The wind sector has been facing some headwinds of late and the future may not be as bright as the past unless some course correction takes place. Though the wind sector has been the flag bearer of India’s Renewable Energy (RE) capacity growth (installed capacity of ~25.2 GW against ~5.5 GW for solar), future targets may reverse this with the solar sector expected to have ~67% higher capacity than wind within the next 5-6 years.
The RE sector is still at a stage where government thrust/support is required; however the central government seems to be relatively more focussed on solar as compared to the wind sector. Consider the government’s initiative of promoting setting up of solar parks—similar efforts are not being made for the wind sector. If the government can facilitate centralised infrastructure creation, ensuring reliable long term wind data is made available, setting up of wind plants would also be easy. State governments have also taken the cue from the central government with states like Madhya Pradesh reducing wind tariffs and Maharashtra not signing PPAs (~550 MW of ‘ready to generate’ projects are stuck).
For achieving India’s quest for increasing clean energy share, solar and wind technologies need to grow in tandem instead of competing with each other. Owing to the nature of availability (solar power is generated during the day while wind energy is mainly produced during evening/night) the technologies are in fact complementary. Unlike the solar sector where most equipment is foreign-sourced, wind turbines have to be manufactured domestically as per applicable regulations. Accordingly, wind sector growth would provide wider benefits and support initiatives like “Make in India”.
There is resistance from some state distribution companies to buying wind power because of significant reduction in solar power prices. The key reason for such decline in solar prices is a steep fall in solar module prices. Apart from genuine cost reduction due to benefits of scale etc, it is widely believed that there is significant dumping of solar modules by some international suppliers. While that is obviously a problem for domestic solar suppliers, the wind sector ends up not being able to match the power price that solar developers can afford. Compared to this, the price for wind turbines/systems is actually increasing (though efficiency has improved). Wind WTG suppliers do not seem to be passing on manufacturing efficiency gains to developers and that is hurting sectoral growth.
The growth of the solar market has been/is being driven by the competitive bidding model. In wind, under the feed-in-tariff regime, there is little incentive for wind turbine manufacturers to innovate/reduce costs. On one hand, wind turbine manufacturers are not passing on cost benefits to developers and on the other they are lobbying against introduction of competitive bidding in the sector. At some stage, wind turbine suppliers would need to take a call on having higher margins in a smaller market versus lower margins in a much larger market.
Wind players/other stakeholders also need to actively think about product/service innovations to expand the market size. With smaller installation sizes, rooftop solar is a new business segment that solar players are exploring. However we don’t have a similar story of small scale wind solutions. Hybrid systems (solar + wind) should also be actively explored. Offshore wind is another interesting area where there is significant potential for growth.
Wind is a proven technology with almost double of solar’s installed base globally. International investors are comfortable with the sector dynamics globally and in India where several inbound transactions have taken place recently. Historically, the mainstay of RE growth in India, the wind sector definitely holds promise; how well it lives up to its potential will largely be determined by government/regulator proactiveness and how wind stakeholders evolve the business. Given the steep dive in solar tariffs, wind businesses can flourish in the long run if they deliver power at a price that makes sense for customers. It is vital for all stakeholders in the wind value chain to come together to ensure its survival and a meaningful place in India’s renewables growth story.
Written By- Vikas Sharma. The author is vice president —Transaction Advisory Services (Infrastructure practice), EY. The views are personal