Wind power rates may bottom out

With reverse auctions stopped, prices may rise from as low as ₹2.50 a unit

Last week, the Ministry of New and Renewable Energy (MNRE) said that it would be doing away with the practice of reverse auctions — when companies bid to offer the lowest price — while awarding contracts for setting up wind-energy projects. However, wind industry experts say this alone wouldn’t necessarily improve the sector’s fortunes.

India has committed to installing 60,000 MW of wind power projects by 2022 but has only met two-thirds of the target.

“An in-principle decision has been taken. There were complaints from the industry that e-reverse auctions are leading to tariffs being artificially lowered leading to unhealthy competition,” said Indu Shekhar Chakravarty, Secretary, MNRE, at a conference organised by Confederation of Indian Industry (CII).

While reverse auctions were the norm for all renewable energy projects including solar and wind projects since 2015, the government’s change of stance signals that the rock-bottom prices associated with clean energy projects—per unit solar power costs have fallen to ₹2.40 a unit—don’t reflect the true costs of renewable energy.

The cost of large tracts of land required to install wind turbines, the limited availability of prime sites that are favourable for cost-efficient wind power projects and the poor financial health of State electricity distribution companies, who pay wind power project developers for every unit of power sold to them, are among the reasons cited for the dwindling health of the sector.

Francis Jayasuriya of the Global Wind Energy Council, an international trade council of the wind energy industry, said that there was yet no clarity on what would replace the existing policy. “Prices were going below ₹2.50 per unit and in fact the government had to intervene and put a ceiling on how low this could go. People were desperately building and driving it down to unsustainable levels,” he told The Hindu.