For the first time in history, India added more renewable capacity than thermal power in FY17, but the latter regained the top slot in the first quarter of the current fiscal. Just 1,043 mega watt (MW) was added in the renewables sector, compared with 3,790 MW capacity newly created by thermal power firms. In FY17, the country’s solar, wind and biomass capacity was augmented by a whopping 14,410 MW while thermal capacity addition was just 6,200 MW. The sudden trend reversal is primarily due to the cessation of assorted sops accorded to solar and wind energy units by the Centre. Sundry generation-based incentives and viability gap funding were discontinued from April this year while the benefit of accelerated depreciation was reduced from 80% to 40%. Although renewables continues to be in policy focus, it is also being felt that since the sector has now attained a certain level of maturity and competitiveness, the investment incentives could be gradually rolled back. Additionally, as the competitive bidding mechanism has driven tariffs to levels far lower than anticipated (see chart), many project developers have turned less enthusiastic.
“There could be a substantial dip in (wind) capacity addition in FY18 to 1-1.5 giga watt (GW) only from about 5.4 GW in FY17 because of the unwillingness of state discoms to sign long-term purchase agreements (PPAs) at higher feed-in tariffs and unpreparedness on their part to come out with auctions in a big way in the near term,” said India Ratings and Research in a recent report. As reported by FE last month, the reverse auction for the second tranche of 1,000-MW wind projects — for which bids of more than 2,800 MW have already been received– has been delayed till the second half of August as the Central Electricity Regulatory Commission (CERC) is yet to clarify the procedure for allocation of transmission connectivity.
Reverse auctions for 500 MW each of solar and wind power in Gujarat are also running behind schedule due to monsoons and delays in regulatory approvals, sources told FE. The country has set a target of 175 GW renewable power capacity by the end of 2022, comprising 100 GW of solar power and 60 GW of wind energy. Of the current installed renewable capacity of 58.3 GW, wind and solar consists of 32.5 GW and 13.1 GW, respectively. In order to achieve the target, the country needs to add more than 6 GW of wind generation capacity and 17 GW solar power-based on average every year, hence warranting a significant increase in the scale of auctions. However, Anand Kumar, secretary, ministry of new and renewable energy, told FE that the government intends to auction 6,000 MW of wind energy before January 2018. Tranches of 2,000 MW of these bids are scheduled to come up in September and November this year and in January 2018. To expedite the process, the ministry would release wind bidding guidelines for the states in a week, Kumar added. In the wake of falling tariffs, some states are reneging or renegotiating PPA terms signed earlier with developers, putting additional pressure on renewable energy companies. For instance, for an upcoming reverse auction of 500 MW of wind power, Tamil Nadu’s discom has decided to keep the base-price at Rs 3.46/unit.
“Though some companies have moved court against the decision, others have been forced to accept the terms. Also, several discoms might not sign PPAs unless tariffs are lowered,” said a source from the wind industry who did not wish to be named. Talking of the solar sector, Raj Prabhu, CEO, Mercom Capital noted that “uncertainty around GST rates, utilities renegotiating to get better rates, and the recently initiated anti-dumping case has stalled momentum in the sector and could have a significant negative effect on installations in 2018.”
Source:FinancialExpress
