The past few years saw unprecedented measures and reforms in the power sector, ranging from reduction in distribution companies’ outstanding dues to addition of renewable energy capacity and efficient energy storage systems. As the peak demand for power touches new highs every other year, the industry sees huge investments happening in the transmission, distribution, and capacity addition in the next six years to meet the sectoral targets.
Moody’s Ratings estimates over $385 billion investment in the country’s power sector in the next six to seven years to meet its target of 500 gigawatt (GW) of renewable energy. The agency sees coal to remain the key source of power generation for the next decade.
To meet the renewable energy target, it expects India to add 44 GW of non-fossil capacity each year with an investment of $190 billion to $215 billion. It estimates investment of another $150 to $170 billion for electricity transmission and distribution, and energy storage to cater to the incremental renewable energy capacity.“The sizable pipelines of announced projects will likely keep financial leverage of rated renewable power companies high over the next two to three years, a credit negative, but leverage of government related issuers is likely to remain moderate over the same period,” it said.
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Moreover, the pace of transitioning away from coal will depend on how the government balances energy affordability and reliability against its commitment to reducing emissions. It expects India to add another 40 GW-50 GW of coal-based capacity during the period. “Renewable energy and electricity transmission will continue to drive investments in India’s power sector over the next six to seven years. Incremental coal-based generation capacity additions are also likely to supplement baseload requirements because we expect power demand to grow by 5%-6% per annum over this period,” Moody’s Ratings said in its report.
The agency is confident that a stable regulatory environment and policy support will continue to facilitate energy transition for power companies. Vikram V, vice-president & co-group head – corporate ratings, Icra, also noted that a lot of expenditure — primarily on battery energy storage systems, generation, and transmission segment — will happen after June and July. “We continue to see large investments happening in generation and transmission space to meet growing demand. The government is also focusing on revision of projects and encouraging investments in thermal space so that till we have sufficient storage capacity, we should have sufficient thermal capacity to meet demand,” Vikram said.
Among the rated transmission issuers, Moody’s sees Power Grid Corporation of India and Adani Transmission Step-One to have substantial capital spending to grow their electricity transmission businesses. However, the distribution sector will see a bulk of investments by the state-owned electricity distribution companies. The rating agency expects that the total grid investments (including storage) needed to optimally use the new generation capacity will be in the range of $150 billion to $170 billion. “Access to low-cost, long-term capital from the public and private sectors will be vital to achieving these goals,” it noted.
From: financialexpress
Financial News
