Global ratings agency Moody's Investors Service in its latest report has said that the renewable energy market in India is likely to experience strong growth over many years, as the country is moving towards meeting its commitments under the Paris Climate Change agreement on climate change. Though, it has also pointed out that renewable energy projects face a few headwinds related to the weak credit quality of offtakers, an evolving regulatory framework along with financing and execution risks.
The ratings agency has explained that India's emission reduction commitments under the Paris agreement will lead to a sharp rise in renewable energy capacity. It also noted that the country is aiming to achieve 40% of cumulative installed capacity through from non-fossil fuel-based energy resources by fiscal year 2030 from a current level of 30%. Adding further, it said that the country also plans to expand its renewable energy installed capacity to the tune of 175 gigawatts (GW) by 2022 from the current capacity of 57GW. It added that such growth will be driven by the public and private sector.
The report however said that the key offtakers for most renewable projects are state-owned distribution companies, and these firms typically demonstrate weak financial profiles. It also said that this situation poses a key challenge for developers and while there is no history of defaults under power purchase agreements, payment delays are quite common. Moody's report pointed out that the overall policy framework for renewable energy is still evolving and noted that adherence to renewable purchase obligations has been low till now, leading to lower demand for renewable energy.