India’s wind power projects are poised for a significant uptick in volumes during fiscal 2024, according to insights from S&P Global Ratings, signalling a promising recovery in the renewable energy sector.
S&P Global Ratings reports a noteworthy 20% year-on-year increase in the all-India level wind load factors during the latter half of the 2023 calendar year, indicating positive momentum in wind energy generation. This surge in performance is anticipated to bolster the overall output of wind power projects across the country. While renewable power generation experienced a resurgence in fiscal 2023, it fell short of the P90 estimates at the portfolio level. However, the underperformance gap narrowed to just 0.5% in fiscal 2023, marking a significant improvement from the 1%-2% gaps observed in previous fiscal years. Wind energy, a vital component of India’s renewable energy portfolio, has faced challenges in achieving the P90 output target, particularly in states like Andhra Pradesh, Karnataka, and Maharashtra. The persistent shortfall against performance indicators suggests that initial resource estimations for these projects may have been overly optimistic.
Notably, around 70% of wind projects failed to meet their P90 forecasts during fiscals 2021-2023, prompting industry players to recalibrate resource estimates for enhanced performance stability and cash flow predictability. Technological advancements in wind energy are expected to drive improvements in newly commissioned assets, potentially boosting their plant load factor (PLF) to approximately 35%, representing an 80% increase from previous decades. Moreover, cash collection from state-owned distribution companies has shown improvement, supported by the implementation of the Late Payment Surcharge (LPS) Scheme, thereby strengthening the financial viability of renewable energy projects. Looking ahead, S&P Global Ratings anticipates a reduction in working capital outflow for renewable energy firms to around 10% of EBITDA, a notable improvement from the previous 20%. This trend signifies enhanced operational efficiency and financial resilience within the sector. Overall, the outlook for India’s wind power sector in fiscal 2024 appears optimistic, driven by technological advancements, improved operational performance, and favourable regulatory measures aimed at fostering sustainable growth in the renewable energy landscape.
