Over the years, renewable energy has grown from a fringe player to a mainstream actor in the energy sector. In the last 3 years, installed renewable energy capacity in India has more than doubled from 32 to around 71 GW. Wind energy is leading the pack, contributing more than 50 per cent of this with cumulative installed capacity of around 34 GW.
However, the last year had been challenging as the wind industry witnessed slowdown due to the transition from Feed-in tariff (FiT) to competitive bidding, which impacted margins and created temporary uncertainty in terms of volumes. As a result, the overall wind industry installations plummeted to 1,766 MW in FY18 (32 per cent of FY17 installations) due to stagnant volumes, uncertainty on PPAs and policy environment.
Talking on the recent performance of wind energy industry, Dr Sanjiv Kawishwar, Sr. Vice President – Technology & System Certification, ReGen Powertech Pvt Ltd, outlines few points:
- Project activities have slowed down in India.
- Many players, mainly OEMs, are in the red (loss making) and are struggling to manage cash flows for survival.
- Wind turbine has highly complex certification and regulatory processes for registration in India.
- Focus on quality at every step of type certification from concept to commissioning as well as operation and maintenance makes it time consuming and expensive.
- Uncertainty at various stages of project execution spoils the financing and cash flow. Therefore, the recent tariffs are not sustainable.
- Wind typically has higher quality components and higher PLF compared to solar.
- The sharp decline in solar tariffs recently witnessed is due to reliance on cheap imports from China.
- Wind has an established supply chain with a high degree of localisation thus has an entirely different cost structure compared to solar, and has a tendency towards increasing costs unlike solar.
Therefore, he suggests, the government needs to prioritise wind power by temporarily reintroducing incentives till the bidding mechanism stabilises.
According to Dr Kawishwar, some of the factors driving the Indian wind energy industry are:
- Availability of low cost (interest), long-term financing from other countries are driving the Indian players to bid at such low price and maintain project economics.
- The existence of a strong project opportunities is an encouraging sign for investors and developers.
- While the reverse bidding mechanism has driven tariffs to unsustainable levels, developers have been able to bid with strategic understanding of resource data and costs. Currently, there is a steady increase in tariffs.
- The industry also now has a little better transparency on the regulatory environment than in the past. There’re the less spikes of project execution activity in this environment.
- The best wind sites have been taken, and more tenders are expected to be floated for sites in low wind areas.
- Larger capacity wind turbines with better technological options are being sold now, that are optimised for low wind conditions, but at times require higher upfront investment.
- The auction mechanism has encouraged more direct OEM involvement with IPPs in the bidding and development process, leading to slightly less downward pressure on margins.
However, he suggests, “Better tariff structure will play crucial role in making the industry sustainable.”
Tech trends defining the future of wind energy business
Dr Kawishwar lists some of the technology trends that are defining the future of wind energy business:
- The tendency towards larger turbine capacity has been continuing with the 10MW mark recently breached.
- Much of the impetus for this has been the mature European offshore industry, where increased size helps offset high installation and infrastructure costs.
- Load bearing component manufacturers have been continuously innovating on enabling better monitoring, diagnosis as well as ease of operation and maintenance (O&M).
- With involvement from IoT and analytics providers, it is now possible to have predictive maintenance of wind farms.
- Further, IEC 61400-25 standards on information exchange for wind turbines has become widely adopted, meaning that large wind farms can be monitored, controlled and better integrated into the power system.
According to Dr Kawishwar, these are some welcome developments since O&M is a major contributor to costs both in magnitude and uncertainty. “Investors and developers are increasingly willing to consider larger turbines for both onshore and offshore deployments,” he added.
Future of wind power sector beyond 2019
The government has focused strongly on solar PV technology leading to a relative neglect of the wind sector. Wind is also facing increased capital costs and fewer high wind sites. However, Dr Kawishwar observes, “The government’s commitment to 75 GW wind power by 2022 is achievable under current manufacturing capability, if appropriate tariff and incentives are carefully reintroduced with a focus on reaching the target.”
He goes on to explain: “If economies of scale are achieved, then competitive bidding can continue to be the basic mechanism for discovering price. Alternative approaches like wind-solar hybrid and offshore wind will become more prominent in the near future. Large solar farms are already in development and such sites tend to have high wind potential. The prior existence of evacuation infrastructure makes the hybrid approach cost-effective. Another related development is the interest in storage systems, which are highly suited to wind, solar and hybrid technologies. MNRE has indicated that it might subsidise development of the same. We can thus look forward to a larger share of renewable energy in the grid in the near future.”