Wind power auction a dud; tariff hits all-time low of Rs 2.64 per unit

By: | Published: October 6, 2017 6:07 AM

Wind energy tariff fell to a new low of Rs 2.64 per mWh in the second round of auctions for 1000 MW capacity conducted by Solar Energy Corporation of India (SECI) on behalf of the ministry of new & renewable energy (MNRE) on October 4.

Wind power, wind energy auction a dud, wind power tariffThe wind tariff fell 24% from Rs 3.46 per kWh discovered in the first round of auctions in February. (Reuters)

Wind energy tariff fell to a new low of Rs 2.64 per mWh in the second round of auctions for 1000 MW capacity conducted by Solar Energy Corporation of India (SECI) on behalf of the ministry of new & renewable energy (MNRE) on October 4. The wind tariff fell 24% from Rs 3.46 per kWh discovered in the first round of auctions in February.

SECI received a total of 12 bids totalling 2,892 MW capacity out of which 9 bids with a total capacity of 2,142 MW were shortlisted for e-reverse auction.

Five winners include ReNew Power for 250 MW projects quoting Rs 2.64 per kWh, Orange Sironj for 200 MW projects quoting Rs 2.64 per kWh, Inox Wind for 250 MW projects quoting Rs 2.65 per kWh, Sembcorp Green Infra for 250 MW projects quoting Rs 2.65 per kWh and Adani Green for 50 MW projects quoting Rs 2.65 per kWh.

SembCorp Green Infra had won 250 MW in the first round of auctions as well which shows the continued interest of foreign investors in the renewable sector. “This is continuation of our established strategy of building a viable and sustainable energy business in India. We are waiting for the official Letter of Award from the concerned authorities,” a Sembcorp spokesperson said.

In an official statement, the MNRE said, “With improving technology and reducing tariffs, it is not only confident of achieving the target of 175 GW by 2022 but exceeding it.”

The ministry further said these wind projects are to be commissioned within 18 months from the date of issue of letter of award by SECI to successful bidders. As per the provisions of the scheme, additional 100 MW capacity can be allotted to Central Public Sector Enterprises (CPSEs) willing to undertake development of inter-state transmission system (ISTS)-connected wind power projects at the lowest bid tariff of Rs 2.64 per kWh, for which they have to submit their proposal within 30 days from the declaration of results of e-reverse auction.

The bidding has, however, been considered aggressive from independent power producers’ credit perspective as they are likely to result in modest internal rate of return and debt coverage indicators.

Sabyasachi Majumdar, senior vice-president & group head, Icra, said: “Even under the assumptions of PLF of 30%, cost of debt at 9.25% with 20 year tenure post commissioning and a capital cost of Rs 7 crore per MW, the debt coverage metrics and return metrics for such projects at tariff of `2.64 per unit are estimated to be thin, with cumulative debt service coverage ration (DSCR) of 1.1 times and single digit project IRRs.”

Experts believe viability of such tariff from credit perspective will be thus critically dependent on the developers’ ability to ensure the PLF level well above 30% at the sites with high wind potential & advanced wind turbine generator machines with a higher hub height, as well as to ensure the project cost in a cost competitive manner.

This latest tariff is significantly lower than the approved feed-in tariffs by State Electricity Regulatory Commissions (SERCs) for wind power project — varying from Rs 3.74 per unit to Rs 5.76 per unit — for wind power projects across key states with high wind power generation potential.

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