‘Wind industry’s move to bidding regime created short-term challenges
Suzlon Energy, India’s largest indigenous wind turbine manufacturer, is tackling regulatory changes in the sector. The Union government stalled feed-in-tariff regime to shift to competitive bidding in wind energy in 2017. This has impacted inventory and the pipeline of major players, as the project outlook is dependent on the government’s auction calendar. Though 3,000 Mw was tendered at record-low tariffs, it failed to raise the spirits of the sector. Suzlon’s profits were in the red during Q2FY17. In an email interview,
chairman & managing director of Suzlon Energy, tells Shreya Jai this is a temporary phase and the company is trying to be lean and agile to tackle the drastic changes in the market. Edited excerpts. What’s the outlook for the wind sector this year, given that it faced its worst production year in 2017, with capacity addition of 435 Mw? Renewable energy has entered an exciting new phase and its growth is unstoppable. Once considered a niche industry dependent on government subsidies, today it is driven largely by economic realities, improved reliability and cost competitiveness, backed by proven technology. Another advantage of renewables is that it is modular and is scalable. We are confident that the evolving technology and economic viability of
energy storage solutions will give further impetus to renewables. 2017 was a watershed year for the industry, with significant policy reforms such as competitive bidding in wind, record low wind and solar tariffs and the GST (goods and services tax) roll-out. In addition to this, technological advancement and increased competition are steering new possibilities for clean energy.
In India, investors are bullish and excited to be part of the renewable growth story. While the wind industry’s transition to the bidding regime created short-term challenges in 2017, it has laid the foundation for sustainable and inclusive sector growth. Wind industry is poised to grow to 8-10 Gw annually, with 5-6 GW annual bidding from the
central government level, 3-4 Gw capacity auctions from the nine windy states and 1-Gw capacity expected from PSUs (public sector undertakings) and captive markets. This will pave the way to unlock 300-Gw wind energy potential in India and harness the latent potential of non-windy states.
What is Suzlon’s unsold inventory? We have learnt that the company has laid off workers and has also asked executives to take pay cuts.
The Indian wind industry is witnessing a complete overhaul with respect to cost optimisation across the value chain, specifically with the advent of competitive bidding. With declining tariffs, cost competitiveness and efficiency become key. Cost optimisation continues to remain a focus for us, with an aim to substantially lower our cost structure. This has enabled us to become lean and agile, thereby accelerating decision-making and implementation in a highly competitive market environment.
Our India-based vertically integrated manufacturing and strong in-house technology gives a huge competitive advantage. Suzlon is well- equipped to capitalise on the inevitable growth of renewables. Our growth strategy is based on strengthening our leadership position in India and expanding our global footprint, with a focus on select profitable markets. Our key priorities are to leverage innovation and technology to bring down levelised cost of energy, further strengthen our capital structure and remain cost competitive, by leveraging India as the manufacturing hub, to increase market share.
As a market leader, what are Suzlon's views for improving market conditions for wind energy?
Technology and innovation will remain the catalyst that will drive renewable energy growth. Digitalisation of services, innovation in tower and blade technologies aimed towards making unviable wind sites viable, ensuring better yield and increasing turbine utilisation will be the key focus areas. The industry will collaborate further to improve supply chain, enable grid integration and leverage digital technologies.
FY18 is the only transition-phase year. The Indian wind industry is shifting to a competitive bidding regime environment from FiT-based market. Due to administrative process stabilisation, the regulatory process, and some shift from state to central process, there is a temporary vacuum in the market during this financial year (FY18). However, the government's focus on renewables and target of 175 Gw by 2022 and job creation remains unchanged. Hence, there is a significant growth for renewables, and sufficiently in wind. We are well equipped to cater to the market scenarios.