India’s wind power segment has gone through various ups and downs over the past decade. On the one hand, the announcement of feed-in tariffs (FiTs) led to record deployments in the wind space in 2016-17. On the other, capacity additions have moved at a sluggish pace since the launch of reverse auctions owing to issues of restricted bid capacity, land acquisition, grid unavailability and tariff approval delays. Indian wind turbine manufacturers have struggled to remain profitable in this flux. However, things are expected to change for the better with the launch of the new bidding framework and expected capacity deployments in the commercial and industrial (C&I) segment, as well as repowering. In an interview with Renewable Watch, Kailash Tarachandani, chief executive officer, Inox Wind Limited discussed the current state of the wind power segment in India, and the outlook and plans for his company…
What is Inox’s total wind power portfolio? What have been the recent achievements for the company?
Inox’s total wind power portfolio is approximately 2.8 GW. The company, recently, successfully commissioned its first 3.3 MW proto wind turbine in Gujarat. The type certificate and subsequent Revised List of Models and Manufacturers listing is expected to be completed by May 2023. Inox is fully geared up to commercialise this product beginning in October 2023, and will predominantly cater to the independent power producer (IPP), C&I and public sector undertaking segments.
Inox has successfully secured a repeat order from NTPC Renewables for 350 MW of wind turbines to cater to their hybrid requirements. It will execute these projects on a total turnkey basis, that is, from concept to commissioning. Inox Wind is the only company to adopt a flexible business model and offer both turnkey and limited scope supply (LSS) projects on a case-to-case basis. With the launch of our new 3.3 MW platform, Inox is in advanced stages of discussions with leading IPPs to sign approximately 300 MW of projects on an LSS basis. Inox Wind’s sister company, Inox Green Energy Services Limited (IGESL), successfully completed its initial public offering subscription last year with a focus on both organic and inorganic business. Besides maintaining Inox’s own fleet, IGESL will also focus on turbines of other original equipment manufacturers (OEMs) as an independent service provider.
How has India’s wind power segment evolved over the past few years? How has the company dealt with these changes? What are your expectations from the new bidding system?
There has been an enormous push from the Government of India to develop renewable energy projects on a large scale for the last five years. Approximately 20 GW of wind power tenders have been floated since 2017, predominantly by the Solar Energy Corporation of India (SECI) and through state bids, as well as through newer tendering mechanisms such as those for round-the-clock and peak power.
Like other OEMs, Inox did face issues pertaining to piling up of inventories due to the change from the FiT regime to the reverse auction regime. Inox suffered a major setback in liquidating the inventories, which were sourced at higher prices from major suppliers. Due to the abolition of FiTs across the country, and to compete in the reverse auction regime, Inox has had to take a huge hit in its contribution margin just to liquidate its inventories. Having said that, we have now overcome this issue and have started afresh with our new 3.3 MW wind turbine. We are confident of doing profitable business in the years to come.
I feel that the L1 + 2 per cent tariff mechanism should be removed from the new bidding system, and the projects should be allotted based on the actual tariffs quoted by the bidders. I think this is feasible now, since reverse auctions have now been abolished, with the closed bidding concept being introduced in January 2023.
How did the company deal with the supply chain issues during the pandemic and the subsequent commodity price fluctuations? How has the demand and supply for wind turbines been impacted?
Like other OEMs, we did face constraints during the pandemic in the years 2020 and 2021. In the first phase of the pandemic, in 2020, Europe and the US were more affected than China and India. Fortunately for Inox, approximately 30 per cent of its components (value-wise) come from China, 60 per cent are sourced locally, and 10 per cent from Europe. Hence, we did not face too many issues in manufacturing, although there were delays in meeting timelines.
During the second wave of the pandemic, in 2021, India was worst affected, in the form of an acute shortfall in supply of medical oxygen for hospitalised patients. Manufacturing was badly affected by this, as most of the industrial oxygen manufacturers were directed by the Government of India to produce medical oxygen. During this period, the prices of commodities such as steel, copper and aluminium went up considerably. Since the capex had been fixed with customers for the orders already signed, and there was no price variation clause, we absorbed the losses caused by the commodity price increase. During this period, most of our projects were delayed. Fortunately, the Ministry of New and Renewable Energy has provided extensions (of three to six months, on a case-by-case basis) for all these projects, considering the pandemic and supply chain issues.
What is the expected potential in emerging areas such as the corporate PPA market and repowering?
Corporate power purchase agreements (PPA), or the C&I segment, is a rapidly growing market in India. Most of the renowned IPPs have shifted their focus to the C&I segment, since they offer better tariffs (Rs 3.50 to Rs 4.5 per kWh), compared to SECI’s reverse auction tariffs (Rs 2.90 to 3.0 per kWh). So far, C&I projects have been developed using state transmission unit connectivity. Going forward, these projects shall also be developed using Central Transmission Unit connectivity. A policy for this, with clear regulations, is expected soon from the MNRE. This new policy will allow investors to sell power to interstate customers. Going forward, in my view, 30 to 40 per cent of the wind power market share will emanate from the C&I segment. There is an enormous opportunity in the wind repowering market as well, since approximately 10 GW of wind projects have either crossed their designed lifetime of 20 years or are on the verge of completing it. This is especially true in the states of Tamil Nadu, Gujarat and Karnataka. The repowering market will emerge in two to three years from now. Inox is fully geared up to cater to this segment, as we continue to produce both 2 MW wind turbines in various configurations as well as 3.3 MW ones.
Are there any plans in the offshore wind space? What is your take on the 30 GW offshore wind target by 2030?
At present, Inox will focus more on the onshore wind space, as we believe there is still an enormous potential to be tapped in India, especially with the new multi-megawatt-class wind turbines. Moreover, our licensing partner American Superconductor (AMSC) is yet to venture into the offshore space. However, a decision on offshore wind shall be taken based on the progress made in the next two years, as AMSC is capable of developing new turbines for offshore wind in a short span of time. It is premature to comment on achieving the 30 GW offshore wind target by 2030, as there are many gaps yet to be addressed, especially on the tariff front. The project cost of offshore wind is approximately three times that of onshore wind. Hence, unless the Government of India announces a preferential tariff or viability gap funding (VGF) (as is the case in Europe), it would be very difficult to justify the higher capex. The discoms may not pay more than Rs 4 per kWh for offshore wind power. The Government of India has to provide VGF to make such projects commercially viable. Thus, in my view, 30 GW may not be feasible by 2030.
What has been the company’s experience in AI and predictive maintenance of wind turbines? How has the IPP community reacted to these innovations?
OEMs like us need to optimise maintenance costs, ensuring sufficient plant reliability at the same time. The evolution of this maintenance approach is represented by on-condition maintenance and predictive maintenance. Through models and the implementation of machine learning algorithms, our team is trained for early detection of anomalies, enabling further diagnosis, condition-based maintenance and better planning of repairs. This can prevent consequential damage, lead to fewer turbine downtime periods and extend the service life of the monitored turbines. With this AI-based approach, we could increase the uptime of the wind turbines to more than 97 per cent, and adhere to our contractual commitments.
What are your expectations from the Indian government with respect to promoting the wind power segment?
We expect the Indian government and regulators to expedite land allotments and the implementation of Power Grid Corporation of India substations. This will enable developers to adhere to the scheduled commercial operation dates of their projects. We also request them to expedite the process of signing PPAs and power sale agreements with discoms. Moreover, we expect the government to provide support to renewable projects by reducing the cost of debt, so that the projects are viable even with lower tariffs. Finally, we urge the government to reinstate FiTs to tap open access customers.
