Mr. DV. Giri, Secretary General, Indian Wind Turbine Manufacturers Association (IWTMA)

Yes you are right that we have a large target of 60 GW which is to be achieved by 2022. Couple of observation we have. One, this year, 2016-17, we would be crossing over 4500 MW of wind power, which perhaps is going to be one of the highest. One can say that this is going to happen because Generation Based Incentive (GBI) is going to be called off by March this year, and also that Accelerated Depreciation (AD) has been reduced from 80 percent to 40 percent. So there is a rush to install wind turbines. Andhra Pradesh alone is expected to see more than 2000 MW of installed wind capacity. So one can say that this is a peculiar year and this may not happen again. Now, having said that, let us face few things. One, wind turbine industry goes with Make in India program of the Government, with 75% localization. Two, 95% of the investment in this sector is coming from the private sector and not from the government undertakings. Now when you want to get the private investor to invest in wind turbine, especially when it is not a core business and investor is looking it as a business opportunity, the investment decision will purely depend on the capital cost, on the interest, the PLF and the tariff. Let us face it, as far as the capital costs are concerned, we are the cheapest in the world. Interest cost in India is around 12-14%. We can work out the PLF depending on the site on which we are going to operate. With all this, finally the tariff is determined by the state electricity regulatory commission. If they are going to give a tariff which is going to give an IRR of less than 16%, who would be interested? Let us take the classical example of Madhya Pradesh which installed 1100 MW of wind capacity last year (2015-16) when the tariff was at Rs 5.92 per unit because it is a low wind region. Now, for some odd reason, this tariff was slashed to 4.78 per unit. Today, there are no wind projects coming up in Madhya Pradesh. How do you handle this kind of a situation? Then, we have huge problems in grid connectivity. The grid is congested. Now with green corridors under implementation, some kind of opportunity is there. But the problem is that the grid is absolutely congested. With the result that during high wind season when the wind is blowing at the best, the discoms are getting wind at say Rs 4.16 in Tamil Nadu, while the same is available from fossil fuel at Rs 2.50 per unit, then what do they do? They have to balance this load through the state load dispatch centres where the primary concern is the financial health of discom. So the load dispatch centre is asked to switch off all wind turbines to accommodate power produced from fossil fuels. So the generation is lost without any mistake of the generator. But does the discom pay for the units lost? No. When it comes to payment, be in Rajasthan, Madhya Pradesh, Maharashtra or in Tamil Nadu, the delay can range anywhere between six to 14 months. If a person is not getting paid for this long and he has to pull out money from his pocket to service his loans, the project again doesn’t remain viable. The PPA calls for payment of interest if payments are delayed beyond one month. Barring Gujarat, which not only pays on time but also take a cash discount by paying in seven days of raising the bill, rest of the states are in various stages of delay. Rajasthan is 10 months, Tamil Nadu is 13 months. Maharashtra is another peculiar case where PPA is signed and turbines are generating, but they have not been paid for the past 14 months. There are situations when machines are generating, PPAs have not been signed; machines are standing where evacuation has been given but they are not connected with the grid. If this is the situation we are going to have in the states, any policy of the Centre is absolutely of no use. So what we tell the Centre is you make the policies, but unless we have the engagement of the states where they must give a “must run” status to wind turbines, have payment security and perform their RPO. None of the states follow their RPO. If all the states perform their obligation under the National Tariff Policy, we can do something like 6,000 MW per annum. Today, we are purely dependent on nine wind states of which seven are operating because Telangana and Kerala nothing is happening. This is the situation we have, but what are we blamed for say high capital, which I have already said is not true. Then, it is claimed that while solar prices have come down, wind sector is still keeping its costs high. Our prices and costs will go up because we have lost all the wind sites, which are all occupied. So what is the alternative? We have to increase the hub height, increase the blade length to have a meaningful PLF to have a worthwhile IRR. When you put hardware costs, the cost goes up. That’s why we tell the Centre and State governments to not look at wind from the view of capital cost. You look at levelised cost of energy over a 20 year period. Then you will find if it at grid parity or lower. We have a manufacturing capacity of 9500 MW as of today, with some more members joining; it can go up to 12,000 MW. We are chasing a market of about 3,000 MW. How can you have economy of scale and how can cost come down? We perform everything for the customer right from wind resource assessment, to connectivity, to getting their PPA signed. If there is no help from the government, what can we do?

The Government is today talking about competitive bidding. The government has put up a 1 GW interstate competitive bidding from wind to a non-wind state. I am very happy that the industry has responded with a 2.6 GW response. I hope the competitive bidding goes off well. Still, there are many glitches in terms of payment, connectivity, who is going to take the long term access, what is the role of PTC, what is the role of discom, what happens when there is a grid congestion and machines are made to switch off, which have not been addressed. I am sure they will be addressed when the bid opens which is expected in next two to three months. Implementation of projects, with all the improbable and the number of question marks to be addressed, projects will come up and perhaps the implementation will happen in December 2018, not before that. If that happens, what will happen in 2017-18? You are saying that Feed in Tariff (FiT) is a bad word. So what happens in 2017-18? We have submitted to the ministry that till competitive bidding stabilizes itself, allow FiT to continue, get the RPO implementation, and then if GBI has been a game changer, allow it to continue so that the meaningful IRR is achieved for IPPs. IPPs today are borrowing money from private equities abroad and if it doesn’t make sense for them, they will not make the investment. So we believe that if 60 GW is to be achieved, perhaps GBI needs to continue till 2022, or till such time competitive bidding comes in full play. Even if you take interstate competitive bidding, the PGCIL network is only about 4,000 to 5,000 MW. It will be completed in another two or three years, till then you have to depend on state utilities. State utilities have to move from the point of generation to interstate connectivity point where you have the STU charges which are very high and need to be rationalized. So I feel that if Government really wants to do something in a comprehensive way, there is no point just to go for competitive bidding and price discovery mechanism hoping price will come down and market will stabilize itself. How can the market stabilize itself without grid connectivity, payment security and achieving the national renewable portfolio obligation?

