The wind power segment in India has been facing persistent challenges since the change in tariff regime from feed-in tariffs to competitive bidding. While the direct impact has been the discovery of lower tariffs because of aggressive bidding, the other key challenges pertain to transmission, land acquisition, payment delays and regulatory environment. These issues have added to the woes of industry stakeholders, and have led to a decline in tendering activity and capacity addition. At the 10th Edition of the “Wind Power in India” conference organised by Renewable Watch, industry stakeholders talked about the key concerns of developers and original equipment manufacturers (OEMs), expectations from the government and the future outlook. Edited excerpts…
The concerns of wind OEMs remain the same. The industry has a turbine manufacturing capacity of 10 GW per annum. However, in the past three years, the installed capacity addition in the country has been just around 5 GW. In the most optimistic scenario, just 2 GW of capacity is installed per annum, which is just 20 per cent of the manufacturing capacity in the country. This is a grim situation not only for the stakeholders in India, but globally as well.
Prior to 2017, the manufacturing capacity was used for the domestic sector. This was the year in which the accelerated depreciation and generation-based incentives were withdrawn. By 2017, the industry manufactured over 5.4 GW of turbines, with limited exports. Since 2017, exports have risen steadily, reaching over $800 million per annum, due to low domestic demand. This trend is expected to continue as most of the OEMs have a very small local business. Having said that, we are proud to champion the Make in India initiative. The level of domestic manufacturing of wind turbines currently stands at 70-80 per cent. Another big positive has been the low cost of wind turbines as compared to global prices.
The government has a target of setting up 60 GW of wind power capacity by 2022 and 140 GW by 2030. As of end 2020, the installed wind capacity in India stands at around 38 GW. This translates into 22 GW of installations required in the remaining two years to meet the target. Crucial questions need to be asked. Do we have the demand for the offtake of this capacity? Do we have the grid infrastructure for the evacuation and integration of the capacity? Are investors ready to invest in 11 GW of wind capacity per annum? All these questions concern not only OEMs but also the other stakeholders in the country.
According to me, the key issue in the Indian wind power segment is that we have only one procurement model, that is, centralised procurement with reverse bidding. The wind power segment needs a multi-procurement model. If that does not happen, it will be impossible to achieve the 60 GW target by 2022.
The first 20 GW of the wind installations in the sector were for retail investors. After 2017, state procurement has not been encouraged and, in fact, states curtailed policies on wheeling and banking. It is unfortunate that in some states there have been cases of severe curtailment of wind power and issues of payment delays. Since the bid size for states is 25 MW and that for central procurement is 50 MW, the retail segment will be eliminated.
There are two more issues with state bids. One, the tariffs for state tenders will be higher than the tariffs discovered in the SECI tenders. Naturally, the state utilities will be unwilling to procure power at a higher tariff, having tasted blood with low tariffs. Therefore, unless a special disposition is there for projects of capacities less than 25 MW (retail investors), challenges will remain in the wind segment.
Two, interstate captive and group captive projects are not being promoted. Today, the talk about captive is only on paper as discoms are discouraging banking of power. To solve this issue with the discoms, all the stakeholders should come together and discuss a holistic strategy.
Since 2017, the average capacity addition in the country has been around 1,700 MW per annum. The capacity tendered by SECI (Tranche I to Tranche IX) is 13,900 MW, awarded capacity is 10,300 MW, while actual capacity commissioned is only 2,400 MW. Also, after the introduction of reverse bidding at the national level, falling tariffs and aggressive bidding led to project development only in Gujarat and Tamil Nadu. We had been recommending that the government go for state-specific reverse bidding. If independent power producers were uncomfortable bidding for states with less windy sites, then perhaps two states – one with a good wind resource and another with less windy sites – could be clubbed. With this, reasonable tariffs could have been achieved.
In terms of technology, India has done significant research and development (R&D) to increase wind turbine efficiency and output. With the fall in tariffs, wind OEMs had to work a lot to bring in new variants of the old turbines with better technologies. Apart from falling tariffs, the other key point is that projects are moving from the best wind sites to lower wind terrain. This requires longer hub heights and blades and larger capacities of turbines. Today we have turbines that can help in reaching a capacity utilisation factor of 38-40 per cent.
Going forward, the repowering of old wind turbines is an attractive opportunity. India has a good wind potential at higher heights, which can be harnessed with the use of the latest wind turbine technologies. However, the state governments are resisting repowering. In Tamil Nadu, some turbines have been operating for more than 30 years. In my view, after the end of the certified life of the wind turbine, it should be necessarily disengaged, owing to performance or safety concerns. Another big opportunity is the development of wind-storage and wind-solar storage projects.
We view the wind power segment from a developer’s perspective. While looking at the overall demand scenario in the country, we can see that the demand has been increasing. Further, there is a difference between the peak demand and the baseload demand, which is also increasing. We are looking forward to a future scenario where renewables contribute over 450 GW to the power mix by 2030, which will be about 60 per cent of the total generation capability. A component of this renewable energy will also form the baseload at that stage. When one talks about renewable energy becoming the baseload, wind becomes an essential part of it. In order for renewable energy to become part of the baseload, we would require a combination of wind, solar and energy storage. The wind component needs to be very high in this combination. If it only has a solar component, there will be significant curtailment in the peak time and loss of power. If a significant portion of wind is added to the mix, the storage requirement will go down dramatically. We need to look at an integrated combination for the future, which can replace thermal power as the baseload.
