Home / Market / Mark-to-market /  What is behind the curious decline in generation of renewable energy

Renewable energy generation fell 20% in August despite a notable expansion in capacity. This was the biggest monthly fall in at least three years, according to data collated by SBICAP Securities Ltd.

Wind power generation fell despite an expansion in installed capacity. As of June, the combined installed capacity of wind and solar energy was 15% higher year-on-year. What gives?

Beginning June, renewable energy generation, typically, undergoes a seasonal slowdown for a couple of months largely due to change in weather conditions and wind speeds.

The significant fall in renewable energy generation in August is being attributed to low wind energy generation.

According to India Ratings and Research Pvt. Ltd, wind energy generation declined 27% in August. Given the high share of installed wind power generation capacity in the country, the impact on overall energy generation is understandable.

Apart from variation in wind speeds, part of the fall in renewable energy generation in August was also attributed to curtailment in power offtake by several states in the southern part of the country.

These states—Andhra Pradesh, Karnataka and Tamil Nadu—have a high share of installed renewable energy capacity compared with the rest of the country.

States generally realign their purchases due to the softness in demand during the monsoon, often leading to reduction in utilization levels of thermal power plants. Thermal power generation dropped 3.5% in August.

The impact is more pronounced in the renewable power segment. “They are not able to do proper integration of renewables," says a renewable energy developer referring to curtailment in power offtake by certain states.

Another industry observer agrees, attributing the sharp fall in renewable energy generation to backdown in power offtake by certain states. Even so, with the monsoon season drawing to a close, these experts say generation should improve hereon. “We have passed that period (June–August) when demand is low and generation also falls," says the developer mentioned above on condition of anonymity.

Still, the fall in energy generation highlights the need for better planning at the state level. More so, given India’s ambition to achieve 175,000 megawatts of installed renewable energy capacity by 2022. Power offtake curtailment and project execution challenges sap investor sentiment.

As pointed out earlier, renewable energy projects are facing the financial impact. Payment delays and threat of tariff renegotiations have led to downgrades in credit ratings, and pushed up finance costs, hurting returns and competitiveness of the renewable energy sector.

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