New Delhi: India’s wind power tariff fell to a record low of Rs2.64 per unit in an auction conducted by state-run Solar Energy Corp. of India (SECI) for 1 gigawatt (GW) of wind power contracts that ended in the wee hours of Thursday morning.
While ReNew Power Ventures Pvt. Ltd and Orange Sironj Wind Power Pvt. Ltd bid Rs2.64 per kilowatt hour (kWh) to win contracts for 250 megawatts (MW) and 200MW each; Inox Wind Infrastructure Services Ltd and Green Infra Wind Energy Ltd bid a tariff of Rs2.65 per unit for securing contracts of 250MW each, said a person aware of the development, requesting anonymity. Adani Green Energy (MP) Ltd also bid Rs2.65 per unit to win a 50MW contract.
These firms quoted the price at which they will sell electricity to win contracts under the tender that received demand for three times the grid-linked capacity being sold.
These tariffs are lower than the average rate of power generated by coal-fuelled projects of India’s largest power generation utility, NTPC Ltd, at Rs3.20 per unit. The price gap between electricity generated from thermal, solar and wind projects has been bridged. This is primarily due to costs of solar modules and wind turbine generators falling by 80% and 20%, respectively, over the past five years.
A SECI spokesperson couldn’t be immediately contacted.
All the nine firms in the fray for the reverse auction bid below the earlier recorded low of Rs3.46 per kWh for another 1GW tender in February floated by SECI. In a reverse auction, the developers are chosen on the basis of the lowest prices offered.
The aggressive bids came in the backdrop of India’s wind sector transitioning from a feed-in tariff regime to tariff-based competitive auctions. Feed-in tariffs ensure a fixed price for wind power producers.
The winning prices are not an outlier, as was evident by the bids placed by Adani Green Energy (MP) Ltd, BLP Energy Pvt. Ltd, global private equity fund Actis LLP’ Sprng Energy Pvt. Ltd, Hero Wind Energy Pvt. Ltd and ReGen Powertech Pvt. Ltd, which also bid low tariffs.
In such a scenario, obtaining finance at the lowest cost has become key to success. India has also witnessed record low solar tariffs of Rs2.44 per unit in May which firmed up to Rs2.65per kWh in an auction conducted by the Gujarat government last month.
SECI received bids for three times the grid-linked wind capacity on offer, Mint reported on 14 July. In comparison, the February auction received 2.6 times the quantum of bids offered.
The latest bids were placed at a time when concerns have been expressed over some states looking to renege on their offtake commitments for projects awarded at a comparatively higher tariff.
Apart from the tariffs for executed power purchase agreements facing a downward tariff pressure from the states, the projects are also facing other impediments such as curtailment of wind power procurement, payment delays and no guidelines for state-level wind bids, according to the Wind Independent Power Producers’ Association (WIPPA).
According to the lobby group, these issues will create a new set of non-performing assets (NPAs) of Rs20,000 crore in India’s wind sector with Indian banks stopping funding to these projects due to the concerns mentioned above.
However, investors’ attraction with India’s emerging green economy continues. A case in point being a joint venture of French energy firm Engie SA and Dubai-based private equity firm Abraaj Group which plans to invest around $1 billion to build a 1,000MW wind power platform in India.
India has a target of installing 175,000MW of renewable energy by 2022. Of this, 100,000MW is to be generated by solar projects and 60,000MW by wind projects.
To help achieve this ambitious target, India’s newly appointed power and new and renewable energy minister Raj Kumar Singh announced last month that he has instructed that 20,000MW each of wind and solar power contracts be auctioned by December.