The Indian Wind Turbine Manufacturers Association (IWTMA), in partnership with the Global Wind Energy Council (GWEC), organised the country’s largest wind energy conference, Windergy India 2017, in April, bringing the industry together to discuss the growth, regulatory mechanisms, investments, exports, challenges and the future of the wind energy segment in India. The highlight of the two-day conference was a session on the role of the wind energy segment in the growth of the power sector. Renewable Watch presents the perspective of various stakeholders at the session (in their order of participation)…
I am very positive that we will meet the 60 GW wind capacity target much before 2022. The pace at which both the private sector and the government are responding to wind energy development in India is tremendous. Moreover, the shift from conventional sources of energy to non-conventional has further promoted wind power globally. In this era, renewable energy is going to be the primary source of energy. As far as wind energy is concerned, there are two points that need to be kept in mind. First, cost effectiveness plays a major role and India has grown rapidly in this space and come up with competitive bidding to make prices as effective and competitive as possible. Based on these trends, prices will decrease more in the near future. Second, forecasting has emerged as a key priority of the government and the industry. Market forecasting plays a major role in the development of any industry. In addition, mandating renewable purchase obligations (RPOs) and technological development for repowering old sites can go a long way in achieving the targets.
As per McKinsey’s estimates, in the next 15 to 20 years there will be huge wind capacity addition globally. The demand for fossil fuels is coming down and that for renewable energy is increasing around the world. A similar trend has been seen in India, which is driven by a strong regulatory push and technological innovation. In the case of India, if we look at the energy outlook for the next five to six years, electricity demand is expected to grow by 5.9-6.6 per cent, driven heavily by the residential segment. This demand is mostly due to government initiatives such as urbanisation and rural electrification. Moreover, the government initiated the Ujwal Discom Assurance Yojana (UDAY) in November 2015 to ensure the financial viability of discoms through a permanent resolution of past as well as future issues in the sector and to empower discoms with the opportunity to break even in the next two to three years. It is expected that renewables will account for 17 per cent of the total energy mix by 2022 in India.
Renewable energy growth in any country goes through three stages of development. The first stage is where there is a liberal feed-in tariff (FiT) and subsidy, and therefore many players and investors enter the market. This is followed by the next stage of development where the competition is fierce. In this stage, a lot of innovation takes place. Smart providers in terms of optimising technology and operations are the survivors of this stage. India has already moved into the second stage of development, with most of the regulatory framework in place, various technological developments, a move towards competitive bidding, improvements in power transmission and efforts at repowering. Thus, India is just one stage short of reaching overall maturity and the final stage of its growth. However, there are some challenges facing the industry, such as compression of returns from investors, the financial health of discoms, delays in payments to developers, grid integration of renewable energy and inadequate availability of domestic capital. We also need to develop improved forecasting measures because as compared to other markets, we are still a long-term power purchase agreement (PPA)-driven market. There is a need for a wide wholesale market with financial products that allows us to have a forward view of prices, create risk management instruments and increase transparency in the market, both on the physical and financial side, and auxiliary services.
The wind energy segment has developed into a mature and sustainable market in the past few years. The segment has provided job opportunities and has the potential for creating exports. During 2016-17, 5.5 GW of wind energy was installed. The biggest turning point in the wind industry was the move to the competitive bidding regime. In the coming year, the Ministry of New and Renewable Energy (MNRE) is planning to add more than 2 GW of wind capacity. This capacity addition will mostly be in the non-windy states so that the focus is on achieving a greater spread across the country. However, there are some challenges associated with the segment’s development. The primary one is the enforcement of RPOs on state utilities. The financial health of state discoms is another challenge that the industry has been grappling with. Although UDAY has been launched and it is expected to help the discoms recover, it will take some time for things to fall into place.
Meanwhile, we should use the experience gained from the solar industry for the development of the wind segment. Another area that the ministry has been focusing on is repowering of old wind farms. Not much progress has been achieved in this area but with new technological developments, the ministry will soon be able to address the repowering issue. Another area that will help the industry to grow is forecasting. The National Institute of Wind Energy has done some notable work in this area and is in the process of finalising the model for forecasting wind generation in India, which will help in fulfilling demand.
The segment is quite mature and fully equipped to deliver on the target of 60 GW by 2022. There has been rigorous research and development in the segment, which led to 3 GW of installations in the last quarter of 2015-16. This will not only help tap the available potential and the infrastructural capability of the country but also increase export opportunities. However, in order to build this capacity, we need to make sure that the regulations are in line with the centre’s decision of meeting the required RPOs. Moreover, state utilities need to be incentivised properly so that they can buy renewable energy in place of energy based on conventional sources. If these two issues are addressed in time, India will soon be the second largest country to be powered by renewable energy after China.
