Wind energy sector needs course correction

Richa Mishra | Updated on: Jun 24, 2022
India was a global wind manufacturing hub, with more than 80 per cent of the components sourced locall

India was a global wind manufacturing hub, with more than 80 per cent of the components sourced locall | Photo Credit: PICHUMANI K

Despite a head-start the sector is languishing. The switch to reverse auction, Discoms’ lack of interest and tariff barriers are to blame

Wonder why the run rate of wind energy is on the lower side, despite India being an emerging wind manufacturing hub?

Some of the reasons cited are: Disinterested power distribution utilities (Discoms), tariff barriers, and risk of payment delays.

India was a global wind manufacturing hub, with more than 80 per cent of the components sourced locally, and with full supply chains backed by highly skilled manpower to operate this sector. Today, in spite of this head-start and the potential for strong export opportunity, the sector is going through a rough patch. Why?

National utility scale bids have been constrained with Discoms disinterested in opting for renewable energy, players in the industry say. Adding to this is the tariff barriers created by Discoms, which constrain the industry from going green in a more viable and sustainable way. “The tariff expectations of Discoms are unviable and there is also a significant risk of payment delays,” said one wind energy player.

According to Ajay Devaraj, Secretary-General, Indian Wind Power Association, “In 2015-16, India declared its self-set RE target of 175 GW by 2022 and 450 GW by 2030, out of this, wind was to account for 60 GW by 2022 and 140 GW by 2030. Following this, India recorded its highest annual installation of over 5,510 MW in 2016-17. But the very next year it plummeted, and is yet to recover since.”

So who was the disruptor?

“The disruptor was the switch from feed-in tariff (FIT) to reverse auctions before the industry was actually ready for it. India had around 30 OEMs in the wind sector. The number has dwindled to around a dozen now. Further, the MSME sector, which actually contributed to growth in installed capacity for captive use, has been left out with bid size raised to a minimum of 50 MW,” says Devaraj.

The reason for Discom reluctance is also because the true cost of RE has not been recognised. Clearly, wind and solar cannot have the same tariff rates. There is an immediate need to recognise the true cost of renewables by making subsidies explicit. The policy of passing on the costs of renewable inter-State transmission and intermittency onto conventional generators and Discoms has run its course.

As Disha Agarwal, Programme Lead, Council on Energy, Environment and Water (CEEW), puts it, “The wind sector policies did not adequately address the requirements most critical to cost-effective development of wind plants — land procurement and coordinated development of projects, timely construction of transmission facilities, and minimising the curtailment of power. Additionally, with a switch to pan-India reverse bidding in 2017, the rate of growth of wind capacity reduced as the business model of existing players got disrupted, and new capacity additions became geographically skewed.”

What is reverse bidding?

While reverse auction has brought about significant transparency, it has some major challenges of its own. The dictionary defines the reverse auction mechanism as an approach to procurement, wherein sellers meeting certain minimum criteria are eligible to submit non-negotiable price bids.

In the wind sector, reverse auctions and unrealistic price discoveries have made many of the projects unviable for commissioning in the present conditions, especially with commodity prices northbound. This has pushed a large segment of OEMs into bankruptcy.

As Devaraj elaborates, it is partly policy and partly the way the policy was implemented that have pushed the industry to this situation. “In addition, while the learning-curve has been very steep, the pace at which all stakeholders, including the policymakers, have learnt has been rather tardy. Even though statistics relating to new project implementation has been available, there was, till recently, a marked unwillingness to accept reality and do something about it. However, this is now changing. The rate of change, though, needs to be much faster,” he added.

Published on June 24, 2022
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