In a major relief to the sector, MNRE has granted project completion deadline extension to wind projects allocated under SECI auction tranches 1-5. More time has been granted to these projects mainly because of delays in land allocation and completion of transmission infrastructure. A total capacity of 7,200 MW was allocated by SECI in these auctions between Feb-2017 and Sep-2018, but only 1,825 MW has been commissioned so far.
- Heavy concentration of projects in Gujarat has exacerbated land and transmission connectivity delays;
- The developers face a multitude of other challenges on supply chain, debt financing and project clearance fronts;
- Progress is likely to remain slow with total capacity addition estimate of only 9 GW over next three years;
Figure: Developers with pipeline projects in SECI wind auction tranches 1-5, MW
Source: BRIDGE TO INDIA research
Note: This chart excludes commissioned projects.
Since February 2017, wind projects aggregating 12,265 MW have been allocated under auction route by various central and state government agencies. Based on the mandated completion deadline of 18 months, 5,000 MW of these projects should have been commissioned by now. But only 2,128 MW has been actually completed. The issue is mainly lack of suitable land at acceptable price. More than 75% of total tendered capacity is estimated to be coming up in Gujarat with most of the balance being located in Tamil Nadu. However, late last year, Gujarat refused to allocate state land for central government schemes. This left the developers in a bind – moving to other states was not viable due to low wind speeds and time constraints, and buying private land at 3-4x the cost of government land was simply unaffordable. Under persistent pressure from the central government and developers, the state is believed to be in the process of finally allocating land for the projects.
The developers face yet more hurdles. All projects in Gujarat need approval from the Ministry of Defence, which can be time consuming. The turbine market has shrunk due to debt woes afflicting Suzlon and Senvion, and many of the smaller suppliers being squeezed out of the market. Lack of bankable turbine makers, willing and able to take large scale lump sum EPC contracts, is bound to affect execution timelines as well as cost. Layering debt financing challenges on top of these problems being faced by the sector currently means that there is a growing risk of some projects being abandoned altogether.
After a bumper FY 2017, when 4,564 MW of new wind capacity was added, the sector has been in a slow, gut wrenching mode. Capacity addition in FY 2018 and FY 2019 stood at only 1,788 MW and 1,819 MW respectively. Our estimate for total capacity addition over next three years until the end of FY 2022 is around 9 GW.