State of Wind Energy in India remains dismal even after a record-breaking 2016!

While Indian wind energy industry is looked upon as one of the bright spots in a world where growth is slowing, I hold a different view. Even as foreign equipment suppliers rush into India, attracted by the record breaking 5 GW of capacity installed last year as both the incentives GBI and AD expired, the future market outlook is not looking that great. The Feed in Tariff market for wind energy in India is effectively dead since the central wind energy auctions, where INR 3.5 price was discovered (which is much lower than the FIT that was being paid by the governments all along). This shows that the equipment suppliers and developers were making large profits at the expense of consumers as they were protected by a subsidy.

Equipment suppliers have seen their wind turbine orders crash in the wake of these results as discoms have stopped FIT orders. Now states will only buy wind energy through reverse auctions in which competition will be fierce, leading to very low margins for the wind equipment suppliers. There is also the huge looming problem of solar energy which has seen prices crash to as low as INR 2.44/kWh.

Now states most of which are already power surplus do not have any reason to buy wind power to meet their RPO. They would be better off buying solar power at a much cheaper price than wind energy. While the central government has promised to set up 4 GW of wind energy capacity this year using central auctions, it does not seem to be achievable. For doing this, the central government has to get the state discoms to buy this power which looks difficult as of now.

While the developers and equipment suppliers can sell power in the open market, that does not seem easy, given that Indian distribution utilities levy high cross subsidy charges on selling power through open access.  The difficulty of competing with solar power which is selling at a cheaper price these days is also a major headache for the Indian wind industry.