared
with the tariffs of new conventional power plants due to steep increase in prices of fossil fuel (coal
and RLNG).
3. Ratings
Credit Outlook for India's Wind Power Producers Remains Stable 3
Table 1: State-wise tariffs
(Rs. per unit)
State FY11 FY12 FY13 FY14
Tamil Nadu 3.39 3.39 3.51 3.51
Gujarat 3.56 3.56 4.23 4.23
Maharashtra Zone 1 - 5.07
Zone 2 - 4.41
Zone 3 - 3.75
Zone 4 - 3.38
Zone 1 - 5.37
Zone 2 - 4.67
Zone 3 - 3.97
Zone 4 - 3.58
Zone 1 - 5.67
Zone 2 - 4.93
Zone 3 - 4.20
Zone 4 - 3.78
Zone 1 - 5.80
Zone 2 - 5.04
Zone 3 - 4.29
Zone 4 - 3.86
Karnataka 3.70 3.70 3.70 3.70
Rajasthan Jaisalmer, Jodhpur &
Barmer - 5.18 Others -
5.44
Jaisalmer, Jodhpur &
Barmer - 5.18 Others -
5.44
Jaisalmer, Jodhpur &
Barmer - 5.18 Others -
5.44
Jaisalmer, Jodhpur &
Barmer - 5.48 Others -
5.75
Andhra Pradesh 3.50 3.50 4.70 4.70
Source: Wind tariff order of respective SERCs
o Reintroduction of GBIs: With a view to
move away from capital subsidies towards
performance incentives for promoting
renewable sources, the Government
reintroduced GBI (budgetary allocation of
Rs.800 crore to the Ministry of New &
Renewable Energy as per the Union
Budget for 2013-14). GBI focuses on
incentivizing higher efficiencies with the
help of a generation/outcome-based
incentive and provides an additional stream
of revenue. As per the scheme, GBI is
currently valued at Rs.0.50 per unit of
electricity fed into the grid with a cap of
Rs.0.62 lakh per MW over a period of 10
years. The GBI is over and above the tariff that may be approved by the SERCs. Although this
is likely to improve the debt coverage indicators for the project, in CARE’s opinion effective
implementation of the scheme with timely receipt of funds from Indian Renewable Energy
Development Agency (IREDA) remains crucial.
Counterparty Risk - A Key Challenge
In CARE’s opinion, the counter-party risk
remains the biggest credit concern with
delays in payment ranging from 12 to 15
months in few of the states, owing to weak
financial risk profile of the off-takers (power
distribution companies). Timely receipt of
payment from the off-taker is crucial for the
viability of the project, which otherwise is
likely to put a strain on the cash flows of the
power producers. In its credit assessment,
CARE also factors in the parent’s ability and
willingness to support the project by way of
timely infusion of funds to enable the
companies to tide over the liquidity crisis.
4. Ratings
Credit Outlook for India's Wind Power Producers Remains Stable 4
o Renewable Energy Certificates (REC) mechanism was introduced in November 2010, as an
alternative market designed to facilitate renewable energy power producers. RECs are traded
through a power exchange platform that provides market-based price discovery mechanism (1 REC
= 1 MWh of electricity injected into the grid from renewable energy sources). Also as per the
National Action Plan on Climate Change (NAPCC), by the year 2020, 15% of the power generated is
to be procured from the renewable energy sources. Currently, the states are required to procure 5-
10% of the electricity from the renewable energy sources as per the state-wise Renewable Purchase
Obligation (RPO) targets specified by the respective SERCs.
CARE Ratings believes that going forward effective implementation of various policy initiatives and
improvement in the credit risk profile of the off-takers would be the positive triggers for the credit
ratings of wind-based power producers.
Rating Dispersion of CARE Rated IPPs in Wind Energy
As of July 31, 2013, CARE Ratings had outstanding ratings on seventeen wind-based power generators, for
whom rating dispersion is indicated above.
0
1
2
3
4
5
6
7
8
CARE BB CARE BBB- CARE BBB CARE BBB+
5. Ratings
Credit Outlook for India's Wind Power Producers Remains Stable 5
Disclaimer
This report is prepared by the Economics Division of Credit Analysis & Research Limited [CARE]. CARE has taken utmost care to ensure
accuracy and objectivity while developing this report based on information available in public domain. However, neither the accuracy nor
completeness of information contained in this report is guaranteed. CARE is not responsible for any errors or omissions in
analysis/inferences/views or for results obtained from the use of information contained in this report and especially states that CARE (including
all divisions) has no financial liability whatsoever to the user of this report.
Contact:
Amod Khanorkar Dhaval Patel Mekhala Leelasagar
Ratings Head Sr. Manager - Corporate Ratings Deputy Manager - Corporate Ratings
amod.khanorkar@careratings.com dhaval.patel@careratings.com mekhala.leelasagar@careratings.com
+91-22-67543520 +91-22-67543438 +91-22-67543544