According to reports, Tata Power, the country’s largest integrated private sector power player engaged in generation, transmission, distribution and trading, has consciously kept away from bidding for projects under the National Solar Mission. The company, with an overall 8,521 MW of generation capacity, finds tariffs under the mission ‘predatory’ and prefers to set up base in States that offer ‘good’ power purchase agreements.
With a 440-MW wind and solar portfolio, Tata Power aims to add 170 MW of wind and 30-50 MW of solar this year in Maharashtra and Rajasthan worth over Rs 13,000 crore. This apart, it has recently bagged two wind projects totalling 230 MW through its joint venture in South Africa. An Indonesian partnership arm is working on a 240 MW geothermal project. The company has made it clear that there is no plan for an IPO for the renewable segment. In a chat with Business Line, Rahul Shah, Chief, Business Development, India Business and Renewables, outlined the opportunities and challenges in the green power area.
Excerpts from the interview:
Do you find the overseas environment, such as in South Africa, more favourable than in India?
They are comparable in terms of stability in regulation and policy. We see good domestic potential for both wind and solar energy. We have not participated in National Solar Mission projects so far as we found that the bidding was going to be ‘predatory’ in terms of tariff. Therefore, we built our 25 MW solar plant in Gujarat, where there was a fixed tariff of Rs 15 a unit for the first 12 years and Rs 5 for the next 13 years.
We have an additional 3 MW capacity in Maharashtra, which we supplied to Tata Mumbai’s distribution, at Rs 17 a unit, which was the tariff at that point of time. It has been subsequently revised.
With your own manufacturing facility for solar panels, are you aggressively looking at solar?
Yes. Our goal is to set up 150-200 MW of wind and 30-50 MW of solar every year. We will expand in States that have good feed-in tariffs.
So, your focus will be more on wind power than solar?
Setting up a wind farm is a far more established process as wind power has been around for 20 years. Further, States have a feed-in tariff for wind and it is relatively easy to set up a wind project and sign a PPA (power purchase agreement) with State electricity boards.
In solar, States are unwilling to sign PPAs unless it is obligatory. We are also careful with whom we sign PPAs, as most distribution companies are in the red.
These factors apply to wind as well…
Yes, but the process for wind is far more established. The cost of setting up a wind farm is settled and not as volatile as solar. Solar has, however, been stabilising over the last six to nine months, at about Rs 7 crore per MW. You can set it up cheaper, but the plant may not be very robust.
The cost of setting up a wind farm is close to Rs 6.2 crore a MW and could increase 3-4 per cent every year, depending on the cost of steel and cement.
Tata Power’s most-favoured States for renewables?
Gujarat, Maharashtra and Madhya Pradesh. The situation in Tamil Nadu is improving after the tariff hike and in Karnataka too.
What are the projects in hand for wind and solar?
We have 170 MW of wind ordered out for sites in Maharashtra (near Satara) and Rajasthan (near Pratapgarh). We also have 28 MW of solar power to come up near Satara.
This apart, we are waiting for the South African Government’s call for the next round of bids for renewable projects in August.
It should be around 2,000 MW and will be mostly for wind power and perhaps about 20 per cent of solar.
What challenges do you foresee in wind and solar generation?
For wind power, land acquisition is an issue. Wind projects are on hillocks and, in general, come under forests. So, it takes at least two to three years to get the files moving and, needless to say, the project development cycle gets elongated.
If land is available, it takes six months to get the turbines up. Land acquisition takes time and is most uncertain.
The other challenge is evacuation. Tamil Nadu, which has a large wind portfolio, tends to back down wind, especially when the rains and hydro-electric power projects have good storage.
When hydro projects start generating they ask you to shut down your wind machines.
Are you not grid-connected?
Yes, but the Tamil Nadu grid is not well connected and there is no capacity on it to vend out the power. It is being strengthened.
For solar, it calls for a good PPA with the State. Similar to wind, offtake, land acquisition and evacuation are issues. PPAs are available, but getting a good one is tough.
What is your average ROI (return of investment) for every MW of wind and solar? I know multiple factors are involved…
As you can guess it is the function of the resource available at the site, be it wind or solar. The decision is based on project cost, quality of resource and the tariff you get in a particular State. So, even a low-wind site can become viable if land cost is low and the tariff high. In Rajasthan, the wind quality is not as good as Tamil Nadu, but the tariff is good. The current tariff is Rs 5.70 per unit.
Wind tariffs vis-à-vis thermal…
In Tamil Nadu it is Rs 3.50 a unit and is cheaper than thermal. This is because the wind quality is so good.
How about offshore wind farms?
The cost is thrice that of onshore at Rs 20-plus crore a MW. We did a little work on this and participated in a couple of government interactions. The government has also floated a discussion paper.
If you see the pattern in the US and Europe, developers started going offshore only after onshore capacities were saturated. Further, the project development process is longer — eight to nine years. And several kinds of permissions are needed — from Defence, Environment, Shipping and Fisheries.
We studied India’s offshore potential using satellite data and also looked at what is available in the US and Europe. We believe that, except for a couple of sites, our offshore wind potential is not significant. Offshore farms along the east coast are ruled out as it is cyclone-prone and small potential pockets on the western side are close to environmentally sensitive areas and Defence establishments. When wind potential is low, your tariff cost has to be higher to offset the capital cost. Further, bringing the power generated to land is also expensive.