Energetica India Magazine nº88 March-April 2020

WIND POWER Growth Expected for Wind Power Sector in India despite Hurdles Wind power is crucial to India’s target of achieving 175GW of renewable energy capacity by 2022, and 60 GW of planned targets for wind power contribution is vital to achieving the overall goal. The government in the current context has to take bold steps to reinvigorate the sector. The wind power sector in India is one of the key success sto- ries of the renewable energy program. Contrary to solar, where significant capacity addition has been driven by government impetus in recent years, wind energy in India has grown steadi- ly since 2000 and the country is one of the top five markets in the world. According to Frost & Sullivan’s analysis, wind power has been the dominant source of renewable energy thus far and ac- counts for 57% of the renewable power generated in India. It further accounts for nearly 60% of the renewable power gen- erated by Andhra Pradesh, Karnataka, Tamil Nadu, and Telan- gana—the top four states for renewable power generation in India. Among the next five states, it is more than 70%. In its heyday, the wind power sector in India saw the emer- gence of domestic manufacturers like Suzlon, which took to the world stage and in a short span became one of the top five wind turbine manufacturers in the world. The allure of the domestic wind market soon faded, and Suzlon not only lost its global position but also its market leadership position in India in 2013. The market’s focus shifted to solar, considering the sharp decline in achievable generation tariffs, which prompted Suzlon to venture into the solar business. In 2019, the sector entered its most turbulent phase, plagued by regulatory and implementation hurdles. With less than 2GW annual capacity additions, the long-term impact of this drastic slowdown could lead to unmitigated disasters for companies operating in this space. Suzlon, which over the years struggled to service its debt, underwent constant changes and lost its sheen as an Indian renewable energy success story. Hindrance to Growth If one were to sift through the fault lines, it can be traced to the introduction of fiscal and regulatory incentives such as Ac - celerated Depreciation benefits for developers in 1990, Feed- in Tariffs (FiT) in 2003, Generation-Based Incentives in 2009, and the recent roll back to competitive bidding. The incentives helped propel the market and further revisions, discontinua - tions, and reintroductions negatively impacted the sector’s growth. Before 2017, under the FiT regime, a select few players installed projects based on their available land bank. In 2017, competitive bidding was introduced to create a market that is fair to all participants and does not just benefit the incumbents. Since then, according to media reports, the tariffs in the wind power segment have hit an all-time low, ranging between ` 2.44 per kWh (for SECI Tranche III, 2000 MW during February 2018) and ` 2.83 per kWh (for SECI Tranche VIII, 1800 MW during Au- gust 2019). Large capacity auctions and the need for low tariffs have impacted the cost economics of the segment. Further, with competitive bidding, there is an increased risk of states backtracking on Power Purchase Agreements (PPAs)— as was the case with Andhra Pradesh government’s decision to revisit the PPA agreements of old RE projects awarded under FiT. Other challenges faced by the sector include: • Increasing unavailability of wind-rich sites that can support low tariffs. • Delays in land acquisition due to challenges in getting Right of the Way and Environmental clearances. • Delays in regulatory approvals after awarding projects. These factors further add to the problems for developers who bear the losses due to delays. Perhaps the biggest concern Supreeth Srinivasa Rao Associate Director, Industrial Practice, Frost & Sullivan 54 energetica INDIA- March-April_2020