Mumbai

Nearly 5,700 MW of solar capacity is expected to be added during 2016-17, even as concerns over aggressive bidding and regulatory challenges persist, says rating agency Icra.

According to an Icra study, the capacity addition, including PV and grid connected projects, in 2015-16 is expected to touch 2,700 MW, which will increase to up to 5700 MW next fiscal, going by the project awards and tenders floated in December last year.

All-India solar energy capacity stood at 5,248 MW as on January 31, accounting for 13.3 per cent of the country’s renewable energy capacity as against negligible levels as of March 2010, it said.

“The growth has been driven by the significant improvement in the cost competitiveness of solar energy over the last two to three years, strong policy support from the government under its National Solar Mission and from several states through state-specific solar energy policies and regulatory support in the form of RPO norms,” ICRA said.

The caveat is, the actual addition to capacity would hinge on timeliness in the award of projects (following bidding) under state and Central government policies and the subsequent signing of power purchase agreements (PPAs) with the discoms, the report said.

Moreover, tariff competitiveness of solar PV has significantly improved with state-owned power utilities and the nodal agency under the National Solar Mission adopting the competitive bidding route during 2015.

However, the viability of such competitively bid tariffs hinges on structuring of debt with longer tenures and competitive funding costs, it said.

“The solar sector further continues to face a major regulatory challenge, particularly with regard to compliance with RPO norms.

“While the solar RPO target has been recently revised upwards from 3 per cent to 8 per cent in the national tariff policy, we feel its timely alignment by the state electricity regulators will be crucial,” Icra said.

PTI