Wind power tariffs fall to historic low of ~2.64/unit
ReNew Power, Orange, Inox, Green Infra emerge winners in second auction
The wind power sector witnessed a new record unfold during the second round of bidding for 1000 MW of power projects by the Centre. Tariffs fell by 23 per cent in just six months to a new low of ~2.64 per unit in an auction held on Wednesday by Solar Energy Corporation of India (SECI). Project deficit and oversupply, coupled with surplus wind equipment capacity, are learnt to have pushed prices so low.
ReNew Power and Orange Sirong quoted the lowest tariff to win 250 MW and 200 MW, respectively. Closely following them were INOX Wind and Green Infra Wind Energy, which won 250 MW each at ~2.65 per unit. These are fixed tariffs for 25 years. Adani Green Energy secured 50 MW at ~2.65 per unit. It is optional for the company to take up the project or not, as the tender followed the bucket-fill approach.
ReNew Power founded by Sumant Sinha is backed by Goldman Sachs in India. Orange Sironj is financially promoted by AT Capital Group, a capital investment firm of Singapore. Inox Wind is a subsidiary of Gujarat Fluorochemicals, operating in wind energy since 2008. Leading global energy company Sembcorp Industries Limited bid through Green Infra, which it recently acquired in India.
ReNew and INOX have indicated they will set up their projects in Gujarat while Green Infra and Orange have mentioned Tamil Nadu as their project location.
“These sites are one of the best wind sites with Capacity Utilisation Factor (CUF) of 35- 40 per cent vis-à-vis an average of 22-25 per cent in the country. Also, payment risk is minimal because of a central entity being a procurer vis-à-vis direct PPAs with state discoms, where the payment delay risk is high,” said Vivek Sharma, Senior Director, CRISIL Infrastructure Advisory.
SECI, a public sector undertaking under the renewable energy ministry, conducted the auction. It is the designated agency for implementation of this wind power scheme. Power Trading Corporation will buy the power after entering into power purchase agreements with the successful bidders. The responsibility for the inter-state transmission system connectivity and longterm access lies with the wind project developer.
In the first wind tender issued by SECI in February this year, the tariff discovered was ~3.46 per unit, much lower than the prevailing feed-in tariff of ~5 per unit in the wind sector. It was followed by bidding held by Tamil Nadu for 500 MW of wind power projects in the state wherein the tariff was ~3.42 per unit in August.
“The tariff quoted at Rs. 2.64/kwh signifies the significantly improved tariff competitiveness of wind-based energy generation against conventional energy sources and is also favourable for distribution utilities. However, the tariff quoted is aggressive from the IPPs’ credit perspective and is likely to result in modest project IRRs and debt coverage indicators,” said Sabyasachi Majumdar, Senior Vice-President & Group Head, ICRA Ratings.
The current government has retired the feed-in tariff regime in the wind sector to introduce more competition and bring down prices. Aiming at an ambitious target, the ministry of new and renewable energy plans to auction wind power projects every month.
With few projects in hand and a skewed outlook on the pipeline, some executives said the low bids were a sign of desperation by project developers to grab as many projects. At the same time, wind turbine manufacturers are sitting on oversupply.
“IPPs are able to squeeze and secure throwaway deals from wind manufacturers which are currently suffering from high inventory, low plant utilisation and a poor pipeline for the future,” said Sharma.