According to reports, discontinuation of the accelerated depreciation (AD) benefit for the wind energy sector is likely to result in a fall in capacity addition to the range of 800-1,000 mw in the near term. While the long-term outlook is seen as intact, scheme discontinuation is expected to impact the wind power capacity addition in the near term, according to rating agency Icra.
Discontinuation of AD benefit would keep capacity addition for FY2013 lower than that achieved in FY2012. With the expected fall in demand for wind based capacity, wind turbine manufacturers may also face some pricing pressure in the domestic market, it added.
It is estimated that the overall domestic wind-based capacity addition during FY2012 increased to about 3,000 mw (against 2,350 mw in the previous FY), driven mainly by growing demand from the independent power producer (IPP) segment. While the share of consumers availing themselves of the AD benefit (mainly retail consumers, financial investors or captive consumers) declined gradually to 40-45 per cent in FY2012 from the earlier 70-75 per cent, the same still remains sizeable.
However, the long-term demand drivers for wind energy remain intact. In the long run, wind-based capacity addition would continue to be driven by the IPP segment, given the progress in the implementation of the renewable energy certificate (REC) framework, besides other factors. These factors include the preference of many IPPs for the REC route, the renewable purchase obligation (RPO) norms being put in place in most states, and the increasing cost-competitiveness of wind energy versus conventional sources.
Meanwhile, Indian Wind Turbine Manufacturers’ Association (IWTMA), an umbrella body of leading wind turbine manufacturers in India, has urged the government to reconsider the decision to build confidence in the minds of the investors when the industry along with ministry of new and renewable energy (MNRE) has set an ambitious capacity addition target of 5,000 mw per annum during the 12th Plan.
“The withdrawal of AD has also come at a time when continuity of generation based incentive (GBI) remains a question mark. Urgent intervention is required on continuity of GBI in the 12th Plan period as requested by the industry in the discussions of the 12th draft plan. On a broader note, it is rather ironical that high efficiency coal and oil fired boilers continue to get AD and it has been denied to a source of power generation which is clean,” Ramesh Kymal, chairman of IWTMA said.
“Wind power generation has been growing at a rapid speed in the country and this financial year witnessed a milestone installation of 3,000 mw. It is a major contributor to achieve the goal of 15 per cent share on renewable power by 2020 set under National Action Plan on Climate Change (NAPCC). Unlike other sectors, private investment is driving the growth of this sector. It is all the more evident that with the economy slow down, increase in interest rates, escalation in all input costs, AD was the major motivating factor in investment decision, said Kymal.