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The wind energy industry is bracing for a further fall in tariffs as auction of projects, which attracted record-low bids in February and prompted utilities to seek low rates from old plants, resume this week. The Solar Energy Corporation of India’s (SECI) second wind energy auction follows the recent order of the Central power regulator that auction winners should not be given priority in according connectivity, which may reduce competition.
There are 13 bidders for 1,000 MW of wind projects, which can be located anywhere in India. The first wind auction held in February, also for 1,000 MW, saw a winning bid of Rs 3.46 per kwH, substantially lower than the price discoms buying wind power had been paying till then. The newly-discovered tariff led to most of the state discoms refusing to sign any more power purchase agreements (PPAs) with wind energy developers at the old rates, including those that were in final stages of approval. Since no new rates had been fixed by the states, signing of fresh PPAs virtually stopped.
A number of wind energy states are preparing to hold auctions of their own but so far only Tamil Nadu has done so in late August, at which the lowest wind tariff fell further to Rs 3.42 per kwH. SECI has not set any reserve price for Wednesday’s auction. “But we expect lowest tariff to drop beyond Rs 3.42 per kwH,” said an MNRE official. Most developers, however, doubted difference would be large.
“This time, we don’t expect any monumental fall as happened in the first auction,” said one of them. An added complication is the CERC ruling of last week, saying auction winners cannot be allowed to jump the queue for connectivity at power sub-stations. There are long waiting lists for connectivity at several sub-stations where all the bays are already occupied. Though new sub-stations to accommodate the applicants are being built in the vicinity, these take 36-40 months to be completed, while SECI’s wind projects have a deadline of 18 months from the signing of the PPA.
“If there are bidders who haven’t already arranged connectivity at whichever location they intend to set up wind projects, they are unlikely to pursue their bids seriously,” said the developer. This is likely to shrink the number of serious bidders. “It would be very risky to bid in the absence of connectivity,” said the developer. “That is another reason why the tariff is unlikely to fall heavily this time.”
ET VIEW: Ensure fair regulation
The rapid reduction in tariffs of renewable energy must be accompanied by a regulatory regime that is conducive to competition and aids the smooth transition to low carbon energy sources. The regulatory regime must ensure fair play. The order on booking transmission slots is part of this effort. It will ensure that renewable energy sources are integrated in a sustainable manner into to energy mix.
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