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Wind power sector likely to move entirely towards auction-based allocation: Bridge to India

According to reports, following the record-breaking success of the recent 1,000 Megwatt wind power auction, the sector is likely to shift entirely towards auction-based allocation route but this transition may lead to short-term hiatus on the market, renewable energy research firm Bridge to India said in a report.

“Indian government wants to tender out 4 GW of wind capacity next year but capacity addition through the tendering process often takes a long time. This may lead to a short-term demand hiatus in the market,” it said.

India’s first ever wind power auction has resulted in a record low wind power tariff of Rs 3.46 per unit, just marginally higher than the record low levelised tariff of Rs 3.29 per unit in the recent Rewa solar auction.

Mytrah, Sembcorp, Inox and Ostro are the winning bidders and will be awarded 250 MW each. Successful bidders will sign 25-year power purchase agreements with PTC India, a power trading company (partly owned by the Government of India), which will sign back-to-back PPAs with discoms.

Bridge to India also said remains to be seen if investments in transmission grid can keep up with increases in renewable generation capacity and inter-state flows of power.

“Concentrating projects in resource heavy states will also put more strain on the transmission grid. It remains to be seen if investments in grid can keep up with increases in generation capacity and inter-state flows of power,” it said.

On the record fall in the wind power tariff, Bridge to India said since the old procurement model had failed that was hurting the developers, the 1,000 MW tender managed to attract intense competition from bidders.

“Second, the preferential tariff regime was used by some wind turbine manufacturers to bundle together land, turbines and EPC work. This allowed them to command significant price premium and dominate the market. Auctions will provide more transparency to the sector, break wind turbine manufacturers’ domination and make the wind turbine market more efficient,” the report said.

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