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Renewable energy tariffs that have already tumbled to a record low will fall further and help India achieve its ambitious targets for generating green electricity, renewable energy secretary Anand Kumar said. However, project developers said they don’t expect wind power to get any cheaper.
Developers offered to supply power at Rs 2.64 per unit to win wind energy projects at an auction conducted by Solar Energy Corporation of India last week. In the first such auction held in February, the lowest tariff quoted was Rs 3.46 a unit.
“In the years to come, with the technology improving, we expect the tariffs would go down further, both in solar and wind sector,” Kumar told ET. The ministry welcomes this trend of falling tariffs, which will provide a boost to the renewable energy sector in the country, he added.
"This is a boost to the renewable energy sector and it makes RE power affordable for the benefit of the common man. As more and more renewable energy would be generated, the issue of grid balancing will be automatically taken care of. Power from renewable sources will bring a household revolution in the country," he said.
Lowering the tariffs will help the country realise its goal of adding 175 GW renewable energy capacity by 2022, Kumar said, as there will be more takers for cheaper power.
"I am confident that we will not only achieve this target, but will also exceed it," he said. Analysts see this tariff as sustainable only if this bid is looked at as one-off, where the profit margins for developers may be thin, but still positive.
“The pricing will not be sustainable if more projects are bid to meet policy targets. There’s a valid concern that low margins will put off investors and lead to some OEMs shutting down — both detrimental to us in the long run,” said Kameswara Rao, leader-energy, utilities and mining at PwC India.
One of the reasons for developers to quote such a low tariff is the easy availability of equipment, industry executives said. Equipment manufacturers are sitting on huge inventory as no wind projects were set up in the past few months, they added.
“In the last few months of this year, there has been no addition to wind power. The OEMs were clearing their inventory. They might as well have reduced their margins and enabled this business to go to that (Rs 2.64 a unit) number,” said an industry player, who did not wish to be named.
“It is about how you manage to leverage your partners,” this person said. “As long as it is sustainable throughout the value chain, companies may be ready to quote lower tariffs. The inventory clearance has a significant role to play also.”
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