More and more wind farms face delays in India as developers struggle to make their projects work in the world’s cheapest market.
About 2 gigawatts of wind power generation auctioned by the federal government since February 2017 is running behind schedule, according to BloombergNEF. That number has more than quadrupled since February, threatening to derail the nation’s renewable-energy ambitions.
Developers are having difficulty finding affordable land, getting financing and connecting to grids after accepting some of the world’s lowest green energy tariffs over the past two and a half years. On top of that hangs the uncertainty whether they will be paid on time by power distribution companies, known locally as discoms.
“With such low tariffs, projects can be viable only if they have access to low-cost funds, cheap land and inexpensive transmission infrastructure. Unfortunately all these three are found wanting for most wind projects,” said Prashant Khankhoje, a director at India Electron Exchange, a New Delhi-based power consulting firm. “The risk of delayed payments from discoms is another big issue, which makes lenders scared to lend to wind projects.”
India started auctioning wind projects in 2017, ditching a previous system that had feed-in tariffs for developers. The auctions saw aggressive bidding from developers, which led to a drop in prices.
The need to keep costs down amid the increasing competition also led to financial difficulties at some turbine makers, such as Suzlon Energy Ltd., impeding their ability to execute projects on time.
“Today we’re left with a handful of equipment suppliers, which has turned the industry from a buyers’ market to a sellers’ market,” said Vinay Rustagi, managing director at Bridge To India, a consultant to the renewables industry. “Developers have lost the bargaining leverage they need to make the project viable.”
Prime Minister Narendra Modi set a target in 2014 to install 175 gigawatts of renewable energy capacity by 2022. As the nation approaches that goal, Modi this year announced a longer-term plan to install 450 gigawatts of renewable capacity as part of the country’s efforts to reduce the emissions intensity of its economy.
“That target looks extremely, extremely ambitious,” said Rustagi. “Until core issues of site availability, adherence to contracts and timely payments by discoms are resolved, developers would be wary of investing.”
Referred from economic times, dated 05 Dec 2019