Going forward, we need to aim for the conversion of renewable energy to baseload energy and look at the ideal mix required for that purpose. Another aspect we are looking at is repowering, or remodelling, of existing wind projects. Wind projects that were set up about a decade ago are operating at good wind sites, although with low capacity turbines. If we remodel the existing projects and install high capacity wind turbines, we will be able to generate more power with a limited footprint. Repowering coupled with the integrated renewable energy projects can pave the way forward for the wind power segment in India. This will help increase the share of wind power in the energy mix, expedite the development of the segment and address the market needs.
When we look into remodelling of wind power plants, we must also look at how much capacity the grid stations within states can support during the evacuation of electricity. We need to look at the provisions available for repowering or remodelling of existing plants. As of now, there are no clear guidelines or provisions on the regulatory front. Some policy or scheme must be introduced by the government to support repowering. Once such a scheme is put in place, there may also be an increase in mergers and acquisitions since there is a huge potential to upgrade plants at a competitive cost. The repowering of plants by replacing lower capacity turbines with 2-3 GW capacity turbines could help reduce costs by almost 10-15 per cent. It is a very cost-effective proposal, but there need to be some guidelines and stipulations in the scheme in order to encourage people.
The current market trend of reverse bidding is not very encouraging. We have seen similar trends in hydropower and thermal power as well. As the bidding process drives tariffs down, the focus shifts to acquiring a comfortable share in the market, while the building process slows down. We have seen this in the renewable energy sector as well. The growth of renewable energy development is slowing down. There is some link between the bidding price and the slowdown in capacity development. Wind power is viable as the capacities of wind turbines are rising with technological developments. The capacity and efficiency of wind turbines are expected to rise further, which will continue to make wind power projects competitive in the renewable power market. However, to increase the share and satisfy the market needs, we need a combination of wind, solar and storage.
The immediate wind power market surrounding India is South Asia. South Asia has a significant potential for wind energy. Since we are very cost competitive, we need to expand to the South Asian market, which is growing fast. By expanding in the South Asian market, the growth potential of Indian manufacturers can be utilised optimally. Although the Indian market is slowing down, Indian manufacturers can diversify into the wind power markets of other South Asian countries to offset the contraction in domestic demand. Greenko is also looking at ventures abroad with the aim to install the integrated model in other countries as well. We are looking at sites across other countries with growing economies.
The wind power segment is in a very complex situation as of now. On the one hand, OEMs are not doing well in the market. On the other hand, there is a backlog of capacity that has to be commissioned. It has been highlighted that after the SECI IV auctions, not much development has happened on the ground. In Gujarat, earlier the state denied access to government land for the development of projects, and now even private land is challenging to procure. Currently, the power transmission infrastructure has been set up at most places, but land procurement is still challenging. The infrastructure development cost is not fully in control as developers, and sometimes most of the IPPs pay an additional 50 per cent for land and other infrastructure. The most time-consuming and tedious task for wind projects is land procurement. The steps involve identifying the land (it should not be suitable for agriculture), and obtaining legal diligence. It takes six months to more than a year for the procurement of land. Although SECI and the other bidding agencies give 18 months for project development, due to land procurement issues it becomes very difficult to accomplish it in this timeline.
Apart from this, new issues have emerged due to the pandemic. After the lockdown, many industrial loads were zero in most of the states. This led to a fall in power demand, impacting the renewable energy sector. The MNRE’s decision to have must-run status for renewable energy helped the developers a lot. The curtailment hours were reduced in states such as Andhra Pradesh, Telangana and Tamil Nadu. The lockdown also led to a situation where the labour force was unemployed. Although we were providing food and shelter to the workers, they started to move away from the site. The other problem was delays in the implementation of the projects. Luckily, the MNRE announced a time extension of five months for project implementation.
Another key issue is payment delays in most of the states. In fact, some states have not paid for more than 9-10 months. On the one hand, our projects are delayed by four to five months because of land procurement and logistics issues caused by the pandemic. On the other hand, we are not getting timely payments from our existing projects. Even before the pandemic, the discoms were unable to pay because of the lack of funds, and now the issue has become even more severe.
Due to falling tax collections, the state governments are not able to provide timely subsidies to the discoms and free electricity to the poor and farmers.
Another persistent issue has been the curtailment of electricity. In Telangana and Andhra Pradesh, the developers are seeing some curtailment. Recently, in Telangana, there was 100 per cent curtailment for all the solar parks. In the wind power segment, some curtailment is taking place in Andhra Pradesh.
The high capital cost of wind projects is another challenge for developers. In the solar power segment, the cost of solar panels has fallen consistently and is now economical. However, in the wind power segment, higher investments are needed to procure turbines with a bigger rotor diameter in order to reach a plant load factor of 40 per cent. Such investments are needed as most of the sites with high wind speeds have been utilised.
Many Indian states have favourable wind policies. Recently, some OEMs have also opened R&D platforms in India. In addition, wind projects require just 20-30 per cent per MW of land as compared to solar projects. The country has many resourceful sites for the development of wind farms. Therefore, according to me, the future outlook seems bright for the wind power segment.