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Indian Wind energy capacity jumped up by a whopping ~65% in the current fiscal year setting up a record 5400 MW between March 2016 and March 2017 (in India the fiscal year ends in March). This was not only the highest ever wind energy capacity installed in India but also 35% higher than the target set up by the Indian government of 4000 MW for FY 17. This means that the total wind energy capacity in India is now touching 30 GW. The huge jump in wind energy capacity came due to a number of factors:
1) Good IRRs from the feed-in tariffs available in major states such as Andhra Pradesh, Gujarat and Karnataka leading to a developer fueled boom
Also, read Andhra Pradesh has become a renewable energy hub in India.
2) The expiration of the GBI and AD incentives which mean that you needed to install the wind farm before March end 2017 in order to get these incentives
3) A pro-business government in states such as AP and Gujarat who encouraged renewable energy development in order to boost the business environment in their own states.
The Top Wind Energy States in India
Andhra Pradesh at 2,190MW, Gujarat at 1,275MW and Karnataka at 882MW accounted for almost 80% of the total wind energy capacity additional while previous year leaders such as Tamil Nadu and Madhya Pradesh installed much less wind energy capacity.
Wind Energy Future
Though the wind energy industry is celebrating now, the future does not look that bright. The major challenges facing the sector are:
1) Reverse auctions have changed the paradigm in terms of the subsidy given by the government as well as the returns. The record low price of INR 3.46/kWh means that high return guaranteed by the government in terms of high fixed electricity prices ranging from INR 4-6/kWh is a thing of the past. Gujarat and AP are not ready to sign PPAs with wind power projects under construction in their states. Other states will also not sign FIT PPAs from now on given their much higher cost.
2) AD and GBI incentives are probably gone for good and wind energy has to pretty much compete on its own against the fossil fuel aka coal power.
3) Solar energy prices keep falling with each passing month making wind energy less and less of an option for the government in meeting its green energy commitments.
4) Wind turbine and wind developer margins will be under high pressure due to the competition created by wind reverse auctions. Entry of foreign wind turbine companies such as Senvion is expected which will further increase competition and lower returns.
It is difficult to foresee the wind energy industry repeating its FY17 performance given the aforementioned factors. The wind industry will have to really pull up its socks in terms of cost cutting and technology improvement if it wants to remain relevant. Many other industries such as solar thermal have bitten the dust against the relentless onslaught of crystalline solar technology. Even coal is dying a slow painful death all over the world as solar PV technology has become cheap enough to challenge King Coal in terms of affordability.