Wind power tariffs unlikely to drop; wind energy group calls for sops

Wind power tariffs will not see any reduction unless producers are provided with tax sops and drop in interest rates to make their projects attractive, the industry feels.

“I don’t see a possibility of tariff reduction because windy sites are getting full and the new projects are coming up at less windy areas raising the project costs,” Madhusudhan Khemka, Vice-Chairman of the newly-formed body Indian Wind Energy Alliance (IWEA) told BusinessLine .

To maintain high efficiency levels, the swept area of blades are being increased and towers are becoming taller, which in turn is raising the capital cost of the producer, he said. Khemka, also the Managing Director of turbine manufacturer ReGen Powertech, said that economies of scale are yet to be achieved, which would naturally bring down tariffs later.

But, the industry is open to tweaking power purchase agreements wherein tariffs begin relatively low and are gradually increased over the course of the agreement tenure.

“Our tariffs are based on 20-25 year power purchase agreements. The other way to bring down tariffs is by keeping it low in the beginning and gradually increasing it later,” he added.

Currently, wind power tariffs range from ₹3.80 a unit to ₹6 a unit as compared to conventional coal-based power, which is available anywhere between ₹0.87 a unit to a maximum of ₹5.29 a unit.

Amongst renewable sources, solar power tariffs have seen a sharp reduction over the last two years and are currently hovering around ₹7 a unit, with the industry expecting a further reduction as technology keeps improving.

“Reducing the cost of debt for independent power producers and giving them tax incentives can help bring down tariffs to ₹4-4.50 a unit,” said Sumant Sinha, Chairman of IWEA as well as Chairman and Chief Executive Officer of ReNew Power.

Currently, only State governments are the ones that buy wind power. With numerous problems in scheduling and forecasting for wind power, State governments often choose solar power over wind power as the preferred renewable energy source with some even choosing not to have wind electricity at all.