Energetica India Magazine nº88 March-April 2020

WIND POWER 57 energetica INDIA- March-April_2020 Reasons these measures are necessary First, although bid tariffs have started to rebound, they are not yet in the vicinity where projects become sustainable. A flashback would be in order here. Wind tariff mechanism transitioned to competitive bidding in December 2017from the feed-in-tariff (FiT) regime. This caused stall, and cut-throat competition and bidding aggressionsqueezed profitability of the entire value chain, beating down tariffs to Rs 2.43/ unit. At the same time, blew gusts of headwinds: delays in discom payments, lack of land availability, inadequate transmission connectivity, tariff renegotiation and finance availability issues. The fallout: capacity additions nearly halved to 1.7 GW over the past twofiscals compared with 3 GW on average in the preced - ing five. It is heartening to see tariffs rebounding,with the latest auction in Gujarat seeing Rs 2.93/unit. However, factoring potential risks, CRISIL believes tariffs need to be above Rs 3/ unit for operations to sustain. On the financing side, lack of liquidity poses a huge hurdle. At home, merger of public sector non-banking financial compa - nies, together with the inability of PSU banks to lend more as these have already breached the limits for the sector,and the fact that certain private banks are fraught with high non-per - forming assets, have led to a significant squeeze. External commercial borrowing has also been challenging, giv en that foreign lenders are not willing to take on the con - struction risk in most cases. While green bonds have been increasingly explored with significant fund raising in 2019, a recent issueby a leading independent power producer (IPP) indicates a spurt in interest rates due to theprevailing market risks. Another headwind stems from the very nature of wind power, which is operated on a ‘must-run’ basisbutis an infirm source of power. As a result, discoms have to back down coal power de - spite being obligated to pay fixed costs for such plants. More importantly, such situations, if not handled appropriately, have significant ramifications on grid stability.