A couple of days ago, a senior Tangedco official had said that a few wind turbine manufacturers have “formed a cartel” , driving up capital costs of setting up wind power projects in India.
Speaking at a stakeholder hearing on determination of tariff and allied issues related to power generation from Non Conventional Energy Sources conducted by Tamil Nadu Electricity Regulatory Commission (TNERC), Mr. G Rajagopal, Director-Finance,Tangedco said, “There are 4-5 wind manufacturers who have formed a cartel and setting the prices in India”. He further observed that such cartelization was driving up the capital costs of the projects and that cost of the wind turbine should be taken at about 4.5 Crore/MW.(Industry sources however noted that the capital costs have increased due to rise in raw material and other input costs, apart from longer blades and taller hub heights, resulting in bigger structures.)
He added, that Tangedco welcomed international competitive bidding for procuring wind energy,noting that this would enable newer international players to enter the country and offer the best prices to the distribution company.
According to reports, TANGEDCO, on Friday made a plea before the Tamil Nadu Electricity Regulatory Commission for abolishing the system of ‘banking’ of electricity by wind power producers.
The ‘banking’ system allows wind power producers to put power into the grid and draw the power back for consumption within a year. This is particularly useful for wind power producers who also own other industries that may need electricity to run.
“Banking has to be totally withdrawn,” said Mr G Rajagopal, Director-Finance, TANGEDCO, in a public hearing organised by the TNERC for the purpose of ‘determination of tariff and allied issues in non conventional energy sources.’
TANGEDCO’s plea was that banking was hurting the organisation because wind power producers put electricity into the grid when there is enough power – they are paid Rs 3.39 a unit – but exercise their option to draw power when there is a scarcity of power. As TANGEDCO is bound to supply them the power, it has to purchase power at high rates from the market for that purpose. In the bargain, TANGEDCO makes a loss. Furthermore, it has to supplly power to the wind producers (who had ‘banked’ the power) in preference to other consumers.
In the public hearing, TANGEDCO’s officials were supported by a number of sympathisers who said that it was unfair that TANGEDCO was made to suffer a loss at so that the wind power producers may be favoured.
Wind power producers, on the other hand, said that the facility of ‘banking’ was a promise made by TANGEDCO on the basis of which heavy investments have been made. Withdrawing the promised facilitiy would tantamount to breach of agreement, they said.
There was also a variance of views on the point of what the cost of capital should be and whether or not the tariff should be a fixed one, or determined through a process of competitive bidding.
Wind power developers said that the cost of wind turbines had gone up to between Rs 6 crore and Rs 7 crore, compared with the normative cost of Rs 5.35 crore on the basis of which the current tariff had been fixed. Others opposed this saying that there was no reason why the cost of a wind turbine should be so substantially higher than the cost of equipment of, say, thermal power, which is anyway more complex machinery. They said that the cost of a wind turbine should be taken at around Rs 4.5 crore.
Wind power producers also wanted the plant load factor to be brought down from the current normative rate of 27.15 per cent, to perhaps around 25 per cent. One speaker said that the TNERC itself had assumed a PLF of 19.5 per cent while determining the tariff to be charged by TANGEDCO to consumers. Therefore, he said, the normative PLF should be 19.5.
The wind farm developers were also against the idea of tariff determination by competitive bidding. A representative of South India Mills Association said that competitive bidding was okay at a time when the southern grid would be completely integrated with the national grid. (Today, all the other four zones are fully integrated while the southern grid is not linked with the all the rest, but the national plan is to link up south with the national grid by 2014.)
The SIMA representative said that if a wind power producer could sell his power to any customer anywhere in the country, then ‘competitive bidding’ made sense, but not till then. A representative of Indian Wind Turbine Manufacturers’ Association noted that 64 per cent of the global wind capacity of 191 GW was under fixed, feed-in tariffs.
While TANGEDCO was opposed to raising the ‘feed-in’ tariff beyond the current Rs 3.39, wind power producers’ demanded higher rates. Dr K Venkatachalam of Tamil Nadu Spinning Mills Association (TASMA) wanted Rs 5.32 a unit, another speaker wanted Rs 6.40.