The share of renewable energy in the country's electricity generation mix is likely to rise to
around 18 per cent by 2022, from 7.8 per cent at present, owing to the continuous focus on capacity addition from solar and wind, a report said Tuesday.
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Global ratings agency Moody's Investors Service in its report said India is taking positive steps to align its power generation mix with its Nationally Determined Contribution (NDC) commitments under the Paris Climate Agreement.
"Renewable energy's share of new capacity additions for power generation has been the largest at around 60 per cent over the last two years, while additions to coal-fired generation capacity have slowed sharply," said Abhishek Tyagi, vice-president and senior analyst, Moody's Investors Service.
He further said that large companies have also announced plans to make their operations more energy-efficient and source more renewable energy.
According to the agency, renewable energy's share in the electricity generation mix is likely to rise to around 18 per cent by 2022, from close to 7.8 per cent as of March 2018.
It also said that eventually, the share of fossil fuel-based generation capacity is likely to fall to 50-55 per cent by 2022, from 67 per cent currently.
"This trend in part reflects the fact that wind and solar tariffs are now in most cases either comparable with or lower than domestic coal-based projects," said Tyagi.
The utilisation rate for existing coal-fired capacity has been falling since 2010 and was around 59 per cent in FY18, according to the report, while the annual growth in coal-fired capacity is likely to slow to 4-5 per cent over the next five years.
Tyagi, however, opined that the renewable energy sector faces challenges, despite its strong growth prospects.
"The renewable energy sector faces challenges, including the weak credit profiles of many off-takers, which are typically state-owned distribution companies, while India's renewable energy policy framework continues to evolve," he said.
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In addition, he added that sharply expanding renewable energy capacity would require similar growth in the transmission infrastructure for the efficient evacuation and
inter-regional transmission of electricity.
India is targeting 40 per cent of cumulative capacity from non-fossil fuel-based sources by 2030, in line with its NDC commitments, which compares with total non-fossil fuel power generation capacity (including nuclear) of 35 per cent as of June.