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Energy: going where the wind blows

According to reports, for the first time, wind power installations (windmills) crossed the 5 Gigawatt mark, to reach 5,400 MW in 2016-17. The earlier record was 3,472 MW of 2015-16. The current year might see installations of 6 GW.

And?

In February, in the country’s first-ever auctions of wind power capacity, the price at which windmill owners would sell electricity to companies that supply power to consumers fell to a record low of ₹3.46 a kWhr, as competitive forces were at play. Otherwise, wind power prices are fixed by the various state electricity regulatory commissions.

Why this optimism?

The Indian wind industry has been around since the late 1980s. For many years, it existed only in T.N., the windiest State. In the last decade, it spread to eight other States that have any wind potential — four other southern states, M.P., Maharashtra, Gujarat and Rajasthan. But now, the Centre wants to buy electricity from wind power producers and sell it to electricity supply companies in other states, which are bound by law to buy a portion of their needs from wind and solar sources. The 1,000 MW capacity auction of February took place under such an arrangement, and there will be more. Government of India playing trader truly expands the market for wind power companies.

So, are wind power companies mighty excited?

Well, yes, but there is a flip side too. Following the Centre’s example, all states want to determine prices through competitive bidding, and competition hammers down prices, as we saw in February. So, while the market expands, the prices also drop.

Besides, the government has let expire last month the ‘generation-based incentive’, a scheme which paid wind power companies 50 paise for every kWhr they produced, subject to certain caps. Also, the tax-saving ‘accelerated depreciation’ benefit, which engendered the industry in the late ‘80s, is now halved. So, it is a mixed bag for the wind industry.

How important is the sector, anyway?

India, with 32,280 MW, has the fourth biggest capacity in the world, after China, the U.S. and Germany.

The national target is 60 GW by 2022. Wind accounts for 10% of India’s total power capacity of 3.2 lakh MW; and 4% in terms of electricity produced.

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