Wind power generation is likely to be sustainable at around Rs 2.9-3.0 per unit in fiscal 2019 because of reduction in payment and offtake risks, lower capital cost per generated unit and conducive debt financing. Rating agency Crisil in a report while outlining the trend said, “Such tariffs, despite being 28 per cent lower than the lowest under the erstwhile feed-in-tariff regime, will still offer developers a healthy and sustainable 12-14 per cent equity IRR or internal rate of return.”
The payment risk in projects has reduced with the Solar Energy Corporation of India, set up by the government through the Ministry of New and Renewable Energy, increasingly taking up the role of the principal counter-party.
This would have otherwise hinged on discoms, some of which are in financial distress and unable to make payments on time. Average payment delays by SECI have been less than one month compared with ~4 months by discoms of major wind power purchasing states.
What is also providing comfort to developers is the deemed generation clause in recent power purchase agreements that offer payment for generation rather than offtake.
Subodh Rai, Senior Director, Crisil Ratings, in a statement said, “Also tariffs of about ₹3 per unit would be at least 10 per cent lower than the average power purchase cost of 12 out of 14 major power consuming states in fiscal 2017, and competitive versus other sources of power, which allay the risk of back-downs.”
Waiver of inter-state transmission charges will also make wind power generation more attractive for non-windy states such as New Delhi, Uttar Pradesh, Jharkhand and Bihar, Crisil said.
This may not only reduce offtake risks, but also provide up to 15 GW demand opportunity over the next 4 years through unmet non-solar renewable power obligations for non-windy states