Wind sector in India needs an overhaul — here's why

Transparent and closed bids, bundling of tarrif some ways in which wind energy sector can go up again 

By Sapna Gopal
Published: Monday 31 October 2022

Globally, India has the fourth-highest installed capacity to generate wind energy. However, the potential is higher and can be accelerated with changes to the bidding system and policies.

The country’s total installed capacity was 41.67 GW as on September 30, 2022, according to the Union Ministry of New and Renewable Energy. Around 60.15 billion units were generated in 2020-21.

The Indian government set a target for 175 gigawatts (GW) of renewable energy capacity by 2022. The goal included achieving 60 GW of onshore and 5 GW of offshore capacity for wind energy.

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The country has potential for more than 602 GW of onshore wind energy at 120-metre hub height and 100 GW of fixed and floating offshore, according to estimates by the National Institute of Wind Energy (NIWE) and the World Bank Group.

Even though India’s wind sector is performing well, the pace of the wind energy sector has slackened, believe experts in the industry.

The procurement model was changed from state procurement based on feed-in tariff (FiT) to central procurement through an e-reverse auction in 2017.

This is when the downside of wind-based electricity began, a senior official in India's wind energy sector told Down To Earth.

A feed-in tariff is an energy policy focused on supporting the development and dissemination of renewable power generation. A reverse auction is a type of auction in which the traditional roles of buyer and seller are reversed. Thus, there is one buyer and many potential sellers.

“Currently, there is only one procurement model through the central public sector undertaking Solar Energy Corporation of India (SECI), where the bid size is 50 megawatts. Also, low tariffs resulted in exploitation only in Gujarat and Tamil Nadu. However, even Gujarat halted when the government stopped allotment of land for wind projects,” the official said.

Since the bid size is 25 MW for state bids and 50 MW for SECI bids, it eliminated small and retail investors from participating in procurement. The government is now considering closed bidding with eligibility criteria for bidders and allotment of bids on bucket filling method.

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Challenges in meeting targets

“With 37.5 GW of onshore wind power installed at the end of 2019, India may fall short of its 2022 targets due to pricing, payment risk mitigation, transmission capacity and land use challenges,” said energy forum Global Wind Energy Council’s report, India Wind Outlook towards 2022.

Even in a best-case scenario, wherein these bottlenecks are resolved, the cumulative installed base of onshore wind would reach only 54.2 GW by 2022, it added.

Current bidding is based on tariffs derived from site plant load factor (PLF). PLF is the ratio of average power generated by the plant to the maximum power that could have been generated in a given time.

Also, Gujarat and Tamil Nadu are the highest PLF states and to realise better tariffs, most projects are being planned in these states only (60 per cent in Gujarat and 30 per cent in TN).

Competitive bidding at low tariffs has led to the concentration of wind projects in Gujarat and Tamil Nadu. This has put pressure on land availability and power evacuation infrastructure in these states, leading to delays in project commissions — Bhuj II, Jam Khambhaliya and Tirunelveli extension projects were due in 2021.

The issue of land availability in Gujarat may have been covered, but experts believe the greater issue of grid planning persists. There is a need for more consultation from industry stakeholders to implement the green corridor and for the transmission of power.

For example, projects awarded by SECI in 2020 are yet to take off due to delays in the commissioning of substations at Koppal and Gadag in Karnataka.

Apart from the concentration of projects that create severe pressure on land, the creation of infrastructure for power evacuation leads to a choking situation, as seen in Gujarat. This is creating execution challenges at the state level.

In spite of the availability of land and infrastructure in other states, investors do not prefer Madhya Pradesh, Rajasthan and Maharashtra as the proposed projects cannot compete with projects in Gujarat and Tamil Nadu due to PLF and economic constraints.

Read more: India’s offshore wind energy: A roadmap for getting started

What can be done?

To accelerate growth in the wind energy sector, FiT is required in various states, based on their resources and PLF. Currently, the PLF in India varies in the range of 35 per cent to 43 per cent across sites in seven windy states.

SECI should come out with four 4.2 GW bids in a year, distributed across the seven windy states as 600 MW x 7, according to experts. By doing this, the current manufacturing capacity will be well utilised.

These bids should be transparent and closed without reverse auction. Lower wind zones will get bids with higher tariffs and medium wind zones will get bids with lower tariffs. SECI, they added, must bundle this tariff and sell power to distribution companies at an average power purchase agreement (PPA) tariff of these seven windy states.

The estimated difference in average PPA tariffs and highest/lowest tariff of any state shall be a maximum 30 paisa per unit. Also, bidders must be made accountable for delivering on time, otherwise, a penalty should be imposed.

Additionally, NIWE can map wind resource potential and declare the PLF and wind zone at each state site. Project registration must be obtained through the state nodal agency before bidding and Central Transmission Utility (CTU) must create a power evacuation facility as per the potential mapped by NIWE.

CERC should come out with FiT based on the PLF of each state site wind zone, prevailing project costing, prevailing interest rates and operational expenses. Also, the tariff has to be less than the state’s average power purchase cost.

With these measures, the wind energy that is generated, land, evacuation and related state resources can be uniformly utilised across seven windy states. Also, current manufacturing capacity of 10,000 MW every year can be utilised and commissioned.

Projects can be planned in low/medium windy sites in Rajasthan, Madhya Pradesh and Maharashtra, where in the last three years, no major development for standalone wind power projects has been seen.

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Closed wind turbine and component manufacturing capacity in low windy states can be revived — this way, CTU/Power Grid Corporation of India infrastructure in these States will be effectively utilised and more investors can be mobilised.  

Way ahead

The market is becoming more competitive, forcing tariffs to come down, said Secretary General of the Indian Wind Turbine Manufacturers Association, D V Giri.

“There is a need for larger turbines, of 4 to 5 MW size with higher PLF to reduce the levelised cost of energy. Also, a steep increase in commodity price, nearly 30 per cent to 40 per cent, has pushed up the cost of turbines and the engineering, procurement and construction,” he told Down To Earth.

Apart from tariffs that have gone down drastically, costs have also gone up since 2019-20. The majority of wind suppliers are facing financial challenges and the market is slowing down at 1.5 GW per annum year-on-year due to delayed project commissioning.

Under the circumstances, major original equipment manufacturers have resorted to exporting turbines and components as the domestic market is going down south. While FiT is the answer, closed bidding will perhaps see viable tariffs.

Encouragement of captive and group captive with annual banking and interstate trading under Green Open Access will accelerate capacity addition, concluded Giri.

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