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CRISIL analysis: India is making rapid progress toward its renewable energy goals

India's attempts to boost the percentage of clean and sustainable energy sources are trending positively, as seen by the country's notable progress towards meeting its objectives for renewable energy.


According to CRISIL MI&A Research, India is on track to meet its renewable energy (RE) ambitions, with over half of the nation's electricity output coming from renewable sources by 2032.

This is in spite of misgivings about some promises made during the most recent United Nations Climate Change Conference (COP28), which was held in Dubai. Countries at the conference came to a wide consensus about moving away from fossil fuels.

India's installed base of renewable energy (RE) is expected to nearly treble from its present level of 172 GW to over 550 GW by the financial year 2031–2032 (including hydro and pumped storage facilities), according to CRISIL MI&A Research.

The majority of the installed base for renewable energy will come from solar power, with 270–290 GW, and wind power, with 120–140 GW (both onshore and offshore). After that, 40–60 GW will come from hydropower, 70 GW from storage, and the remaining energy will come from other RE technologies including waste-to-energy and biomass.

This would equate to a 46% penetration rate for renewable fuels in terms of generation. With the addition of nuclear power, non-fossil generation will account for 51% of India's power mix, thereby reducing fossil-based output to only 50%.

But doing this would need the persistence of the supporting elements. Expanding the domestic supply chain is also essential to ensuring efficient operation.

Regarding solar, favorable export and local demand channels along with production-linked incentives (PLI) are anticipated to support the expansion of domestic module manufacturing capacity. By the fiscal year 2029–2030, it is expected to reach 100 GW, up from 38 GW as of March 31, 2023. Upstream value chain expansion is also planned, with polysilicon capacity predicted to enable 35% of domestic module manufacturing by financial year 2029–2030, up from 0% in 2022–2023.

By the financial year 2029–30, the percentage of module manufacturing that depends on wafer imports is predicted to drop from 100% in 2022–23 to 43%.

Global and domestic supply chain expansion has a positive effect on module component pricing. It is anticipated to be a key factor in India's increased solar off-take in the country's renewable energy mix.

Support from policymakers, favorable solar module costs, and greater capacity all contribute to the renewables industry's steady credit outlook. This will assist developers in managing leverage in the face of capacity expansions.

As of October 2023, the average price of solar modules has decreased by over 45% from 2022–2023. For the balance of 2023–2024, prices for modules built in India are predicted to be steady around $0.18–0.21 per watt-peak.

This will contribute to the sustainability of solar projects, which account for more than 75% of the future potential for renewable energy.

Another positive development for the current fiscal year is the anticipated continuation of the discharge of outstanding receivables from state discoms following the enactment of the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022.

It is anticipated that as the operating portfolio of renewable players expands, the accrual would rise.

The operating portfolio of top developers grew from 29 GW on March 31, 2022, to 40 GW on September 30, 2023, according to the CRISIL Ratings Survey.

Developers will have stable leverage as a result of all these considerations.

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