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November 21, 2016India Wind Player- Suzlon
Suzlon has made some very impressive gains in Indian wind energy marketshare, becoming the second largest WTG seller. The company has also been helped by the fact that the Indian market showed high growth last year and is expected to show a record breaking year in FY 17 also. The company reported a profits of INR 238 crores this quarter, which implied a net margin of 10%. The new government has set a target of 60 GW of wind power by 2022 which means a run rate of 5 GW of wind power capacity additions annually. However, headwinds remain for the industry in the form of a repeal in major subsidies such as the GBI and AD, which are the mainstays in pushing wind power demand.
The other big problem is that utilities are refusing to sign expensive PPAs with wind power developers since solar energy projects have become much cheaper. The wind developers are also facing long delays in getting payments from the SEBs. Though the supply of WTGS is growing, the overall industry faced a huge amount of risks. Suzlon has smartly diversified into developing and building of solar projects which gives it a piece of the action in the exponentially growing solar industry. However, unlike the wind energy industry, solar energy has much more competition in both suppliers and developers. It is not easy for Suzlon to dominate the solar industry like it did for the wind industry.
The entry barriers for solar energy are much lower than wind energy. Though the market is big and growing fast, the competition is much heavier, meaning much lower margins. The Indian wind industry too is getting influenced by the solar industry with the government issuing its first reverse auction tender for wind capacity. Till now all wind capacity was generally deployed using the feed in tariff (FIT) schemes. This is intended to lower the cost of wind power and foster higher competition amongst developers. This will be bad for Suzlon as it might have to lower prices and margins in order to compete with other players such as Inox Wind.