Windy woes. Power Ministry opposes MNRE’s ‘closed bid’ for wind projects

The hopes of the beleaguered wind industry for a beneficial change in the way capacity auctions are made appear to have been dashed with the Ministry of Power not in favour of the change proposed by the Ministry of New and Renewable Energy. 

Today, the government-owned renewable energy facilitator, SECI, auctions capacities on the ‘reverse bidding’ method. Under this, the wind energy companies quote a price at which they would sell to SECI. SECI will buy first from the cheapest, then from the second lowest and so on until the auctioned capacity is reached. However, after the bids are opened and the lowest bid price—L1—is revealed, the others are asked to offer counter bids, bettering the L1. This competitive bidding results in hammering the price further down, often ending up in unviable prices. Quoted prices (tariffs) had gotten as low as ₹2.44 a kWhr, before rising to around ₹2.82 levels. 

Wind projects are not happening, because, after such zestful bidding, wind companies often find their input costs shooting up, affecting viability; it is worthwhile to forgo the earnest money deposit rather than put up an unviable project. Against 13,830 MW awarded in the last five years, only 4,670 MW has come up. 

Plea for closed bidding

This tells upon India’s commitment to go green. Since this reverse bidding method of awarding capacities first came up in February 2017, India has installed about 13,000 MW—around 2,000 MW a year—a way below the ambition or potential. According to the Draft National Electricity Plan, India plans to set up 40,500 MW by 2022-27 and 53,100 MW during 2027-32. 

It is against this backdrop that the Ministry of New and Renewable Energy (MNRE) had proposed, upon the request of the wind industry players, to change the method of bidding from ‘reverse auction’ to ‘closed bidding’. Under ‘closed bidding’, there would be no counter bidding after the bids are opened—hence no hammering down of tariffs. 

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BusinessLine has reliably learnt that the Ministry of Power is not okay with the idea. It fears cartelisation and a consequent shooting up of tariffs.  

Industry insiders say that cartelisation would not happen. The prices may rise a little, but shall remain firmly under the ‘average power purchase cost’ of the discoms (electricity utilities). “Even if the tariffs rise by Rs 0.30 a kWhr, discoms will be paying much less than their APPC,” D V Giri, Secretary-General of the Indian Wind Turbine Manufacturers’ Association, has told BusinessLine. 

They also point out that in the current financial year so far, not a single tender has been announced by the SECI. Media reports suggest that SECI is unable to sign a back-to-back power sale agreement with discoms. 

Small players woe

They have often pointed out that the ‘reverse bidding’ system has killed the small players. An energy company, or an investor, who wishes to put up a 5 MW or 10 MW wind plant would never be able to beat a 500MW aspirant on price. The wind industry has been asking for a separate dispensation for the small players.  

The government’s motives behind bringing in ‘reverse auction’ were noble, but the approach has not delivered—as evident from poor capacity additions in the last five years. Nor have the low tariffs helped the consumer at all. Discoms have been able to get cheap wind power, but it makes hardly any material difference because the quantity of wind power they buy is too small to matter. 

Against this backdrop, the industry hoped that the government would change the method of auctions. But with the MoP opposing closed bidding, it appears that it is going nowhere. 

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