Reverse Auction Tenders- Wind Energy India

Wind energy developers in India have had a relatively good time as compared to solar energy developers with decent IRRs in the range of 15-20% and low competition. Several independent power producers (IPPs) have made wind energy as a focus area and have developed a large profitable portfolio. Renew Power, Mytrah, Greenko, Continum etc. are some of the large successful wind energy developers in the country. These companies have benefited from fixed feed in tariffs given for wind energy by Indian states.

Under this policy these companies can set up wind capacities and be assured of fixed tariffs. They do not have to battle for winning projects in tenders which is the norm for solar power projects in the country. They do not also have to worry whether the tariffs will be good enough to get them a decent IRR.  Managing the ecosystem is their main concern. But these cushy days will soon be gone if the central government successfully executes its first 1 GW reverse auction tender for wind energy that it is planning.

Solar energy has been extremely successful in managing to get very low tariffs due to reverse auction mechanism in which tens of developers have competed ruthlessly with each other to lower tariffs to win large projects which would give those economies of scale. While solar energy developers are working with IRRs of 10-15% and even below, the wind energy developers have managed IRRs of 15-20%.  India has massive untapped potential of wind energy in states such as Gujarat, AP, Maharashtra, Karnataka and others.

Read more about Wind Power Plants in India.

However, given the solar tariffs have fallen below wind tariffs, now utilities are reluctant to purchase costly wind power. There is no option but to lower tariffs in wind energy if this energy expects to remain competitive in the long term with solar power which continues to decline by 5-10% in costs every year. Wind energy developers will have to come up with a new business model in order to survive. Many of the erstwhile wind energy developers have successfully diversified into solar energy development. They should see the writing on the wall and instead of stalling government efforts to increase competition in the wind power sector, they should embrace the new environment and try to go with the flow by reducing their costa and return expectations.