‘Demand for wind energy will be hit unless prices come down’
NEW DELHI: India’s green energy sector has turned the corner with wind and solar power developers placing record-low bids to win projects awarded by the government. This will result in wind and solar power becoming more competitive energy sources, without the need for subsidies to lower tariffs, minister for power, mines, coal, new and renewable energy Piyush Goyal said in an interview. Edited excerpts:
Your reaction to the record low wind tariff bid of ₹3.46/unit?
Wind power procurement has the potential to save thousands of crores of rupees; in effect public money, which would otherwise go to private hands. And it is estimated that consumers in India or for that matter everywhere in the world would have had to bear the burden of that extra cost . ... competitive prices discovered through a transparent auction process has reduced the burden and that’s the effort of this government. It’s one more significant achievement towards putting an end to corruption, black marketing and discrimination. And, do you realise that this is without GBI (generation-based incentive)… So, effectively, imagine the profiteering which was happening.
Were you expecting such low tariffs?
I was expecting it (wind energy tariff) to go below ₹4 per unit but when the opening bid itself came at ₹4 per unit, it was felt that it will go much lower. My own initial estimates were between ₹3.50 and ₹3.55 per unit… It was an accurate assessment.
For solar bids also, my office had calculated an estimated price before the bidding and we were 3 paise off. We had calculated ₹2.94 per unit (for the first year tariff), given the current pricing structure internationally of equipment and the advantages that India has because of good irradiance; we had estimated that the bid will come down to R2.94 per unit plus 5 paise (per annum escalation in tariff for 15 years).
The wind industry is used to pricey tariffs and has over the years demonstrated a higher equipment price. Possibly that could have been one of the reasons why wind was being bid at higher prices in the country.
I have been saying from the day that I took office to these guys to come and bring in transparency in 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.
Let me add a word of caution there. Because there is competitive procurement, we must bear in mind that there is much better counterparty risk and the developer is allowed to set up the project at any place of his choice. So obviously they will be putting it up at places of better wind potential and higher output. When there is a tender for a low wind profile area, we may not be able to discover exactly the same price on a bid-to-bid basis.
THE WIND INDUSTRY IS USED TO PRICEY TARIFFS AND HAS OVER THE YEARS DEMONSTRATED A HIGHER EQUIPMENT PRICE, SAYS GOYAL