One area which the Government should look into is to see how we can export wind turbines out of the country. There are two major problems in exports. One, the exim line of credit is just not enough. They need to have a green line of credit separately for wind. Also, the logistics cost need to be addressed by Ministry of Commerce and Ministry of Shipping, whereby the freight cost from India as compared to say China, are about 17% higher. Some sort of intervention is required so that we can work on a level playing field. If these problems are removed, exports, looking at the quality of products we do in India, I am sure we can in 18-24 months, do about 2,000 to 3,000 MW per annum of exports alone which will add to the country’s overall turbine sales. Then there are some other issues. We move our goods by roads. Ours is an over dimensional cargo. Both at the state and national highway the cargo carrying critical equipment is stuck due to the way the state authorities operate. I feel we need to be given a special status in movement of over dimensional cargo. The other thing is when we put our transmission lines, unlike power and telegraphic lines, to put those on private land, the cost of the project runs into crores of rupees. We are forced to pay under the table, whereas under Section 68 of the Indian Telegraphic Act there is a prescribed compensation that needs to be paid when you put lines on private or agrarian land. If this is available to us then our costs can come down.

If GST comes in and we are put in a higher slab, we will break the chain and cost could go up from anything between 14 to 20%. So we have requested the Government to either give us zero rating or concessional rating so that the impact on cost can be minimised.

The green corridor plans are on. But the point is that the green corridor is going to be in position not before 2018 or 2019. So there is a delay even from their side. If you take the state corridors, for example in Tamil Nadu, they have been planning a 4X400 KV substation for past three years, out of which only one has been commissioned. Now because of that, the entire grid is congested and they are not able to give any further permission to put up turbines.

Let us understand one thing. Solar is against India’s interest if you see what is happening in the country today. It is being imported, which means there is a cash outflow from India to other countries like China or Taiwan. I think import cost by value is beyond 78% of the entire solar project which is installed in the country. So in solar 78% of a project’s cost is being imported, as against wind, which has 75% localisation under Make in India. Two, why are we not buying solar panels from countries like USA? There are over capacity in countries like China and Taiwan and I don’t think I should mention the quality of Chinese equipment. Also, the actual ground reality is that PLF is not more than 16% in solar, while in case of wind, the average is around 21-22%, in areas of good wind, we are having a PLF of 30-35%. You have to look long term. What is the standardization for solar in comparison with wind? There are stringent standards for wind, else wind turbines cannot be put up. But is there any standard of any kind for solar? Not at all. Another problem of solar is that you require expensive water to clean the panels. India is a tropical country full of dust and heat. So when you have dust on the panel, the PLF is going to come down. Infact there are reports that in next six to seven years, the panels may have to be written off. In wind, we are giving assurance of generation without deration for next 20 years, whereas solar even at international standard, there is a deration of 0.5% year on year. If you are comparing solar with wind, it is like comparing chalk and cheese. What you require in renewable energy is long term sustainable energy source with bankable policies which are friendly when private sector is investing. However, if solar of good quality can be achieved and there is a meaningful price, I think there is a great opportunity for wind and solar to work together as wind-solar hybrid.

If you take a tariff of Rs 5 per unit, that would be the ideal tariff for people to bring in large investments. And once scale of economy goes up, let’s say instead of 3,000 MW we are able to do 10,000 MW per annum, if capital costs can come down, transmission lines can be loaded better, then I see every reason why kilowatt hour cost can come down.

It is too premature as we do not yet know the potential of the country. The pilot projects are currently being undertaken at two locations in Tamil, Nadu and Gujarat to study wind speed and potential. However, considering the number of agencies required for taking permission, which is more than 25, the cost of offshore would be three time that of onshore. I really wonder if it will be viable at this point. We need to learn from countries like UK who have been successful in this area. However, there are a few things which go against offshore wind in India. One, our sea bed is very soft. Which means cost of foundation goes up. Then, is there steady wind like North Sea will be known only when the study is done.

In rural India where we deal with petty contractors, water suppliers, contractors, petty labour and unskilled labour, their wages have to be paid in cash. We expect this year atleast 800 to 1,000 MW of wind projects missing commissioning by March due to demonetization. It will not impact generation, as it will start only in May or June, but if GBI is withdrawn from March 2017, these projects which are in pipeline and not able to catch the March deadline, would lose benefit of GBI, which is Rs 1 crore per MW. So we are talking of about a loss of Rs 800 to Rs 1000 crore to the developer. So we have approached the Government asking if the GBI is to be closed, the window should be kept open for atleast two more months.

Infraline Energy would like to thank the contributor for his/her valuable time and opinion shared on the topic.