Indian renewable energy companies have shown a capability to withstand generation shortfalls in wind projects due to their diversified portfolios in solar projects, states a recent report by Moody’s. The report emphasizes that rated issuers possess strong credit metrics to absorb moderate underperformance in projects. Furthermore, the credit quality of these companies is bolstered by the financial support of strong sponsors, including sovereign wealth funds, which have a track record of providing capital during challenging times.
The report highlights that wind projects in the fiscal years 2021, 2022, and 2023 experienced an average capacity utilization shortfall of -2.0% to -3.2% compared to P-90 estimates, indicating 8%-10% lower generation. On the other hand, solar projects performed in line with expectations. As a result, the EBITDA of rated renewable energy companies experienced a decrease of 2.5%-6.0% over the past three fiscal years. However, the diversification of the companies’ portfolios limits the impact of underperforming individual projects, and their credit metrics provide sufficient financial flexibility to absorb such underperformance.
The report further highlights that solar power projects exhibit lower deviation than wind projects. Among the eight pure play renewable energy companies, 24% (equivalent to 5.15 GW) of the total 21 GW capacity generated less than P-90 estimates for three consecutive years. The majority of this underperformance, 82%, was attributed to wind projects, while 18% was due to solar projects, according to Moody’s.
Analyzing the reasons behind underperformance, the report reveals that in fiscal 2023, lower irradiance contributed to 76% of solar project generation underperformance, while curtailments accounted for another 19%. For wind projects in the same period, lower wind resources were responsible for 86% of underperformance.
Geographical diversity plays a role in mitigating project underperformance in certain states, as stated in the Moody’s report. In fiscal 2023, 50% of the total underperforming solar capacity was located in Karnataka, and 18% in Telangana. As for wind projects, 26% of underperforming capacity was in Gujarat, and 25% in Andhra Pradesh during the same year. The report explains that the risk of curtailments for wind and solar projects is more pronounced in states like Karnataka and Gujarat, either due to delays in constructing transmission lines or non-compliance by state-owned distribution companies regarding priority dispatch for renewable energy projects.
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