Amidst rising competition and falling tariff bids for solar and wind energy projects, India’s leading renewable energy project developer is looking to foray into the transmission business.
Indian business daily Mint has reported about ReNew Power Limited’s plans to participate in auctions to set up transmission projects. According to the report, ReNew is has assessed 10 upcoming auctions for transmission projects and has found itself to be eligible to bid for them.
ReNew Power recently appointed the former head of a leading private transmission infrastructure company, Sterlite Power Grid Ventures. This gives a clear indication about ReNew’s intentions to expand into this new segment of the power market.
Most of the upcoming transmission projects assessed by ReNew Power are part of the Indian government’s Green Energy Corridors program. Transmission projects under this program have been planned exclusively to evacuate power to be generated from large-scale solar and wind energy projects.
We recently covered a story regarding the proposed transmission projects by the Power Grid Corporation of India (PGCIL). These projects have been proposed in the solar and wind-rich states of Maharashtra, Gujarat, and Rajasthan. These projects are expected to require a combined investment of US$1.8 billion and will support evacuation of power from a total of 25.4 gigawatts of solar and wind energy capacity operational or to be installed in these states.
Lack of transmission capacity has been a major hurdle for solar and wind energy auctions, at the state as well as central level. Auctions have been postponed, had their offered capacity reduced or even cancelled with lack of adequate transmission capacity as one of the reasons.
Apart from diversification of risk transmission business also represents an additional source of revenue for the company. Renewable energy generators often face delayed payments from power distribution utilities for the energy generated this increases the credit risk associated with the generators. A subsidiary of ReNew Power was recently assigned a credit rating of BB- by S&P Global.
At present renewable energy transmitted across India is exempt from paying transmission charges. This essentially means that the central government will bear these charges and a significantly higher probability of timely payment to the developer of transmission projects.
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