Siemens Gamesa Renewable Energy has achieved the commissioning of 5 GW of wind power capacity in India. Markus Tacke, global chief executive officer, Siemens Gamesa Renewable Energy, and Ramesh Kymal, Onshore CEO for India, Siemens Gamesa Renewable Energy, recently spoke to Renewable Watch about the opening up of the Indian wind market in the post feed-in tariff era and the company’s plans in the face of increased competition in the segment. Excerpts…
How do you see Siemens Gamesa India in the global scheme of things?
Siemens Gamesa India is an integral part of the global company and India is the second most important market for the Siemens Gamesa Group in terms of numbers. Siemens Gamesa has three distinct market focal points – onshore, offshore and services. In the onshore segment, India has a stand-alone position, given the huge size of imports and exports that it ensures for the company. India has been of particular importance to Gamesa owing to its share in the company’s revenue stream. India’s importance and market size can be ascertained by the fact that we are in the process of launching a dedicated product for the Indian market through a joint effort by the company’s global and Indian units.
Considering that the government will auction 10 GW of wind power capacity every year, what is your opinion on the short- and long-term sustainability of the segment?
I believe that the wind power market is here to stay because the government has realised that wind power is more reliable, and wind equipment manufacturing is more aligned with the Make in India initiative, unlike the solar power segment where most of the capital equipment is imported. This segment also provides clean engineering, which is significant for the country’s manufacturing segment. Moreover, the fundamental challenge is that we do not have oil or gas, we have coal which is of poor quality, and we rely largely on imports for our energy security. Of late, oil prices have risen, which means the country’s balance-of-payment issue is also becoming increasingly critical. Given these factors and the fact that wind power generation is an entirely domestic industry without any capital imports, the 10,000 MW of wind power projects to be auctioned every year is definitely sustainable.
When do you expect to commission the next 5,000 MW?
We have a healthy project pipeline from the existing auctions. With the new offerings being introduced now, we expect to regain our previous position of orders because we do not want unprofitable growth in India. We are not competing for market share, but we wish to be the leader in multiple aspects of technology, quality, reliability, operations and maintenance. And in the process, if we become the largest in terms of volumes as well, we are not going to say no to that.
Do you feel that competitive bidding has dampened the growth of the wind industry and the market for original equipment manufacturers?
We welcomed these auctions and accepted competitive bidding as a global reality. Feed-in tariffs had a certain purpose in the market but now, with these auctions, we feel there is greater transparency. It was initially a dampener because of the lack of visibility, but now that we have a trajectory to look at, we have planned our strategy in a way that will help us succeed in any upcoming auction.
In addition to the central government’s pipeline, do you see state governments tendering wind power capacity in a similar way?
That is the way forward for the development of wind power in India. A kick-start has been given by the centre through provisions like interstate transmission of power, open access and other elements. But the last few auctions saw capacities being tendered in only two states, Tamil Nadu and Gujarat, and in specific areas where the plant load factors are greater than 40 per cent. This means that many states are not yet a part of the competitive bidding process for wind energy. This disrupts the entire process in more than one way.
As manufacturing facilities are located in various states, transporting equipment to the states where auctions have taken place adds to the cost of the project. This defeats the very purpose of having manufacturing facilities spread across India to reduce logistics costs.
However, the government has indicated that either a certain proportion of the centre-based auction will be meant for power supply in the states or the states will be encouraged to bid capacities to fulfil their own demand. In fact, three auctions have already taken place – in Gujarat, Tamil Nadu and Maharashtra – and now Tamil Nadu is planning to launch a bigger auction in the near future to meet its renewable purchase obligation requirements.
Do you see profitable options in solar-wind hybrid projects?
Hybrid projects may not be viable under the present circumstances. The existing wind farms are being converted into hybrids by installing solar panels, and the hybrid power is then being sold to third parties, a provision that is available in only a few states as of now. But we need to have a clear tariff policy for the solar and wind hybrid segment, and clarity on whether there is going to be common bidding or separate bidding for these projects.
The fact is that we are still not manufacturing any significant quantity of solar panels in India. So, the common bidding process is expected to happen only when there is a level playing field for solar and wind manufacturers.
What are the tariffs like for hybrid power and which are the states that have enabling policies for this segment?
Karnataka has a policy for hybrids and the tariffs are going to vary because the power is going to be sold to a third-party consumer, which today stand at about Rs 7 per unit in Karnataka for an industrial consumer. As of now, no cross-subsidy surcharge is levied for solar in the state, which makes it quite a lucrative proposition to produce solar power, feed it into the grid through a separate meter, and sell it to a third party.
Going forward, even if cross-subsidy surcharges are added, it will still be a good proposition as we are making use of the existing infrastructure for the hybrid project. Eventually, hybrid in India will also follow the global trajectory and include energy storage as a component.
Are you also interested in the recent offshore wind capacity that the Government of India has announced?
The government has announced its development plans for 1,000 MW of offshore wind power capacity. We are certainly interested in exploring the opportunity as we are the global market leaders in this space.
What is the difference between Siemens and Gamesa as separate entities and Siemens Gamesa?
The merger that took place in 2017 was of two complementary companies from a market standpoint. Gamesa was strong in the southern part of Europe, which has a strong energy economy, as well as in the US and India. Siemens had a strong presence in other parts of Europe, more in the high-wind areas, and in the offshore segment. So, from a market and product portfolio perspective, the two companies complement each other well. Bringing Siemens and Gamesa together was an obvious move as it was known that consolidation would eventually happen in the industry. The merger took place in a highly dynamic market environment, as seen in India as well, which has affected certain assumptions on how this company should be started off.
A significant drop in power purchase agreement prices, not only in India but around the world, has put the management under some stress. However, the zeal and the dynamic environment have quickly positioned the company in a forward-looking manner.