India’s annual wind energy based capacity addition during the current financial year will improve to about 2,200-2,300 MW, credit rating agency and investment information provider ICRA estimated in a recent report.
The report attributed the estimated 10 per cent growth in capacity addition over the previous year to reintroduction of the Accelerated Depreciation benefit by the Centre since July last year and also the sizeable investments that are under implementation by large players in the Independent Power Producer segment.
“Historically, AD benefit has been a key driver for capacity addition by corporates and financial investors (i.e. non-IPP segment) and with the reintroduction of AD benefit in July 2014, ICRA expects incremental annual demand of about 800 MW from such investors,” it said.
During FY2014, the country’s wind energy based capacity addition improved by 23 per cent to 2,084 MW on y-o-y basis supported by the Centre’s reintroduction of the generation-based incentive in September 2013. In the first nine months of FY 2015, wind energy based capacity addition reached 1,329 MW, an increase of 21 per cent over the capacity addition achieved during the nine months of FY 2014.
The report noted that corporate customers availing the AD benefit would have relatively more favorable project economics as compared with the IPP segment.
“With the reintroduction of AD benefit, ICRA estimates the project IRR for non-IPP segment to be higher by 1.5 per cent to 2.8 per cent as compared with IRR level for IPP segment availing GBI across states, except for assets in Rajasthan and Maharashtra where the tariffs approved by SERCs are adjusted for AD benefit, if availed. Project economics for such corporate customers availing AD benefit in most states with wind potential are remunerative with project IRR estimated to be in the range of 13 per cent to 16 per cent except in the state of Tamil Nadu where the project IRR is estimated to remain weak owing to prevailing low tariffs. The estimated IRR for such customers is estimated to be the highest in the state of Madhya Pradesh followed by the states of Maharashtra and Andhra Pradesh,” it said.
The AD benefit, withdrawn in April 2012, was restored in the Union Budget 2014 by the Narendra Modi-led NDA government with the objective of giving relief to wind power developers and also ramp up wind energy based capacity.
India’s total installed wind energy based capacity stood at 22,465 MW, constituting 9 per cent of the overall installed capacity, as on December 31, 2014. Within the country’s renewable energy segment, wind energy occupies a dominant share of 66 per cent.