Hybrid renewable energy projects to lead capacity expansion: Crisil

India’s renewable energy sector is witnessing a transition towards hybrid or storage-backed capacities, which facilitates scheduling of power round-the-clock to address the intermittency of power supply, says Crisil.

It further says that of the 75 GW capacity to be added in this and next fiscal, hybrids will account for 37%, a massive jump, considering hybrids accounted for 14% of the capacity additions over the preceding two fiscals.

As these sectors transition to a new normal, they face an evolving set of challenges. In renewables, timely availability of evacuation infrastructure is critical. To be sure, a significant ramp-up in transmission capacity is underway with a total capital expenditure (capex) of Rs 1 lakh crore in this fiscal and next, twice of what was seen in the preceding two fiscals.

“These projects may face delays on account of right-of-way issues, delayed approvals or short supply of equipment such as transformers and high-voltage direct current components. Further, as renewable capacities typically take much less time to be set up, transmission capacity may fall short temporarily,” it said.

For renewables, while debt will grow given high capex intensity, resilient operating performance will result in stable net debt/Ebitda at 7 times over this fiscal and next. Cash flow cover is also seen healthy, with average debt service coverage ratio of 1.2-1.3 times.

The agency flagged issues related to pending power purchase agreements by discoms who are either looking for further drop in tariffs or are going for hybrid over vanilla solar. The agency said that things will streamline in a year or so more PPAs are expected from only 50% achieved now.

India has a target of 500 GW of non-fossil fuel energy by 2030. A recent report by S&P global said that India's renewable sector will need to double its annual capacity addition to 50GW over 2025-2030 to meet the country's lofty 500 GW target