Reduction in tariff in Madhya Pradesh, delay in payments by state-owned utility in Maharashtra and slowdown in signings of fresh PPA in last few months would be impacting fresh wind energy capacity additions in the country as these two states account for around 35% to 40% of the incremental capacity additions, says an Icra report.
Reduction in preferential tariff by State Electricity Regulatory Commission (SERC) is a negative development for new wind energy projects to be commissioned in Madhya Pradesh, as it is likely to result into moderation in project IRR by about 360 basis points, said Icra in its latest research on wind energy sector. In case of MP, wind energy tariff has been revised downwards from Rs 5.96/kwh to Rs 4.78/kwh.
According to Sabyasachi Majumdar, senior VP, co-head, corporate sector ratings, Icra Ltd, this reduction in tariff in MP coupled with slowdown in signing of fresh PPAs over last 6-8 months period and reported delays in payments by state owned utility in the state of Maharashtra as per industry sources is further likely to impact fresh wind energy capacity addition expected in the country in near to medium term to some extent.
“This is given the fact that wind energy capacity addition in state of Maharashtra and MP together accounted for about 35-40% of incremental capacity addition seen on all India level in last 2 year period, given the fairly attractive feed-in tariffs notified by SERCs in both the states,” Majumdar said.
Further in Icra’s view from a regulatory perspective, preferential tariff norms by SERCs across the key states, which have wind resource potential, are not consistent with the guiding principles/norms as stipulated by the Central Electricity Regulatory Commission (CERC), points out ICRA .
The preferential tariff regulations in MP and Tamil Nadu have stipulated tariffs which remain fixed over the tariff period and thus do not take into account of the impact of inflation/indexation on the cost structure during the control period, says the report.