Mumbai: Wind energy developers in India are struggling to add capacity amid low tariffs and poor connectivity to the grid.
The industry added 1.7 gigawatts (GW) in the last fiscal year, trailing a target of 4GW set by the government. This year, too, the industry may labour to touch 2GW, increasing the woes for wind turbine manufacturers who are trying to fill their order books.
In December, the lowest tariff for wind energy, of ₹ 2.43 a unit, was achieved in a Gujarat state utility auction. The current status may hamper India’s ambitious plans to almost double its wind energy capacity to 60GW by 2022, from about 34GW at present. The central government has put strong focus on expanding renewable energy capacity, including solar power, to reduce the carbon footprint.
“Margins have shrunk for original equipment manufacturers (OEMs) in India. There was a time when ₹ 4.16 a unit was the lowest tariff. Now the minimum bid price in wind energy auctions is ₹ 2.43 a unit. You can see how much reduction in tariff OEMs have had to absorb," Amar Variawa, director of public affairs (India and South-East Asia) at Danish wind turbine maker Vestas, told Mint.
Vestas has installed capacity of 3GW in India. “With the withdrawal of generation-based incentive and reduction in rates of accelerated depreciation, there is very little scope for OEMs to make money," said the Vestas director.
Wind power capacities have been installed in eight states that have strong wind velocities—Gujarat, Tamil Nadu, Maharashtra, Rajasthan, Madhya Pradesh, Andhra Pradesh, Telangana, and Karnataka.
In the last 12 to 15 months, the Solar Energy Corporation of India (SECI), the nodal agency for wind and solar energy auctions, and state utilities in Tamil Nadu, Maharashtra and Gujarat issued tenders for a total of 8GW of wind energy.
In February and July round of auctions of SECI, the lowest tariff achieved was ₹ 2.44 a unit.
In August, a 2,000MW wind power tender had to be cancelled as it failed to muster subscriptions.
“Such low tariffs put a question on the viability of wind power projects over the long-term," said Animesh Damani, partner at Artha Energy Resources.
Capacity addition peaked in FY17 under the feed-in tariff rules, where developers signed individual power purchase pacts with buyers. In FY17, 5.5GW of new capacity was installed.
Tariffs, however, crashed after the government put in place a competitive bidding structure for fresh capacity. This squeezed margins and also led to cancellation of orders at turbine makers.
Suzlon Energy Ltd, one of the top wind turbine makers globally, plunged from a net profit of ₹ 48 crore in Q1FY18 to a loss of ₹ 575 crore in Q1FY19. The company withdrew its revenue guidance for the year, citing “near-term market uncertainties". Inox Wind Ltd, another local equipment maker, posted net profit of ₹ 10.37 crore this June quarter, an improvement over the loss of ₹ 39 crore it reported in FY18 but lower than the ₹ 11.81 crore profit of Q1FY17.
Besides low tariffs, OEMs blame the lack of power evacuation infrastructure for the slow pick-up in new wind projects. J.P. Chalasani, Suzlon’s chief executive said in a 6 August investors’ call that this fiscal revenue guidance comprised mainly auction-based orders, few state PPA-based orders and captive and public sector unit segment orders.
Industry executives said state-run Power Grid Corp of India Ltd, which maintains the central grid, takes about 24-36 months to expand existing transmission infrastructure for carrying additional wind power.
Project developers, on the other hand, have a deadline of 18 months. “Power Grid gets the bulk of government orders. However, it’s biting off more than it can chew and so its timelines are stretched," said Damani. “I think it’s time the government opens up the transmission business to the private sector," he said.