Wind prices stay low in SECI’s 3rd auctions

Belying all expectations, wind tariffs have remained obstinately low — ₹2.44 a kWhr — at the government’s third capacity auctions that were concluded on Tuesday.

Four companies won rights to put up wind projects and sign power purchase agreements with the government-owned Solar Energy Corporation of India (SECI), quoting ₹2.44 a kWhr. Two other winners quoted ₹2.45. The winning tariff is just a paise more than the winning tariff discovered in the 500-MW bid of the Gujarat utility, held in December.

Sprng Energy, backed by PE firm Actis, which made news when it won 197.5 MW in the Gujarat auctions in December, quoted ₹2.43 a kWhr, two paise more this time, and lost.

In December, industry observers said the quoted tariff was irrational and was probably driven by the inventory of wind machines piled up with turbine manufacturers, such as Inox, Suzlon and Gamesa. It was said that in the next auctions, prices would firm up to at least around ₹2.90.

But this auction has proved them wrong.

Commenting on the auctions, Ramesh Kymal, Chairman and Managing Director of Siemens Gamesa India, a wind turbine manufacturer, observed that the sites chosen by the winning bidders were, once again, in the windy regions of Kutch, Gujarat, and Tamil Nadu.

Windmills here can work at 40 per cent plant load factor, which means a MW of capacity can potentially produce 3.5 million units of electricity a year.

Also, some turbine manufacturers have backed wind energy companies quoting low, as they were anxious to get market share, said Kymal.

Also, the wind energy companies (or, wind ‘independent power producers’) have a big appetite for putting up projects, he said, implying that the companies, being funded by private equity funds, are under pressure to show deployment of the funds.

Inox, a wind turbine manufacturer, also participated in the bidding, doubling up as an energy company.

But typically, equipment suppliers win projects, develop them and sell them off when they are legally permitted to do so.

Incidentally, Semborp has so far won 800 MW through the three auctions of SECI, the highest by any wind energy company.

As at the end of every bidding, this auction too has evoked comments of “irrational exuberance” by the winning bidders.

One industry leader calculates that the assumptions behind the tariff of ₹2.44 were either very low prices of wind turbines, not more than ₹6 crore a MW, or very high generation of electricity (4.7 million units) — neither of which is realistic.

This is the third capacity auction of SECI; the earlier two, for 1,000 MW each, happened in February and October last year, which threw up prices of ₹3.46 and ₹2.64 respectively. In December, Gujarat held an auction for 500 MW, which saw tariffs fall further to ₹2.43.

“What has changed between the second SECI auction and now to warrant a 20 paise fall in tariff? Nothing!” said an industry leader under the condition of anonymity.

COMMENT NOW