India Seems to Miss Its 2022 175 GW Target Big Time

While the Indian government has been tom tomming about the rapid progress on the renewable energy front in recent years, the industry is lurching from one problem to the other in the last few months. Some of them are related to the broader slowdown in the economy and the non-availability of credit for renewable energy developers from large commercial banks such as SBI not willing to lend any money to the capital intensive solar projects.  Other factors that have also heavily affected the sector is the misguided bureaucracy which has put up artificial caps on renewable energy pricing akin to a communist economy which decides on the prices leading to a disruption of the economy.

Some states such as Andhra Pradesh and Uttar Pradesh have also thrown a major spanner in the works by unilaterally deciding to renegotiate to even canceling the power purchase agreements (PPAs) they had signed with RE developers. The poor RE industrialists are running from courts to regulators to appellate tribunals in order to stall or reverse the judgements of the state governments with only lawyers laughing their way to the banks. SECI and state governments continue to release tenders in the gigawatt-scale with very little of them actually translating into actual project awards. As per a recent CRISIL report, the ratio of project awards to tender capacity has halved to just around 35%, with artificial price ceilings resulting to bid unsubscription. The renewable energy industry has also consolidated after the initial gold rush to a few large well-capitalized RE developers who can raise capital at low rates. But even these developers are facing balance sheet issues with lenders reluctant to lend due to a general crisis of financial trust between the various stakeholders in the economy.

While the Modi government is touting its green credentials by putting forward an even bigger target of 450 GW by 2030, the ground level situation is quite alarming with RE additions expected to slow down sharply due to the various issues mentioned above. The wind energy industry is in a deeper pickle compared to the solar industry as record low tariffs have made projects unviable with some large equipment suppliers facing bankruptcy due to the regulatory change of moving from feed-in tariffs to auctions.