The rise of the Indian wind power industry has been propelled by a confluence of factors, including an evolving policy framework, emerging market dynamics, and a growing appetite for green power generation and consumption. India had 41.2 GW of installed wind power capacity as of August 2022. The Global Wind Energy Council (GWEC) India recently released a report titled “Accelerating Onshore Wind Capacity Addition in India to Achieve the 2030 Target.” According to the report, 9.3 GW of onshore wind capacity was under construction as of July 2021. Meanwhile, 19.4 GW of new wind power is anticipated to be installed during the next five years, from 2022 to 2026. Despite considerable improvement in recent years, these anticipated volumes are not enough for India to meet its aim of 110 GW (excluding 30 GW of offshore wind) of wind power by 2030.
The National Institute of Wind Energy (NIWE) estimates that India can generate 695 GW of wind power at a height of 120 metres above ground level (agl). A list of states with high capacity utilisation factors (CUFs) and their estimated wind power generation potential is given in Table 1. According to the NIWE, the combined wind power generation potential in high-CUF states, considering the wasteland alone, is 336.34 GW. In high-CUF states, this corresponds to a technical potential for onshore wind that is over eight times the country’s current installed wind power capacity and the onshore objective for 2030.
Auction regime for wind power
For the purpose of procuring power from grid-connected wind power projects in 2017, the Ministry of Power issued guidelines for a competitive auction process based on tariffs. The objective of these guidelines was to standardise the wind energy procurement process and define the roles and duties of important stakeholders, in addition to increasing transparency and introducing competition in the market. India’s e-reverse auction process for wind power procurement has the following design elements: (a) tendering agencies, (b) tender type, (c) eligibility criteria, (d) submission of bids, (e) selection of successful bidders, (f) pricing rule and (g) penalty.
This report evaluates the performance of India’s wind energy auction regime based on two parameters: cost efficiency and effectiveness.
Cost efficiency: In 2017, the first-ever wind auction in India yielded a tariff of Rs 3.46 per kWh. This was lower than the lowest feed-in-tariffs (FiTs) found in Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan and Tamil Nadu during both the previous and the same fiscal year. As a result, it is certain that the switch from the FiT regime to the reverse auction system has successfully lowered the tariffs for wind generation projects.
The first Solar Energy Corporation of India (SECI) auction of 2017 revealed a tariff that was 9.42 per cent lower than the lowest FiT in use at the time. States consequently started to see the advantages of the auction regime. Tenders from the states of Gujarat, Maharashtra and Tamil Nadu helped in the expansion of installed wind power capacity. In SECI and state bids, the trend of declining wind power tariffs persisted.
Effectiveness: The effectiveness of a renewable energy auction regime is ascertained through an actual increase in installed capacity. SECI has awarded 20.72 GW of wind and hybrid/RTC/peak power capacity bids, with 7.92 GW currently under development. According to the report, SECI Tranche II and Tranche III projects that were granted in 2017 and 2018 are still in the “under-construction” phase. According to the July 2021 report of the CEA, all of the allocated capacity for the wind auctions managed by SECI, namely Tranches V to XI, is being built. Of the allotted capacity, SECI II (27 per cent), SECI III (79 per cent), SECI IV (79 per cent), and SECI VI (79 per cent) are under construction.
The majority of the wind power projects that SECI has auctioned show the challenge of delays in completing PPAs/ power sale agreements. Several persistent issues have slowed down the speed of utility-scale wind generating project completion, increasing project timelines and, in turn, project costs. Some of the major impediments include land allocation, business sustainability, PPA sanctity and infrastructure bottlenecks.
Pace of installation and commissioning
The availability of land and grid connectivity for power evacuation are not guaranteed by the bidding procedure. As a result, there are delays in a number of SECI projects. The present rate of project commissioning and auctions must rapidly gain momentum in order to meet the 2030 wind installation target. Between 2017 and 2021, SECI tendered 3.5 GW of yearly wind capacity on average (excluding hybrid bids), and 1.6 GW of annual wind-solar hybrid/RTC capacity on average between 2018 and 2021. However, between 2022 and 2029, 8-10 GW of yearly tender capacity will be needed to develop 70 GW of onshore wind power by 2030.
India’s 2030 onshore wind objective can be met on schedule if legacy challenges that current projects are dealing with are resolved, appropriate tariff modifications are made, and appropriate risk mitigation measures are put in place.
Non-solar RPO compliance
The State Electricity Regulatory Commissions were mandated by section 86 (1) (e) of the Electricity Act, 2003 to promote renewable energy by imposing a certain percentage of clean electricity from distribution licensees. In addition, the government has made provisions for the purchase of energy from hybrid projects to fulfil solar RPOs and non-solar RPOs in proportion to the hybrid plant’s rated capacity of solar and wind power, respectively.
Summary of recommendations
Based on the aforementioned factors and challenges, it is evident that reassessing the current system for competitive bidding is imperative to ensure cost effectiveness. Also, performance effectiveness is essential to meet the required capacity addition target by 2030. Given the present challenges to India’s wind sector’s growth, viewpoints from the Indian wind industry, and global onshore wind auction design experience to date, GWEC India proposes the following recommendations to strengthen the current auction regime:
- Promote complementarity and avoid competition: Both solar PV and wind power projects face challenges related to transmission infrastructure, power evacuation and land acquisition. However, the complexity of technology deployment and the customization necessary to meet site-specific requirements in the case of wind projects distinguish these technologies from each other. State regulatory agencies must therefore implement technology-specific approaches and development pathways appropriate to each technology and fuel type.
- Strengthening policy support for wind projects and wind manufacturing: First, compared to projects in high potential areas, wind projects in medium-low potential sites are likely to have relatively low CUFs. Additionally, in order to achieve the benefits of wind parks, the government and industry stakeholders must strengthen their relationship. Second, the replacement of outdated and inefficient turbines with higher capacity turbines must be prioritised through the development of win-win financial and business models for all stakeholders. Third, a thorough state wind energy roadmap that defines time-bound state targets, incentives to assist wind projects as well as the manufacturing sector, policy measures, and institutional measures will strengthen the state’s readiness to utilise its potential for wind energy.
- Strengthen dialogue between industry and government: The development of a more efficient auction design can be assisted by increased communication, information sharing, and knowledge exchange between the centre and state governments as well as the global and Indian wind sector. Therefore, improving the processes for consultation that are incorporated into the tendering schedule, criteria and selection methodology will enable increased involvement and transparency, resulting in more effective competition and auction performance.
By removing the requirement for FiTs for large-scale wind projects, auctions have reduced the financial burden on the government. However, since the implementation of the reverse auction regime, the Indian wind industry has experienced a significant slowdown, which is reflected in lower margins across the value chain due to a persistent decline in annual capacity addition. This is true even though relatively competitive tariffs were discovered through the reverse auction mechanism.
Net, net, even with appealing tender volumes and any form of financial incentive, annual capacity additions will not significantly increase if the project implementation issues are not resolved.
This is an extract from GWEC India’s recently released report titled “Accelerating Onshore Wind Capacity Addition in India to Achieve the 2030 Target”