In the latest wind auction for SECI 2,000 MW tender held on February 13, 2018, winning tariffs came out at INR 2.44 – 2.45/kWh. Winners include ReNew (400 MW), Sembcorp (300 MW), Inox (200 MW), Torrent Power (500 MW), Adani (250 MW), Alfanar (300 MW) and Engie (50 MW). There were five other participants including Sprng, Enel, Orange, Hero and Mytrah. The tender was oversubscribed by 1.85x.
- The auction has conclusively demonstrated that wind is price competitive with solar power;
- Most developers are indifferent to RE technology;
- Wind offers compelling advantages over solar including less land requirement and significantly better domestic manufacturing capability;
There are many interesting takeaways here. First, the immense market depth is a revelation. The large number of credible bidders, over-subscription of 1.85x in such a large tender and fine bidding margin all show that the Indian RE market is now very mature.
Figure: Wind and solar auction tariffs over last year, INR/ kWh
Source: BRIDGE TO INDIA research
The fall in wind tariffs has also been, frankly, a major surprise. In the old preferential allocation regime, when states were offering attractive feed-in-tariffs ranging between INR 3.70–4.90, viability was still regarded as challenging and developers were lobbying for additional incentives like GBI (generation-based incentive). Improvement in turbine technology has played its part in making wind competitive. But more importantly, the government has reduced investor risk by making project allocation more transparent and addressing transmission connectivity challenge. More developers have entered the market creating more competition. EPC contractors have also been forced to become more efficient and the consumer has been the big beneficiary. This is a great lesson for policy makers in policy design.
The other interesting aspect of falling wind tariffs is implications for future RE mix. India needs to add another 80 and 27 GW of solar and wind power respectively in the next four years to meet the March 2022 targets. These numbers seem unfairly balanced against wind. The rationale for higher solar target has never been outlined. Presumably the reasons are geographical wider distribution of solar radiation (in comparison to wind) and an expectation that solar costs would fall more sharply than wind power. Solar may have also benefitted from its image of a newer, more progressive technology in comparison to wind, which has been around for much longer.
But rapid improvement in wind competitiveness should lead to a reconsideration of the RE mix. Many complex factors including land and transmission requirement, geographical dispersion, power generation variability, seasonal profile, operational risk and role of domestic manufacturing go into the mix. Solar offers the advantages of slightly quicker deployment and a more reliable generation profile, which is also more closely aligned to demand pattern. But wind has some crucial advantages – it requires much less land in comparison to solar power. And India has a strong eco-system of manufacturing and construction of wind power plants – in sharp contrast to solar, where the country remains heavily reliant on imports
