Solar, wind energy generation rises as discoms cut payment delays in FY24: Fitch

New Delhi: Wind and solar power generation in India rose as payment delays narrowed in FY24, according to Fitch Rating, bringing the nation closer to its renewable energy target.

Producers of clean power received payments from distribution companies or discoms closer to the schedule in FY24 than the year before, boosting cash collections, the ratings agency said in a report on Friday.

“Receivable days at Fitch’s rated portfolio for revenue from the sale of power improved to around 100 days in FY24, from about 140 days in FY23,” Fitch said. Receivable days for solar energy improved to 88 in FY24 from 117 in the previous fiscal, while the metric narrowed to 112 days from 165 for wind power, it said.

Improved production from wind and solar farms took India closer to its target of generating 500GW of renewable power by 2030. Overall power generation was slightly below one-year P90 forecasts, Fitch said, referring to predictions accurate to the 90th percentile.

The rise in solar and wind energy generation in FY24 tracks growing demand for renewable energy across the globe. Yet, the domestic renewable energy sector is beset by multiple challenges including lack of adoption, expensive imports and high costs of capital for energy generation.

Total solar and wind power generation was up 4% in FY24 in India over the previous fiscal as new assets became operational, Fitch said.

Solar energy generation rose 2% as expected and wind energy generation grew 8%, a considerable improvement from the 5% fall in FY23.

Wind energy generation, however, was marginally below Fitch's expectations. “Wind performed between 1%-11% below one-year P90 over the last four years,” Fitch said in its analysis. “Issuers have explained wind’s underperformance as being due to lower resource availability than Fitch expected.”

Cash collection for the renewable energy generators was supported by the government’s late payment surcharge, the ratings agency said. “Total collections improved for both wind and solar assets on the clearance of overdues from most state distribution companies, as sovereign-owned entities and commercial and industrial customers have largely paid on time over the last few years.”

Fitch’s analysis comprised 110 assets in the country, with 77 solar plants generating a little over 4GW and 33 wind energy generators creating 2.12GW, according to the report. More than half (56%) of the generated energy is contracted by government-owned discoms, while nearly a third (32%) of it is taken up by state-owned NTPC Ltd and Solar Electricity Corporation of India Ltd. The balance is contracted with commercial and industrial, and other customers, Fitch said.