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Gujarat, Andhra Pradesh refuse to pay more for wind power

According to reports, two of India’s high wind energy potential states have refused to buy wind power at a rate higher than the one arrived at the country’s first ever wind power auction, putting in jeopardy about 500 MW of projects in these states.

The auction, completed in February, had brought wind power tariff down steeply to Rs 3.46 per kwH.

But before the auction, power regulators in Andhra Pradesh and Gujarat had set the tariff for 2016-17 at Rs 4.84 per kwH and Rs 4.19 per kwH respectively. Now, neither of the states is willing to sign power purchase agreements (PPAs) at a tariff higher than Rs 3.46 per kwH.

“If a Rs 3.46 tariff has been discovered, why should we sign PPAs at a higher tariff?” said Ajay Jain, chairman at Andhra Pradesh Power Generation Corporation. “This is the tariff that will be paid even by non windy states. Why should Andhra Pradesh, which has strong winds, pay more?”

The decision has put at risk projects of around 500 MW in these states. These projects have been completed but have still to sign PPAs with their respective power distribution companies (discoms). These projects had been financed and built on the premise that the tariff would be much higher.

Cost of wind power production depends on numerous factors, such as wind speed at the location of the project, height of wind tower used, etc, which vary considerably from state to state.

The terms of the auction allow the winning developers open source access, by which they can sell the power produced to states other than the one where their project is located. Andhra Pradesh’s discom has filed a petition before the Andhra Pradesh Electricity Regulatory Commission, putting forward Jain’s argument and seeking a direction.

Only nine states in the country, including Andhra Pradesh and Gujarat, have wind speeds high enough to produce wind power. All of them so far had feed-in tariffs ranging between Rs 4 and Rs 6 per kwH.

In Gujarat, the Gujarat Electricity Regulatory Commission (GERC) has already taken the initiative. In a letter dated March 17 to the 12 discoms in the state, Roopwant Singh, secretary at GERC, has directed that both wind and solar power should henceforth be procured through competitive bidding.

The central and various state governments have initiated the competitive bidding process for procurement of power from wind and solar energy projects, in which the discovered tariff for solar and wind energy projects has shown a substantial reduction, the letter said.

“In view of the above, the commission directs that distribution licensees may procure electricity from wind and solar projects through competitive bidding,” Singh had said in the letter. “The tariff determined by the commission in the respective category of renewable energy will act as a ceiling tariff.”

A wind power developer, who did not want to be named, said there is no problem with solar projects where all concerned central and state government agencies have been following the auction process for years. “But wind is a different matter. We made our calculations of returns based on certain assumptions, which will now go haywire. Definitely, this is not what developers want,” this person said.

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