India wind power auction analysis by CARE Rating

wind tariff india

The wind tariff in India touched lowest level of Rs.2.64 per kWh in the second wind auction conducted by the Solar Energy Corporation of India (SECI), compared to Rs. 3.46 per kWh achieved in the auction conducted in February this year.

In the latest auction, five winners were selected for a total of 1000 MW capacity of wind power projects: ReNew Power (250 MW), Orange Sironj (200 MW), Inox Wind (250 MW), Green Infra (250 MW) and Adani Green (50 MW). The projects are to be commissioned within 18 months from the date of issue of Letter of Award by SECI to successful bidders.

The latest wind tariff also comes on the back of solar tariffs witnessing a record low of Rs. 2.44 per unit in May for 500MW in Rajasthan which later firmed up to Rs. 2.65 per unit in the September auction by Gujarat Urja Vikas Nigam, said CARE Rating.

solar tariff indiaThe lowest wind power tariff prior to the latest auctions was in the range of Rs. 3.82-4.16 under the FiT regime as set by specific states. CARE Ratings analysts feel these tariffs may become new benchmarks, even though some industry participants have raised doubt on viability of these projects.

Higher competition for wind projects owing to limited capacity addition in the recent past is one of the major factors for heightened tariff war. This tariff pricing may have also accounted for correction in wind turbines prices, improved efficiency of turbines (higher plant load factor) and better financing mix which includes longer duration of funding as well as lowered cost of debt.

Engineering services which include setting up of wind projects witnessed a higher tax incidence of 18 percent under GST, up from 12 percent earlier. Also, the initial fears of the GST impacting tariff may now be put to rest.

According to the analyst firm, viability of the new projects would depend on project execution capability of the firms involved. This includes land acquisition to set up projects in areas with grid connectivity.  The lower tariffs are an outcome of fierce competition due to limited capacity addition in the wind energy and renewable segment.

[email protected]