Wind Energy in World’s third largest market to see a boost from higher state tariffs and GBI

Wind Energy in India has recently seen a sharp dip in investment and gloominess amongst the wind energy companies. Top global wind turbine companies like Gamesa have cut jobs while Vestas is looking to pull out from India altogether. India’s biggest wind market Tamil Nadu which accounts for more than 50% of the total wind power capacity has seen the sharpest decline. This made wind developers become cautious and even seen exits of top executives. However things are going to change soon as India plans to reintroduce Generation based incentives (GBI) which was discontinued. Some states are also revising the tariffs for wind power which had become too low to be remunerative. Andhra Pradhesh which has recently unveiled a 1000 MW solar energy policy is set to increase the wind power tariffs by more than 30% . The new electricity tariff will be Rs 4.70/ Kwh up from Rs 3.50/ Kwh. Note most southern states are suffering from massive power deficits and blackouts.

GBI to be Reintroduced in India

The Indian Wind Industry has been facing problems in 2012 and installations have fallen off sharply as two of the most popular subsidies have been taken away by the Government in March 2012. This coupled with local factors particularly in the biggest market of Tamil Nadu has taken the sheen of the wind energy industry.

However after a huge effort at lobbying , the Government has agreed to reintroduce Generation Based Incentive (GBI) of 80 paise per unit. Note GBI is a kind of feed in tariff given to wind energy production. Instead of a fixed rate, the Government gives 80 paise to the wind farm developers as an incentive. This is over and above what he gets by selling the power to the state electricity board. Accelerated depreciation however is not going to return and seems buried for good.

Wind Energy Industry of India in 2012, finds going tough as Local bodies start to Tax Wind Turbines in Tamil Nadu

The Indian Wind Industry in 2012 is finding the going a bit difficult after a record breaking year in 2011. First the accelerated depreciation subsidy which has been around for a long time making India the 5^th largest wind energy producer, has been removed. Second the GBI incentive scheme too was removed so that the Wind Energy industry depends on the Renewable Energy Certificates (REC) scheme which is quite fickle and market based. Now the Wind Energy Industry finds itself facing a new set of problems in its bastion of Tamil Nadu which accounts of almost 1/3^rd of the total wind energy capacity in the country. Tangedco, the distribution utility is threatening to remove the “banking facility” of the wind energy producers which allowed them to sell power at a time when the electricity prices were high.

Problems Faced by Indian Wind Industry

Wind Power Plants in India are finding the going tough in 2012. Wind power players are also facing tactical problems like collecting of dues from the state distribution utilities. Most of the state power distribution companies are saddled with massive debt and payment to suppliers is always a perennial problem. In the case of the wind energy developers, the problem of working capital has become acute with payment delays of more than a year.

Wind Companies are also facing capital escalation of costs with the prices of materials like steel and cement showing a sharp appreciation leading to a 30-40% increase in the cost of wind farms. The rise in costs with a fall in electricity tariffs are squeezing the wind energy developers. Wind energy installations in Tamil Nadu which accounts for almost 40% of the wind capacity in India, has already dropped by a startling 70% in the first quarter of fiscal 2012. With the industrial conditions getting worse it is expected that the trend will continue and wind capacity could drop to just 1000 MW from 3000 MW last year. This would have a devastating effect across the wind equipment supply chain. Gamesa has already dropped its plan of building a wind equipment factory in China.

Hindu

In a major boost for wind power energy generation, the Andhra Pradesh Electricity Regulatory Commission has fixed Rs 4.70 per unit tariff for 25 years for firms which sign up power purchase agreements by March 31, 2015. The issue of tariff was proving to be major hurdle for wind power producers. Developers expressed concern that the earlier tariff was unremunerative as it was not bankable. Several leading players in the country had signed up to set up new plants but were unable to do so due to lower tariff structure. Generating companies will have to bear the expenses to evacuate power generated to the grid sub-station.