New capacity addition by the wind power sector may decline to 2,500 MW in current fiscal against that of 3,415 MW in last fiscal due to challenges faced by the segment in the two states of Madhya Pradesh and Maharashtra, rating agency ICRA said on May 30. It, however, said that the long-term outlook for the wind sector remains strong given the favourable government support and large untapped wind power potential. Wind energy sector is facing headwinds in the near term arising out of the substantial reduction in preferential tariff for new wind energy projects to be commissioned in Madhya Pradesh, the agency said in a release. In Maharashtra, the sector is facing challenges of slowdown in signing of fresh power purchase agreements (PPAs) and reported delays in payments by state-owned utility. “These headwinds could lead to a decline in fresh capacity addition to about 2,500 MW in the wind energy sector during FY2017.
“Further, the expiry of generation based incentive from March 31, 2017 and reduction in accelerated depreciation benefit…could also impact the wind power capacity addition from FY2018 onwards,” ICRA Ratings Senior Vice President Sabyasachi Majumdar said. In FY2016, the wind power sector witnessed a record capacity addition of 3415 MW, an increase of 48 percent over the capacity addition of 2,308 MW achieved during FY2015. A major portion of this capacity addition was accounted for by new projects in MP, given the attractive tariff (i.e. at Rs. 5.92 per unit) being offered in the state in the period leading up to March 31, 2016. ICRA notes that the incremental wind-based energy capacity requirement by FY’22 is estimated at about 35 GW as against the current installed capacity of 26.8 GW.
This is assuming annual energy demand growth of 6 percent, renewable purchase obligation (RPO) at 12 percent by FY’22 and wind as a renewable energy resource contributing to a dominant share (75 percent) in meeting the non-solar RPO requirement on an all India basis. ICRA however notes that the sector is facing challenges due to the continuous variation in RPO norms across the states as well as the limited RPO compliance. The RPO norms continue to vary across the states in terms of both, quantum of RPO varying from 2 percent to 12.50 percent in FY’2017 across the states and also the period of RPO trajectory with only six states stipulating RPO norms till FY’2022.