India to miss 175GW renewables target in 2022: report

However, hitting 76% amidst auction risks would still be a noteworthy achievement, an analyst said.

India’s “ambitious endeavour” of hitting 175GW of renewables by the year 2022 will not be met no thanks to the new issues plaguing auctions and investment, said Wood Mackenzie’s solar analyst Rishab Shrestha. Hitting 76% would still be a “noteworthy achievement,” however.

“The recent cancellation of auctions risks jeopardising investor confidence. Various duties on equipment and the associated uncertainty has led to a short-term uptick in solar prices,” he said in a comment.

“This leads to a knock-on effect on already cash-strapped state distribution companies who are showing an unwillingness to greenlight high priced solar projects,” Shrestha added.

Fortunately, the Indian government has been “swift and adaptable” whilst responding to these industry hurdles, reducing project risks. “As a result, renewable prices continue to remain competitive.”

Also read: India sets timetable for solar auctions

India’s combined wind and solar capacity have almost doubled from 2014 levels to 61GW this year. “Driving this growth is the significant cost decline that auctions continue to deliver,” the analyst said.

He added that in the next five years, capital costs are expected to decline by 23% for wind and 31% for solar. “This trend will only continue as new generation technologies replace old ones. We expect non-hydro renewables to make up 13% of power generation mix by 2023.”

Offshore wind, hybrid projects, and floating and distributed solar are also expected to contribute to renewables growth. About 384GW of non-hydro renewables could contribute to 20% of generation share by 2040.

Amidst the talk of renewables, topics related to coal continue to make noise in India. According to Wood Mackenzie's coal principal analyst Pralabh Bhargava, their forecasted imports for thermal coal have risen from 158 Mt to 164 Mt in 2018 with a further upside risk of 3-4 Mt as coal stocks at Indian power plants and Coal India Limited are at historically low levels.

“India's spot market prices, for both coal and power, are expected to remain strong in the coming months as continuous industrial production growth is pushing demand, whilst supply remains tight,” he said.

“Growth in domestic coal production and dispatches can only partially meet the growing demand for coal, which is resulting in increased reliance on imports. With a decade-low stockpile at Coal India's mines and more than half of the plants with a supercritical level of less than seven days’ stock, the reliance on imported coal for several power plants will increase the flow of imports into India,” the analyst added.

The rally in Indian imports is expected to continue up until early next year. “Until recently, the demand for imported thermal coal was driven by non-utilities, where a lack of domestic supply and the need for high-energy coal kept the segment active in the seaborne market,” he concluded.