The winning bidders for 1000 MW wind power capacity have quoted tariff in the range of Rs 2.64 per unit to Rs 2.65 per unit.
New Delhi: The wind power tariff which reached a record low of Rs 2.64 per unit in the auction conducted by Solar Energy Corporation of India (SECI) on Wednesday is significantly lower than the approved feed-in tariffs for wind projects and signify increased competitiveness of wind, ratings agency ICRA said.
The winning bidders for 1000 MW wind power capacity have quoted tariff in the range of Rs 2.64 per unit to Rs 2.65 per unit. The tariff discovered in the current scheme is lower by 24 per cent against the previous bid tariff of Rs 3.46 per unit as discovered in the reverse auction under the first scheme in February 2017.
“Tariff quoted at Rs. 2.64/kwh signifies the significantly improved tariff competitiveness of wind based energy generation against conventional energy sources and is also favourable for its key off-takers – the distribution utilities. However, the tariff quoted is aggressive from IPP’s credit perspective and is likely to result in modest project IRRs and debt coverage indicators,” Sabyasachi Majumdar, Senior Vice President & Group Head, ICRA Ratings said.
He added that even under the assumptions of Plant Load Factor (PLF) of 30 per cent, cost of debt at 9.25 per cent with a tenure of 20 years’ post Commercial Operation Declaration (COD) and a capital cost of Rs 7 crore per MW, the debt coverage metrics and return metrics for such projects at tariff of Rs 2.64 per unit are estimated to be thin, with cumulative Debt Service Coverage Ratio (DSCR) of 1.1 times and single digit project IRRs.
ICRA said the returns and coverage indicators remain highly sensitive to the PLF level, interest rate and capital cost. Viability of such tariff from credit perspective will be thus critically dependent upon the developers’ ability to ensure the PLF level well above 30 per cent at the sites with high wind potential and advanced wind turbine generator machines with a higher hub height, ICRA noted.
The developers will also have to ensure the project cost in a cost competitive manner. “Upside if any to the ICRA projected indicators could arise from a) the developers’ ability to negotiate costs to below Rs. 7 Cr. per MW; and b) ability to generate higher than 30% PLFs by careful choice of windy sites and appropriate technology,” the agency said.
This in turn is likely to put a further pricing pressure on wind turbine generator (WTG) manufacturers, given the surplus WTG manufacturing capacity available & very limited order visibility in the near term, the report added.
The winning bidders under this scheme also have to secure connectivity for power evacuation from Power Grid Corporation of India Limited (PGCIL) and commission the projects within 18 months from the date of issuance of letter of award by SECI.
“In view of the recent order issued by Central Electricity Regulatory Commission (CERC), the execution risks would also remain high for developers without any firm connectivity approval from PGCIL given that CERC has ruled out any special dispensation in approving connectivity for such winning bidders,” Majumdar added.
On the positive side, declining wind energy tariff in bid route remains favorable for the distribution utilities prompting the utilities to adopt tariff-based competitive auction for awarding wind power projects only, instead of the feed-in tariff based mechanism.
Adding that the project award process through bidding route still remains slow with tendering being concluded so far only by the utility in Tamil Nadu for 500 MW.
ICRA also noted that since the winning developers have up to 18 months to commission the projects, the visibility for actual wind-based capacity addition remains weak in the near term.
Source: energy.economictimes.indiatimes
