See 13% growth in electricity demand for all of India for fiscal 22; Prefer Ntpc, Tata Power, Jsw Energy: Axis Capital

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To discuss the renewable energy situation in India, CNBC-TV18 spoke with Prashant Jain, Deputy Managing Director of JSW Energy, and Sumit Kishore, Executive Director of Capital Goods, Energy and Infrastructure at Axis Capital.

India has come a long way in its commitments to renewable energy, and with a total of 100 gigawatts of solar, wind and other renewable energy capacity, it now accounts for almost 26% of the total electricity production of India. India. India has ambitious goals in the field of renewable energies.

In fact, if you consider solar, wind and hydropower combined, they contribute a third of India’s total installed capacity. This figure has been steadily rising and has more than doubled over the past six years, from below 47 gigawatts. But with the expected increase in demand for electricity to meet the nation’s growing needs and the need to find an alternative to fossil fuel-based power generation, India has set an ambitious target of 450 gigawatts. of renewable installed capacity by 2030. This means an annual addition of 20 gigawatts of solar capacity and 10 gigawatts of wind power each year.

Now focusing on solar power in particular, these steep goals come with their own set of challenges. According to brokerage firm JM Financial, until July, around 53 gigawatts of solar capacity has been tendered. However, only 50% of these capacities were under construction, with 35% of these capacities having no agreement to sell electricity and 14% of them being canceled. This raises questions of continuity in the gradual addition of capacities. Going forward, the tender pipeline with power sales agreements beyond fiscal 22 remains limited. The fact that solar tariffs have also halved over the past five years has also made distribution companies more hesitant to sign electricity sales agreements, which only adds to the hurdles. So India may have set ambitious goals, but it also has its own set of challenges to overcome.

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To discuss the renewable energy situation in India, CNBC-TV18 spoke with Prashant Jain, Deputy Managing Director of JSW Energy, and Sumit Kishore, Executive Director of Capital Goods, Energy and Infrastructure at Axis Capital.

Regarding renewable resources and the coal shortage, Jain said, “This discussion has been going on for quite a while and change has been happening for some time. It used to be mostly on the ESG front, but now the change is mostly down to the economy. Because if you are able to generate electricity from renewable resources at prices 30-40% cheaper than thermal, coal or natural gas, then it becomes a natural choice. This is therefore one of the reasons that makes it more and more attractive. India has its own share of challenges, mainly because no capacity has been built in the past 8-10 years and now GDP is picking up. Also, there are capital investments taking place and you see a shortage, so the shortages are here to stay a little while longer.

Regarding the capital expenditure for the renewable energy plans, Jain said, “So this capital expenditure of Rs 16,000 crore is now fully incurred and the PPAs have also been signed. The equipment has been ordered, construction is in full swing and commissioning of assets will begin from the last quarter of the current fiscal year, where we will commission nearly 200 megawatts and thereafter 250 to 300 megawatts each. quarter will be in service and will be brought into service and supplied to the network or consumers with whom we have linked the PPAs.

“When it comes to equity, as I mentioned last time, JSW Energy is the most under-leveraged balance sheet. Our debt to equity is less than 0.4 times and debt to EBITDA is less than 2 times the industry average of 2.50 times debt to equity and debt to EBITDA from 5.50 to 6 times. We are the only free cash flow company, generating Rs 2,200 crore of free cash, which will be used to expand this new capacity. Thus, all of the equity comes from internal adjustments. Also in the future, by increasing to 20 gigawatts by fiscal year 30, all equity will come from internal accruals, ”he said.

Meanwhile, regarding electricity demand, Kishore said, “Since the start of the fiscal year, there has been a 13% year-over-year growth in all demand for electricity. electricity in India and that’s a 3.2% growth if you compare it to the corresponding demand. base of FY20. In September, so far, the growth in electricity volume has been about 1% year-on-year. So the post COVID recovery is starting to moderate the base effect, which was observed until August 2021. “

“So I would say that just looking at the next two years, despite the target of 450 gigawatts until 2030, which is the revision of the 175 gigawatt target that we had until 2022 and our current installed renewable capacity. 100 gigawatts, the key determinant here would be that, after the COVID base effect, do we maintain an increase in demand for electricity of, say, 5.50 to 6 percent more. 5% demand that you have observed in the country over the last decade will not be enough to justify an addition of 35 gigawatts per year until 2030 to reach 450 gigawatts. Perhaps a growth of 5 to 5, 50 percent is just going to justify an addition of 15 to 20 gigawatts per year.

Regarding the best stock picks, Kishore said, “A variety of industry players, starting with NTPC, Tata Power, JSW Energy, Adani Green, as well as other places that are not listed as ReNew Power, announced significant capacity increase targets. I would even say that companies like RIL will allow many capacity additions in renewable energies.

For a full interview, watch the accompanying video.

Disclaimer: Network18, the parent company of CNBCTV18.com, is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.


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