2017-02-28 / Regulatory & Industry Trends
Drama Unfolds in Wind
Last Thursday 3 pm onwards, every player of the Indian wind industry geared up for real action which continued till wee hours of Friday. The first ever wind bidding by state-run Solar Energy Corp. of India (SECI) for 1000 MW. In the SECI tender for 1 GW wind power, bidders were allowed to locate projects in the state of their choice and most have opted for Tamil Nadu and Gujarat. We congratulate the winners and are sure that comparatively they possess all right rationale and better knowhow / cost economics sense on desired returns to equity investors. While I believe every tariff is viable when you invest in a project. But the term ‘viability’ in renewables has assumed a new definition recently. It is time to come to a consensus what should be the viable IRR for renewable projects in India?
What is baffling me today is how the nightlong action packed thriller resulting in tariffs as low as INR 3.46 can be considered as ‘investor friendly’ or ‘Discom friendly’ tariff? Or is it that the wind industry which was missing in action for long, suddenly got inspired by the Bollywood blockbuster “DANGAL” and decided to be the protagonists of Indian renewable industry scene and entertain the audience with never seen before kind of performance.
Surprisingly, only a few months back majority of wind developers were fighting to improve the tariff of INR 4.19 with regulators in Gujarat, which was ‘then’ considered quite low, not to mention that 50 paisa GBI was available over and above this tariff. At the above tariffs did the projects actually look unviable then, even when Gujarat DISCOM is ‘A’ rated or will the recently bid wind projects be viable now? The power offtake is guaranteed in both cases. But I am sure people who have won this bid have figured a smarter way out as developers will not put up projects to lose money.
Another interesting twist in this drama is that some turbine manufacturers themselves have also bid for quite low tariffs. My immediate thoughts are: Has the turbine prices crashed by 15 – 20% in those 24 hours? What is the logical justification of their past project costs based on IRRs viz a vis new pricing to clients based on tariffs. Have they embraced the changing realities?
However, ‘The End’ of this thriller is on a positive note where wind has competed with solar on ‘paisa’ to ‘paisa’ basis and is likely to give thermal a run for money. Let us wait for this blockbuster to perform at the box office.
In my opinion the winners are A- Renewables B- Government C- Environment
Contributed by Sunil Jain, CEO, Hero Future Energies, President WIPPA