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Published:October 23, 2017 12:17 PM
The government has set up a target of installing 60 GW of Wind Power Projects by 2022 in India. The present installed capacity of wind based power plants in India stands at 32.63 GW (Aug 2017, MNRE). The wind capacity addition in FY’17 was 5.4 GW which was the highest ever. The industry rejoiced this fantastic trend till last financial year but now it is witnessing scarce of projects as old PPA’s are being cancelled in the wake of the surprisingly low tariffs discovered in the last two auctions held in 2017 as well as there is a slowdown in auctioning of fresh projects by the government. While India achieved its annual target of installing wind power capacity last financial year, there are many concerns regarding achieving the targeted capacity additions for next year. In February, India chose the bidding model for discovering the wind tariff replacing the Feed in Tariff (FiT) model which was decided by the state’s electricity regulatory commission. This move saw wind tariff crashing 24% lower to INR 2.64/kWh in the recent biddings carried out by Solar Energy Corporation of India (SECI) on behalf of MNRE in October from INR 3.46/ kWh which was lowest in February this year. Problems faced by the Wind Power sector: 1. Curtailment of Renewable Power projects:As per law, Renewable power plants are “must-run” stations. Despite this some states like Rajasthan and Tamil Nadu have been curtailing wind power more frequently. Madhya Pradesh has recently brought in rulings which seek to withdraw “must-run” status from renewable power projects in the state. 2. PPA renegotiation:Recently, few states have cancelled PPA’s and are renegotiating with the developers for lowering the tariff. Tamil Nadu for instance, has been trying to renegotiate agreements at INR 3.4 per unit as compared to INR 4.4 per unit that it has signed for. Karnataka similarly, is vying for INR 3.75 per unit as against INR 4.5 per unit. This issue is very crucial to the investor’s sentiment. 3. Aggressive Biddings:Recently record low tariff of INR 2.64 was discovered. This became possible because big players like ReNew Power Ventures Ltd have received capital at cheap interest rates but in the long run such low tariffs may make the project non-performing asset.The rates of wind turbines have not reduced much so the profit margin is limited at this low-tariff. 4. RPO:Only 10 states have fulfilled their renewable purchase obligations (RPOs). Ten more states are in the process of doing so and have 60-90 per cent RPO fulfillment, whereas the rest are far behind. 5. Reduction in Accelerated Depreciation & withdrawal of Generation Based Incentive(GBI):Reduction of AD from 80 percent to 40 percent and non-continuation of GBI will also hamper the development of wind power. The market may see a temporary slowdown as the after effects. New Hopes:There has been announcement of auctions of 4,500 MW Wind projects. Three bids of 1,500 MW each will be rolled out in October, December this year and February next year. The auctions will be conducted by SECI. This announcement comes with a warning that the bids will be cancelled if the developers shoot up prices. InfralineEnergy Disclaimer: The views expressed here are solely those of the author in his private capacity and do not in any way represent the views of the InfralineEnergy (Technologies India Pvt. Ltd.). The organization is not liable for any use that may be made of the information contained therein and any direct/indirect consequences resulting therefrom.
The government has set up a target of installing 60 GW of Wind Power Projects by 2022 in India. The present installed capacity of wind based power plants in India stands at 32.63 GW (Aug 2017, MNRE). The wind capacity addition in FY’17 was 5.4 GW which was the highest ever. The industry rejoiced this fantastic trend till last financial year but now it is witnessing scarce of projects as old PPA’s are being cancelled in the wake of the surprisingly low tariffs discovered in the last two auctions held in 2017 as well as there is a slowdown in auctioning of fresh projects by the government. While India achieved its annual target of installing wind power capacity last financial year, there are many concerns regarding achieving the targeted capacity additions for next year.
In February, India chose the bidding model for discovering the wind tariff replacing the Feed in Tariff (FiT) model which was decided by the state’s electricity regulatory commission. This move saw wind tariff crashing 24% lower to INR 2.64/kWh in the recent biddings carried out by Solar Energy Corporation of India (SECI) on behalf of MNRE in October from INR 3.46/ kWh which was lowest in February this year.
Problems faced by the Wind Power sector:
1. Curtailment of Renewable Power projects:As per law, Renewable power plants are “must-run” stations. Despite this some states like Rajasthan and Tamil Nadu have been curtailing wind power more frequently. Madhya Pradesh has recently brought in rulings which seek to withdraw “must-run” status from renewable power projects in the state.
2. PPA renegotiation:Recently, few states have cancelled PPA’s and are renegotiating with the developers for lowering the tariff. Tamil Nadu for instance, has been trying to renegotiate agreements at INR 3.4 per unit as compared to INR 4.4 per unit that it has signed for. Karnataka similarly, is vying for INR 3.75 per unit as against INR 4.5 per unit. This issue is very crucial to the investor’s sentiment.
3. Aggressive Biddings:Recently record low tariff of INR 2.64 was discovered. This became possible because big players like ReNew Power Ventures Ltd have received capital at cheap interest rates but in the long run such low tariffs may make the project non-performing asset.The rates of wind turbines have not reduced much so the profit margin is limited at this low-tariff.
4. RPO:Only 10 states have fulfilled their renewable purchase obligations (RPOs). Ten more states are in the process of doing so and have 60-90 per cent RPO fulfillment, whereas the rest are far behind.
5. Reduction in Accelerated Depreciation & withdrawal of Generation Based Incentive(GBI):Reduction of AD from 80 percent to 40 percent and non-continuation of GBI will also hamper the development of wind power. The market may see a temporary slowdown as the after effects.
New Hopes:There has been announcement of auctions of 4,500 MW Wind projects. Three bids of 1,500 MW each will be rolled out in October, December this year and February next year. The auctions will be conducted by SECI. This announcement comes with a warning that the bids will be cancelled if the developers shoot up prices.
InfralineEnergy Disclaimer:
The views expressed here are solely those of the author in his private capacity and do not in any way represent the views of the InfralineEnergy (Technologies India Pvt. Ltd.). The organization is not liable for any use that may be made of the information contained therein and any direct/indirect consequences resulting therefrom.
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