India wind power tariff follows solar route, falls to record low

Mytrah Energy, Green Infra, Ostro Kutch Wind, Inox Wind bid a power tariff of Rs3.46 per unit to win wind power contracts for 250 MW each in the SECI tender

Mayank Aggarwal, Utpal Bhaskar
Updated25 Feb 2017
India wind power tariffs fell below Rs3.46 per kWh in the 1 GW SECI tender for which a reverse auction was conducted Thursday. Photo: Bloomberg
India wind power tariffs fell below Rs3.46 per kWh in the 1 GW SECI tender for which a reverse auction was conducted Thursday. Photo: Bloomberg

New Delhi: Wind power tariffs fell to a record low in a 1 gigawatt (GW) tender by state-run Solar Energy Corporation of India (SECI), potentially placing India at the tipping point on the renewable energy front. Solar power tariffs had hit new lows at an auction earlier this month.

Mytrah Energy (India) Ltd, Singapore-based Sembcorp Industries and IDFC Alternatives-backed clean energy firm Green Infra Ltd, global private equity fund Actis Llp’s platform Ostro Kutch Wind Pvt. Ltd and Inox Wind Infrastructure Services Ltd bid Rs3.46 per kilowatt hour (kWh) to win contracts for 250 megawatts (MW) each, said several people aware of the development.

These firms quoted the price at which they will sell electricity to win contracts under the tender that received demand for 2.6 times the grid-linked capacity being sold. Tariffs have hitherto ranged from Rs3.9 per kWh to Rs5.9 per kWh.

“After solar cost reduction below Rs3/unit, wind power cost down to Rs3.46/unit through transparent auction. A green future awaits India,” said Piyush Goyal, minister for power, coal, mines and new and renewable energy, in a tweet.

The bids come in the backdrop of solar power tariffs hitting a record low of Rs2.97 per kWh in an auction of contracts to develop the world’s largest solar power plant of 750 MW capacity in Rewa, Madhya Pradesh. India has set a target of generating 60GW of wind power by 2022, up from 28,700.44 MW at the end of December.

The price is not an outlier, as was evident by the bids placed by Adani Green Energy (MP) Ltd, ReNew Power Ventures Pvt. Ltd and Gamesa Renewables Pvt. Ltd, which also bid low tariffs.

“My own gut feeling was unless the prices come down, the demand may not be there for wind. And that’s exactly what happened,” Goyal said in an interview.

The wind sector has been hit by inordinate delays in signing of power purchase agreements and untimely payments; distribution firms have shied away from procuring electricity generated by wind projects.

The other firms participating in the auction included ReGen Powertech Pvt. Ltd, India’s first Formula 1 driver Narain Karthikeyan’s family-promoted Leap Green Energy Pvt. Ltd, Singapore-based Sembcorp Industries Ltd, Gamesa Renewable Pvt. Ltd, ReNew Power Ventures Pvt. Ltd, Hero Future Energies Ltd and RP-Sanjiv Goenka Group’s CESC Ltd.

Experts termed the auction a game changer for the wind energy sector.

“With the discovered tariff of Rs3.46, this auction will be disruptive for the wind industry. It will be interesting to see how banks, OEMs (original equipment manufacturers) and developers work together to commission these projects—at these tariffs, the projects will need to be delivered at a substantially lower project cost to ensure viability. Also, this tariff should not be considered as a benchmark in lower wind regime states. Overall, this is a positive development as this brings competition and transparency in the sector,” said Srishti Ahuja, director at consulting firm EY.

The government plans to achieve 175 GW of renewable energy capacity by 2022 as part of its commitments to the Paris climate change agreement.

“The level of participation in the recent solar and wind auctions point to the coming of age of the industry. The auctions have been hard fought and have led to tighter pricing than one would have foreseen even a few months earlier. This speaks to the growing confidence of the players in their ability to deliver projects on terms that are globally competitive,” said Vikram Kailas, managing director and chief executive officer of Mytrah Energy in an emailed statement.

The price gap between electricity generated from thermal, solar and wind projects has been narrowing. This is primarily due to costs of solar modules and wind turbine generators falling by 80% and 20%, respectively, over the past five years.

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