Expect wind based capacity addition in FY12 at 2800MW: ICRA
ICRA Ratings has come out with its report on wind energy sector with key trends and outlook. According to the rating agency the share of the Independent Power Producer (IPP) segment in the overall installations remained muted in the past but improved to about 20% in FY 2011.
January 10, 2012 / 15:38 IST
ICRA Ratings has come out with its report on wind energy sector with key trends and outlook. According to the rating agency the share of the Independent Power Producer (IPP) segment in the overall installations remained muted in the past but improved to about 20% in FY 2011.
ICRA expects wind based capacity addition during the current FY 2011-12 at about 2800 MW (against actual of 2350 MW in FY 2011), and the same to grow at an annual rate at about 15% going forward, supported by growing demand from Independent Power Producer (IPP) segment. The commencement of trading of Renewable Energy Certificates (REC) on Power Exchanges since March 2011 as well as long-term certainty over the floor/cap pricing mechanism of REC are key positive developments for the renewable energy sector. Further, ICRA believes that the spiralling international cost of conventional energy sources and persistent domestic fuel shortages make wind energy more cost-competitive.ICRA expects the new wind-based projects/IPPs to prefer the REC route against the preferential tariff route, and within the REC route, many IPPs would prefer to sign their power purchase agreements (PPAs) with discoms at their average power purchase cost (APPC) instead of selling on merchant/short-term basis. This is due to open-access and banking facility constraints and volatility in merchant tariffs, although the merchant option under the REC route is the most remunerative option available. Notwithstanding the favourable long-term demand outlook for wind energy sector aided by regulatory and fiscal support, we see the following key issues which could affect capacity addition:Implementation issues in complying with Renewable energy Portfolio Obligation (RPO) norms due to lack of consistency and a wide divergence in RPO norms across states, risk of any amendment in RPO norms by SERC (as observed in few states), no precedence of any enforcement of penalty on obligated entities1 for shortfall in RPO & absence of regular monitoring of RPO compliance by state agencies. In ICRA
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