Solar energy has seen considerable price fall, now it is time for wind energy. Solar Energy Corporation of India held an auction for the installation of 1,000 megawatts of wind power installations. During the auction tariffs kissed a new lowest of Rs2.64 per unit, that is a 24% drop from the previous low of Rs3.46 per unit. Solar energy’s lowest record is Rs2.44 observed in May. Now, India has cheaper renewable electricity than coal-based power which costs Rs3.20 per unit.
Narendra Modi government amended the procedure of determining the tariffs of Wind Power in which he let the market decide the tariff rather than imposing any regulator. The new system led to a fall in price. “The main reason is simply increased competition,” renewable energy consultancy Bridge to India said in a not referring to price wars.The tariff crash came into play when India’s wind energy sector is already facing stagnation.
After the introduction of the new system, the central and state governments had not conducted any wind farm auction; most of the developers have no project to work on. Energy distribution firms were looking for replacing the old tariff-determination system in which the firms were pressurized to sell at newly determined rate by the regulator. As a consequence of this, the sector has faced a sharp decline in new capacity additions with respect to the previous year.
The low tariffs might look alluring to the consumers. But it becomes more of a risk for investors and lenders, according to Bridge to India. Energy distribution firms, which have already signed the power purchase agreements at higher rates, will also take their hit. “We believe that the new wind tariffs are too aggressive,” said Bridge to India.
“The viability of these projects would depend on the project execution capability of the firms involved,” CARE Ratings said in a note. “This includes land acquisition to set-up of projects in areas with grid connectivity.”