June 2017

Editor Dolly Khattar

The Ministry of New and Renewable Energy’s experiment to allocate new projects through competitive bidding seems to be having a positive ripple effect. The success of the 1 GW wind capacity auction, which saw tariffs falling to Rs 3.46 per kWh, has not only validated the central government’s move to introduce competitive bidding but has also encouraged
all the states to migrate from the feed-in tariff (FiT) regime to reverse auctions.

The past one month has seen the launch of four new tenders for wind power capacity – a 1 GW tender by the Solar Energy Corporation of India (SECI), a 500 MW tender by Tamil Nadu Generation and Distribution Corporation Limited, a 500 MW tender by Gujarat Urja Vikas Nigam Limited, and a 250 MW tender by NTPC. While SECI’s is an all-India tender, NTPC
has invited bids for the states of Gujarat, Andhra Pradesh, Karnataka, and Madhya Pradesh. Rajasthan and Andhra Pradesh have also announced that they are soon likely to release their tenders.

At a time when the wind power segment has been hit by inordinate delays in the signing of power purchase agreements (PPAs) and untimely payments, and distribution firms have shied away from procuring electricity generated by wind projects, this transition to a competitive bidding regime has been received well across the value chain.

For developers and manufacturers that were sitting on a large number of sites and awaiting approvals/clearances from various state departments or signing PPAs with discoms, it is an opportunity to develop this potential capacity, some of which may be at high-wind sites.

For state discoms, the tariff at which they are buying wind power currently is much higher than the tariff quoted in the SECI auction. For these financially stressed utilities, it makes all the more sense for state governments to redraw their strategies and come up with a tender- based process of allocation.

The only flip side, albeit a major one, will be for the capacity that is already operational. Discoms may try to renegotiate the existing PPAs, which may not go down well with investors and developers. How this story unfolds, only time will tell. Meanwhile, what is clear is that the segment is in for exciting times ahead.

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