Is Wind Energy in India Dead?

Fate of Wind Energy in India

Despite tall claims by the Indian government that they would bring in a large number of reverse auctions to augment the Indian wind energy capacity which touched a new record last year, the industry is in a very gloomy state. “Wind, this year, is dead,” as per Sunil Jain, CEO and Executive Director of Hero Future Energies. There are numerous issues plaguing the industry some of which are short term in nature while others are long term in nature.

Short Term Issues

1)      The Indian power industry is seeing a situation of power surplus with many states being forced to pay for fixed long term contracts despite having no demand. In such a scenario adding more power from any source seems difficult.

2)      The Feed in Tariff (FIT) model which has sustained the Indian wind industry for a very long time is now gone forever with the reverse auction model showing how inflated wind energy prices were before!

3)      Many states who had agreed to pay FIT rates much higher than the current wind energy prices are not willing to sign PPAs with the wind energy developers.

4)      Many state distribution companies continue to be in a bad financial state and are not paying wind developers their dues on time. Rajasthan and Tamil Nadu have been said to delay payments for 6-8 months and are also not willing to pay the appropriate interest charges.

Long Term Issue

Solar energy prices are already much lower than wind energy prices and the gap is expected to keep widening. India has the cheapest solar capital cost in the world even 20% lower than China. This makes wind energy uncompetitive with solar energy. There is also the problem that wind industry does not have enough good resource sites unlike solar energy which can be put up almost anywhere

Tariff based bidding has led to hyper competition with the last wind energy auction seeing a price of lower than INR 3.5/kwH or 6 cents. The new auction of 1000 MW has already seen bid of more than 3 times and is expected to see a further lowering of prices to almost INR 3/kWh or just 5 cents.

Apart from central government bidding, the other open access market is also facing trouble. In the face of dwindling revenues, distribution utilities have resorted to heavy cross subsidy charges for open access consumers. While the government had set a target of 5000 MW to 6000 MW for the current year, this target looks highly unlikely.

Source: Businessline