Open access RE projects have regulatory difficulties: ICRA

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The Renewable Energy Sector Independent power producers, selling electricity on the open access route, face increasing regulatory constraints in the form of an upward revision of open access charges, denial of open access approvals and tightening of energy bank standards.

With the improvement in the price competitiveness of the solar and wind segments, renewable energy policies in several states have changed over the past 3-4 years. States have either completely withdrawn or reduced concessions and incentives on open access charges, with respect to the energy supply of solar and wind projects under the open access road.

Girishkumar Kadam, Senior Vice President and Group Co-Head of Corporate Ratings, ICRA, said: “The overall open access fees for third-party-based PPIs vary widely from state to state, ranging from ₹ 2 to ₹ 5 per unit and showed an increasing trend over the period, given the limited progress in price rationalization of the grid rates set by SERCs for public Discoms.

“In most cases, state discoms show passive resistance, due to fears of losing commercial and industrial customers who pay high tariffs through cross-subsidies. This poses regulatory hurdles for adding capacity in the open access segment for renewables in the medium term.

According to the ICRA, the price competitiveness of group captive projects is relatively higher due to the non-applicability of the cross-subsidy surcharge and the additional surcharge (except in Maharashtra) compared to free third-party sales. access.

Vikram V, Vice President and Area Head – Corporate Ratings, ICRA, adds: “Despite these challenges, the credit profile of renewable energy projects in the open access segment remains supported by a set of factors such as relatively better tariff expectations compared to the tariff discovered in the utility segment.

Despite regulatory hurdles in the open access segment, the outlook for the renewable energy sector remains stable. This is due to the improvement in the price competitiveness of renewable energies, the availability of the performance obligation status in the regulatory framework leading to a satisfactory operating history, a dominant part of the addition of capacity which is expected to continue in the utilities segment as well as the availability of a liquidity buffer for rated issuers.


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