Being an investor in the wind industry, I believe the most important thing for any investor is clarity of thought. We have seen discontinuity in regulations between the central and the state governments owing to different FiTs, RPOs and measures for project allocation. Policy continuity and regulatory clarity are important aspects to ensure growth and development of the wind segment and attract more investment. With the recent shift to competitive bidding and promising regulatory reforms in terms of RPOs and UDAY implementation, meeting the 60 GW target seems feasible. Moreover, with wind-solar hybrids, repowering of old wind turbines and the development of potential offshore sites will give the required push to the wind industry.
Competitive bidding is nothing but a reflection of higher efficiencies, which translates into delivering more energy for every rupee spent. As industry participants, we are happy to move to the new environment of reverse auctions from FiTs. Competitive bidding will be highly successful if the government can ensure higher volumes of capacity to be auctioned. This looks increasingly possible now as the secretary, MNRE, mentioned that the government is planning to auction 6 GW in 2017-18. We welcome this move since we believe that if volumes are increased and we are able to achieve higher efficiencies and cost competitiveness, it will result in stronger growth of the wind segment.
Earlier, FiT was an important regime because markets were not open enough, which meant that investors had to survive within the few MWs of capacity available with high overhead costs. However, with the new regime in place, we expect the market to settle down on its own when volumes increase. In addition, it is important to highlight that the Rs 3.46 per unit tariff discovered in the first wind auction is not an indicator of permanent tariffs for the wind segment. Since 750 MW of the 1,000 MW auctioned was at the best wind site in the country, with more than 35 per cent plant load factor (PLF) levels, the tariffs fell to such a low level. Since this may not be the case everywhere, the levellised tariff will increase going forward. However, bidding will continue to be the most competitive way of exploring tariffs for the segment.
It is imperative to understand that the country has a huge wind potential and the growth must spread throughout the country and not be restricted to one part or some states. To this end, the right policy and regulatory framework is important. Since we have huge upcoming renewable energy capacities, wind or solar, managing these will be the most important task lest it becomes a challenge. As it is, wind procurement by discoms is a significant problem. To resolve this issue, proper forecasting and scheduling capabilities must be used for which the SCADA application will be necessary. In addition, managing power at every state load despatch centre may not be the solution. It would rather have to be done at a macro level.
When the world is changing and the change is against you, your tailwinds become headwinds, but that does not mean you keep complaining and do not strategise. For the past many years, the wind power industry has been a working capital bank for the discoms because our cash flows have been financing their work. However, things have improved because developers have agreed to waive payments, and also because the discoms have realised that if they do not pay, they will be penalised. Nevertheless, the industry is happy that things have at least started moving.
In this regard, I believe we should apply the payment proportionality method for discoms. Over the past two years, wind has been absolutely singled out for non-payment by discoms; the payments are virtually zero. Proportionality could prove to be a feasible idea, especially for the wind segment.
For scheduling and forecasting, unfortunately, in addition to central regulations, states are releasing their own regulations, which are not aligned with the Central Electricity Regulatory Commission’s regulations (CERC). This gives rise to ambiguity, as there are two different sets of regulations to be followed. We hope this issue will be resolved soon.
The wind energy segment has been on a roller-coaster ride for the past 25 years. From 12-17 per cent PLF in the initial years, we have now reached 40-45 per cent PLF, in locations with much inferior wind quality than before. In addition, the manufacturing base has increased considerably. We are manufacturing almost all our turbines domestically, which are of world-class quality, comparable to turbines made in Denmark or the US. This has been possible because of the government, which has ensured good quality through various mandatory certifications for turbines.
Therefore, it is time to make India an export hub, which is possible only if a strong domestic market is first ensured. Further, exports should be incentivised at the initial stages since our shipping costs are much higher and the machines are much cheaper as compared to other countries. We expect the authorities to take note of this and incentivise exports by strengthening the local market.
If you love wind, you must love the grid. For scheduling and forecasting, there are regulations in place at the central level. Forecasting may appear simple but it follows all the regulations for transactions. It also keeps track of every detail, including whose payments are delayed and why and who needs to be paid and for what. Through these processes, all transactions will be transparent. At present, we do forecasting for 15 minutes, during which details about the losses incurred by the plant are available. The Forum of Regulators, however, is always trying to find ways to better integrate power generation with the grid. Going forward, the interval of 15 minutes will be reduced to 5 minutes, which will help make the process more efficient and economical.
Another issue is that of flexibility of plants. We believe that if a plant is connected to the grid, it must have a certain amount of flexibility. Our aim is to make all power plants more flexible. Apart from this, transmission infrastructure is very important. In this regard, the Green Energy Corridors project was launched, which aims at large capacity evacuation through high voltage direct current (HVDC) transmission systems. We are looking forward to deploying HVDC for absorbing the renewable energy expected to be generated over the next few years. Further, increased interaction between distribution-level service operators and regional-level service operators will help integrate renewable power better.