Analysis. Centre-driven schemes to propel wind sector

Wind energy in India, until recently, had been largely operating on the Feed-in-Tariff (FiT) model, wherein tariffs were pre-determined by each State Energy Regulatory Commission (ERC).

However, this has changed after the first ever competitive auction for wind energy, held in February 2017, saw a record low tariff of ₹3.46 per unit for 1,000 MW. The auction was held through the Inter State Transmission System (ISTS) initiated by the Ministry of New and Renewable Energy (MNRE).

The discovered tariff is a break away from the subsidy regime for the wind sector. The bid out tariffs are significantly lower than the state FiT, primarily because of connectivity to Central Transmission Utilities (CTUs) and project locations that are rich in wind resource.

Majority of the wind capacity under ISTS bid is being installed in project locations that are favourable for harnessing wind energy (e.g.Tamil Nadu) while power will be consumed in States such as Uttar Pradesh, Bihar, Assam and Jharkhand which are not rich in wind energy resource. The ISTS will help different States that are deprived of good wind resource to comply with their Renewable Purchase Obligations (RPOs).

Further, States will find the tariff of ₹3.46/unit fixed for a tenure of 25 years attractive since it will be cheaper than their Average Power Purchase Cost. Plant Load Factors (PLFs) in wind energy have gone up to as high as 35-40 per cent for certain wind power plants in India in the light of improving technology.

Also, due to the increasing capacity of the wind turbine generators (WTGs), the land requirement per MW has reduced significantly, thus cutting across land acquisition hassles. With improving commercial viability, it can be safely concluded that the sector has now become self-sustainable.

Given that wind resource is restricted to a limited number of States, robust transmission infrastructure is critical for wind energy to be a success. The transmission corridors in West-South and East-South regions have been extremely congested in the past. But increased wind capacity has resulted in the southern region becoming power-surplus, thereby reducing congestion in these lines to an extent.

Bringing down transmission congestion and building a robust transmission infrastructure will be crucial in determining the success of such inter-State bidding and power sale. The government has already introduced a Green Energy Corridor (GEC) for resolving transmission issues and once complete, this corridor could help resolve grid balancing issues and manage the augmentation of transmission capacity in an efficient manner.

The plant and equipment used in wind energy is entirely manufactured in India, as against solar, where more than 60 per cent of the project cost pertains to import costs. All leading wind turbine manufacturers like GE, Suzlon, Gamesa and Vestas have WTG manufacturing units in India. This fits well with the ‘Make in India’ movement of the government to generate employment for Indian youth.

Typically, wind power employs around 30 people per MW capacity in the entire value chain. According to a study by Natural Resources Defence Council (NRDC) and Council on Energy, Environment and Water (CEEW), wind sector in India alone has the potential to generate more than 1.8 million full-time jobs by 2022, considering targeted wind capacity of 60 GW, which is around 4 per cent of the total supply requirement.

According to the Draft National Electricity Plan, power consumption in India is expected to grow by 7.44 per cent annually over the next five years. Demand will further be boosted by penetration of electric vehicles. Considering this growing requirement, India will need around 150 GW of renewable power by 2022 to fulfil future energy demand, assuming all RPO targets are met. India has a wind installation base of 32 GW and ranks fourth globally in terms of total wind installation. The country added 5.32 GW of wind capacity in FY 2017, which is the highest ever in any year.

However, there is scepticism about the sustainability of growth of wind energy in India considering competition from solar in the form of sharply falling tariffs.

Centrally-driven schemes will go a long way in enabling the required capacity addition while delivering green electricity to consumers at lower cost.

The writer is Chief Executive – L&T Infrastructure Finance

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