The wind energy sector has added more than a GW of new capacity in a quarter after a long gap, a development that signals the revival in the segment after a subdued phase, caused by a shift in policy.
During the first quarter of this fiscal, the wind energy sector has added a new capacity of 1.1 GW, about 1/4th of the overall new capacity added to the grid during the period.
While the solar power segment maintained its momentum in bringing new capacity to the grid, wind’s new capacity addition took a hit in the past five-six years after the shift in government policy from a feed-in tariff regime to an e-reverse bidding mechanism in 2017. Since then wind’s new capacity addition has been very poor.
“The reverse e-auction is a process where the bidders can compete online in real time. However, the wind capacities didn’t materialise due to irrational assumptions by the bidders – on evacuation and land acquisition for the most suitable sites. The wind energy sector is not suitable for e-auction because of the complexity and inherent variability of the projects,” said analysts at ICICI Securities.
Post the introduction of reverse e-auctions, the annual capacity addition in the sector dropped significantly from 5.5 GW in FY17 to 2.2 GW in FY18 and since then the segment was stuck in a slow lane.
However, in a big cheer to the wind power sector, the government has done away with reverse auctions. Analysts believe that three key steps will lead to a revival of the wind sector. They include single-stage closed bidding in the place of reverse e-auction, the introduction of wind-specific renewable purchase obligations (RPOs), and the proposed plan to auction 10 GW of wind projects every year.
New mechanism
There are several advantages to the new bidding mechanism. The cumulative capacity in any of the eight windy states will not be more than 2GW, a move that may ensure faster execution and uniform growth. Power from each state’s bids will be pooled and offered to DISCOM on a single tariff under power supply agreements.
Also, under the new mechanism, wind project auctions will be bundled together. Multiple wind projects across various states and PPAs will be signed with the DISCOMs on the blended cost of the power across all the projects. This is likely to lead to an even spread of wind power projects across the country.
“Tamil Nadu is a wind-rich state compared to Maharashtra and so the cost for generating wind power in Tamil Nadu will be far cheaper than in Maharashtra. Thus, no DISCOM would have been willing to sign PPAs with Maharashtra-based projects owing to higher costs. However, when they combine the two projects, the blended cost is likely to remain cheap, pointed out the analysts of ICICI Securities.
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With a slew of supportive policy measures, FY23 is expected to see the wind energy sector add 3.5-4 GW of new capacity to the grid.
Meanwhile, the solar industry (including all segments) brought in a new capacity of 3.3 GW during Q1 of this fiscal. As of June 30, 2023, the total grid-connected renewable capacity in India stood at about 130 GW, of which solar accounted for 70 GW, followed by wind at 44 GW.