The moves follows after wind energy companies chose either Tamil Nadu or Gujarat for power plants
CHENNAI: The government has accepted a demand from the wind industry for ‘sub-station-wise’ capacity auctions, as opposed to the current practice of letting the bidders put up their projects at any place of their choice in the country. “Yes, we are going to do that,” Anand Kumar, Secretary, Ministry of New and Renewable Energy told BusinessLine, when asked if the government would accept the proposal.
Asking wind energy companies to quote a price of their electricity if they were to put up their power plants in places where they would connect to a particular electrical sub-station is likely to enable wind projects to come up across the country.
This move comes after, in the five capacity auctions conducted by the SECI, all the winning bidders have plans to put up their wind projects only either in Tamil Nadu or Gujarat – being the windiest states.
Either TN or Gujarat
Until 2016, wind projects used to be set up in one of the nine windy states in the country. The energy companies would get paid for their electricity at rates – called ‘feed-in tariffs’ – fixed by the respective state electricity regulatory commission.
But in January 2017, the government held the country’s first capacity auctions, brought in ‘competitive bidding’ calling upon energy companies to quote prices at which they would sell electricity. This resulted in tariffs falling to (the then) historical low of Rs 3.46 a kWhr. In contrast, the least tariff energy companies got was Rs 4.16 a kWhr, from Tamil Nadu.
Ever since, the ‘feed-in tariff’ became passé, and ‘competitive bidding’ became the norm, the country has around 34,650 MW of installed capacity of wind, and all but 250 MW has come under feed-in tariffs. SECI, which is mandated to develop renewable energy in the country, has since conducted five auctions, for 7,200 MW. But the wind energy companies chose only Tamil Nadu or Gujarat.
The two states have also conducted their own auctions – Tamil Nadu for 500 MW and Gujarat for 1,000 MW. None of the other states, except Maharashtra which auctioned 500 MW, have had projects coming up. Even the windy states (Rajasthan, MP, Telangana, Karnataka and Andhra Pradesh) have preferred to buy power from SECI, knowing that such power would be cheaper than that from wind projects set up in those states.
In August, the country’s largest power company, NTPC, tendered out for 1,200 MW of capacity and the winners are again expected to put up their projects in Tamil Nadu or Gujarat. All projects coming up in two states has created a congestion problem, as all projects compete for the same transmission infrastructure.
The fifth round of auctions of SECI, for 2,000 MW, had to be cancelled as the response was lukewarm, due to industry’s concerns over connectivity. SECI later revised the auction for 1,200 MW. Similarly, NTPC too had wanted to auction 2,000 MW, but decided only for 1,200 MW.
Thus, while the country has seen healthy auctions of close to 10 GW of capacity in the last 18 months, all the installations are happening only in Tamil Nadu or Gujarat. On the other hand, the industry has estimated that there is about 25,000 MW of transmission capacity lying idle in various substation in the other states.
Tulsi Tanti, the present Chairman of the Indian Wind Turbine Manufacturers’ Association, has been pressing for substation-wise auctions in future – which, according to Secretary Anand Kumar, the government is okay with.
The flipside is, substation-wise auctions would inevitably lead to higher tariffs. Tamil Nadu’s auction for 500 MW in August 2017 was the last that saw tariffs of more than Rs 3 (the highest quote in that auction was Rs 3.45 a kWhr, of Neyveli Lignite Corporation, which wanted to put up a 100 MW project.) Ever since, not one tender has been won on a quote of more than Rs 3 – in facts, offered tariffs have been way less than that, going as low as Rs 2.43. But substation-wise bidding could change that.