“We are not against competitive bidding”

The wind energy industry in India is facing major headwinds. Manufacturing costs for turbine producers have gone up amid phasing out of incentives and talks of introduction of reverse auction regime for award of projects. The coming year will be a challenging time for the industry, Damerla Venkata Giri, Secretary General of the Indian Wind Turbine Manufacturers Association tells Yaruqhullah Khan and Sudheer Pal Singh in an exclusive interview. Edited excerpts..


The government is understood to be working on a reverse auction regime for the wind industry on similar lines as solar. Do you think it would work? Already, the margins for the wind industry are claimed to be under pressure.
It is not an issue of margins. We have gone on record to say that we are not against competitive bidding, both the manufacturers and the IPPs. It is the process of bidding which needs to be looked into. The government has already floated a policy paper for 1 GW of wind capacity under reverse bidding which will be sold by a wind state to a non-wind state. The government’s gazette notification of the tariff policy had earlier said the Central Transmission Utility (CTU) charges are to be waived for solar and wind. It has been notified for solar but not for wind. The charges are between Rs 1.17 to Rs 2.50 per unit. The projects will not be viable with this level of CTU charges. Also, a company opting for bidding would require a license for open access. So, the companies would bid without knowing which state the power will be supplied to.

Solar power tariffs have come down over years. Why are wind power producers holding on their prices, even as raw materials costs have declined?
Solar cannot be compared with Wind. There are no hard and fast standards in solar – any panel or structure can be set up. In wind, developers need to have a manufacturing facility for turbines. Companies have pumped Rs 25,000 crore in setting up such facilities so far. We can manufacture 9,500 Mw per annum which can be ramped up to 15,000 Mw per annum. However, we are chasing a market of only 3,500 Mw capacity per annum. The rest of the capacity is going waste. On the top of that, we cannot import old turbines. And they should have a certified power curve and an accreditation certificate. Our localization is upto 75 per cent. This means we are contributing to Make in India.

So, how have the components of the cost moved for wind players?
Our costs are dictated by the size of the turbine and the sales volumes and the height of the turbine and the length of the blade. The government has imposed a minimum import price on steel. So, either we pay duty on imports or buy from the local market where the price is Rs 10,000 per tonne more. Also, the best of the wind sites are gone, leaving us with low wind regime sites. This means additional cost to be incurred on hardware. The same logic applies to blade length. It has gone up to 55 meter today as compared to 40 meter earlier. In addition, we have costs related to design of turbines. Add to this different costs related to safety. All these issues are not there with solar plants. So, the capex of wind and solar can never be compared.

What is the average tariff for wind projects at present?
The lowest tariff at present is Rs 4.16 per unit in Tamil Nadu and the highest is in Rajasthan at Rs 5.60 per unit.

What are the issues in tapping into the high wind potential sites, even within the low wind regime?
The main issue is of forest clearance. This is true for sites like those in the Western Ghats. The Madhav Gadgil committee report had recommended ban on industrial activity including mining in this area but it had said that wind projects can be put up at selective locations. We even have had to fight for a long time with the Central Pollution Control Board authorities to get the wind industry removed from the Red category list. The other major problem is of movement and logistics.

Despite the problems, India added 3,400 Mw wind capacity last year and seems to be on track to add 4,000 Mw this year.
Every year, at least one state does better than others. It was Madhya Pradesh last year, adding 1,126 Mw. This was possible because the tariff was good. But it has been slashed from Rs 5.19 to Rs 4.78 per unit. This year, Andhra Pradesh would add around 1,500 Mw. Also, the Accelerated Depreciation (AD) benefit has been cut down from 80 per cent to 40 per cent by the finance minister beginning 2017. At the same time, the GBI benefit is coming to a stop from April 2017. There is a question mark over whether the GBI would be revived or not. In addition, wind energy development is facing major issues in Maharashtra. There, more than 900 Mw capacity projects are stuck in different categories — where the machines have been commissioned and the PPA is signed but the company is not getting paid or the turbines are set up but there is no PPA. Also, there are cases where the turbines are erected but not commissioned. This is around Rs 6,000 crore worth of projects stuck. In Tamilnadu, there had been delays of around 15 months in payment. That delay has now come down. Payments are stuck for 8-10 months in Rajasthan also.
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