Wind energy players may be forced to bring down costs further with the government insisting on reverse auction for one gigawatt (GW) projects.Reverse auction is a price discovery mechanism where a project is offered at a base tariff by an authority. Developers bid at or below the base rate. The lowest bidder secures the right to develop the project.The Centre has tried this model in solar power as it tendered out huge capacities for development to meet the target of 100GW capacity addition by 2021-22.
According to a report from ICICI Securities, solar reverse auctions saw massive competition among domestic and international developers, driving down tariffs by around 76 per cent.The government recently notified a scheme for 1GW wind power projects, which will be connected to the Central Transmission Utility. These projects will be awarded through reverse auctions. The Centre is aiming for 60GW wind power capacity by 2022, of which 45 per cent have been achieved.
The decision comes despite concerns among wind power players that reverse bidding could affect the internal rate of return of projects.They also pointed out that compared with solar power, the operating conditions for wind power is difficult in terms of site selection even as the time frame for feasibility studies is much longer.”In our opinion, the scarcity of sites and fixed-return regime are the main reasons for wind turbine generator manufacturers to focus their R&D efforts on capturing wind power potential at greater heights (taller towers, larger blades etc). The imminent implementation of reverse auction mechanism for awarding wind projects will see the industry strive towards cost economisation,” the report added.
The brokerage further said that although India has met 45 per cent of the 60,000MW wind power target, achieving the rest seemed difficult as removal or reduction of incentives such as GBI (generation-based incentive) and AD (accelerated depreciation) and reduced willingness of states to support costly renewable power would result in slower capacity addition.According to the government’s latest estimates, India’s onshore wind energy potential is 302GW, which is almost the current installed power capacity and more than 11 times the current wind capacity.Gujarat has the highest wind power potential of 84.4GW, or 28 per cent of the country’s potential, followed by Karnataka (55.9GW), Maharashtra (45.4GW) and Andhra Pradesh (44.2GW).
According to a recent presentation made by wind turbine maker Suzlon Energy, 2015-16 saw the highest annual wind capacity addition over the last two decades. The capacity rose to 3,415MW from 2,312MW in the previous year and is estimated to further rise to 4,300MW in the current fiscal.