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Wind turbine firms face headwinds with weak visibility on orders

Wind turbine firms face headwinds with weak visibility on orders


New Delhi: India’s wind energy capacity addition in the current financial year remains adversely impacted due to migration from feed-in tariff to bid tariff route and with a very limited progress seen in tie-up of incremental wind energy Power Purchase Agreements (PPAs) through bidding route so far, research and ratings agency ICRA said. “As a result, the credit profile of wind turbine generator (WTG) Original Equipment Manufacturers (OEMs) would remain under pressure due to sector specific headwinds in near term. In this context, clarity from Central Electricity Regulatory Commission (CERC) on inter-state connectivity issue for projects under SECI scheme by MNRE in time-bound manner remains critical,” said Sabyasachi Majumdar, Senior Vice President at ICRA. The wind energy sector is undergoing a transition phase from feed-in tariff regime to a bid based regime, post the success of a reverse auction under the 1,000 MW scheme by Ministry of New & Renewable Energy (MNRE) in February 2017 with bid tariff discovery at Rs 3.46 per unit.

Power distribution utilities are shifting from the existing feed in tariff (FIT) regime to the bid route with utilities in Gujarat and Tamil Nadu announcing bidding plans for procurement of wind energy; the auction for wind energy (500 MW) by utility in Tamil Nadu has been recently concluded with discovered tariff of Rs 3.42 per unit, which is the lowest discovered wind energy tariff so far, while the same by utility in Gujarat is still pending. In case of MNRE’s plan for second bidding round of 1,000 MW for award of wind energy projects, the bidding date has been recently postponed to October 4, 2017 pending clarity from CERC.

The alignment of Renewable Purchase Obligation (RPO) norms for state owned distribution utilities by SERCs in respective states in line with the policy targets is a critical factor. This will further enable the incremental demand for wind energy to meet the RPO compliance, also given that tariff competitiveness of wind energy has improved significantly in bidding route which is structurally positive for the sector in the long run, according to ICRA. Also, the resolution of the PPA renegotiation or cancellation issue, as seen in few states recently, remains crucial to retain investor interest in the sector. On the positive side however, the long term demand drivers remain intact due to an improved tariff competitiveness of wind and solar energy against conventional energy sources, large untapped renewable potential and favourable policy and regulatory support.

Anand Gupta Editor - EQ Int'l Media Network


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