What's in store for 2016?

“Solar Power at ₹5 could be possible by 2015” was the headline of a news story that BusinessLine published on November 17, 2011. Sure enough, 2015 saw tariffs dip well below the ₹ 5-mark, to a surprise ₹4.63—not in one round of bidding, but two.

“Sub-5” has become the new benchmark for the solar tariff, to the delight of some, like electricity distribution companies and governments, and to the chagrin of others such as solar plant construction companies and non-solar renewable energy companies. Industry insiders say there is scope for tariffs to come down further. Year 2015 will be remembered in India’s solar power history for the low tariff milestone. The outlook for solar, therefore, as Hitesh Doshi, Chairman and Managing Director of Waree Energies Ltd, puts it, “is extremely encouraging”.

Huge capacities are about to be tendered out — around 6 GW by March, and possibly 10 GW in calendar 2016. Vish Iyer, who oversees business development at India’s largest solar EPC company, Sterling & Wilson, says that the comeback of Central government tenders was a big positive in 2015. Action on India’s first ultra mega solar project (which will be also Asia’s biggest) — the 750 MW park at Rewa, Madhya Pradesh — is likely to begin this year.

If the solar industry is all smiles, the wind industry is practically on its knees. “The year 2015-16 has not been a good one for us at all,” says D V Giri, Secretary General, Indian Wind Turbine Manufacturers’ Association. He fears that 2016-17 will be worse. In 2014-15, India saw wind capacity additions of 2,312 MW. In April 2015, industry leaders expressed confidence of raising the number to 3,000 MW. But, according to Giri, the wind sector will find it hard to even match last year’s numbers. An industry leader, who requested anonymity, says he was dismayed to see an “adversarial attitude” in BJP-ruled States. In Maharashtra, no new fresh power purchase agreements are being signed, there is policy uncertainty. Rajasthan has capped wind roll-out, and is often mouthing the words the wind industry fears the most, “competitive bidding”. Madhya Pradesh, which was the industry’s mainstay in 2014-15, has tweaked rules so that the tariff paid to wind generators will come down from ₹5.92 a kWhr, to ₹4.72.

Only Gujarat, with a solvent discom, is holding up. Even at a low tariff of Rs 4.15—the State is expected to see 300 MW of fresh installations. Other (non-BJP) States such as Telangana, Andhra Pradesh, Tamil Nadu and Karnataka have problems peculiar to each, and there is little action on the ground.

So, what went wrong? The Centre has little role to play in wind (there being no central procurement as in the case of solar); and the State governments, after tasting the sweetness of low tariffs in solar, want an encore of it in wind. There is a perception that while solar has done its bit in hammering down prices, wind continues to enjoy cushy tariffs.

In solar, equipment manufacturers have played a huge role in bringing down costs. Wind power producers expect turbine manufacturers to emulate solar cell producers. Since that is not happening, the wind industry is a divided house. Wind power producers are mostly on the same page as the governments, leaving the manufacturers to defend themselves.

“The only way is for (turbine) manufacturers to bring down equipment costs,” says Sunil Jain, CEO and Executive Director, Hero Future Energies Ltd. Prices of commodities such as steel being at record lows, there is plenty of scope for dropping equipment prices, says Jain. Wind costs ₹7 crore a MW of capacity, when it can be a crore lesser, he says. When that happens, wind tariffs will decline to solar’s levels and State governments will be encouraged to buy wind power.

On his part, Giri feels that wind ought not to be compared with solar today, because of the “step motherly treatment” meted out to wind. For instance, central transmission utility charges, waived for solar, adds some 50 paise to a kWhr of wind power. Again, unlike for solar, wind enjoys no payment security mechanism and “people have had to go to the courts to get their dues settled in Madhya Pradesh and Rajasthan”.

“If they feel wind power is costly, why don’t they let us play in the market directly,” says Giri, noting that the government was supposed to come out with an inter-state sales policy, but has not done so. He wants the government to do nothing but enforce ‘renewable purchase obligation’, (which needs certain classes of consumers to mandatorily buy renewable energy,) and make it easier for wind power producers to sell across states.

Regardless of where the truth lies, at the beginning of the New Year the Indian wind industry has a ‘bad-boy’ tag, thanks to solar.

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