Can India really Install 6GW Wind Capacity in FY18
Suzlon chairman Tulsi Tanti thinks that India can do 6 GW of wind energy capacity next year after India installed 5.4 GW of wind capacity in FY17. This record breaking capacity addition was a one off since the wind energy industry faced a huge amount of headwinds going forward. I will reiterate some of them
1) GBI incentive is gone with the government no longer giving an extra 50 paisa per unit for wind generation
2) Accelerated Depreciation incentive has already reduced in half to 40% by 80% and will soon go away
3) Solar energy prices are coming down at an alarming pace and are already below that of wind energy. In the future, they may become significantly lower than wind making that technology obsolete like solar thermal technology.
Advantages of Solar Over Wind Energy
However, Suzlon is making the common mistake of extrapolating current trends into the future. Solar PV has a huge number of advantages over wind energy:
1) Solar energy can be installed in all sizes from 1 kW to 1000 MW while wind energy is mostly restricted to larger sizes such as 1 MW or 3 MW
2) Solar energy can be installed in most places in India as the country receives high solar radiation while wind energy can only be installed in a few wind places which have been grabbed by land grabbers long ago
3) Solar energy prices are lower than wind energy and its technology is improving at a much faster rate than wind energy
4) Solar energy is faster and quicker to install than wind turbines
I think it will be almost impossible for India to install 6 GW of wind energy capacity over the next year. Besides the factors listed above, India is also facing a problem of power surplus with many states facing the question of how to use the excess power that they are generating. Punjab is incurring huge losses due to excess power. It will be extremely difficult for states to buy large amounts of wind power. Already some states such as Gujarat and AP are not willing to sign wind farm PPAs and want to negotiate down their prices. Wind power curtailment will become a major issue going forward as cash-strapped distribution utilities have no money to buy power whether it is wind or thermal.
Suzlon also faces the huge problem of declining margins and prices for its products, as a competitive market-based mechanism for wind power procurement in India will squeeze margins throughout the supply chain. Wind turbine makers like Sulzon and Inox are going to be the biggest losers in my view. Despite a record-breaking sales year, Suzlon stock remains in the low double-digit levels revealing poor prospects for its wind business.Google+