Wind energy capacity expansion to slow in next five years: Crisil

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New bidding mechanism has resulted in low realisations

Capacity addition in the wind energy sector will slow down over fiscal 2019 to 2023, with only 14-16 GW being added due to a decline in bid responses and profitability of original equipment manufacturers, according to a report by Crisil.

“Crisil Research expects capacity addition to grow slowly over the next five years, driven by the allotment of central transmission utility’s (CTU) grid connected capacities,” Crisil said in the report.

“The shift to a competitive bidding mechanism has slowed industry growth due to a significant fall in tariffs, triggering a decline in both bid response and profitability for original equipment manufacturers (OEMs).”

The shift to a competitive bidding mechanism in the wind energy sector has resulted in tariffs falling to ₹2.4-2.6 per unit, from ₹4-4.5 per unit under the feed-in tariff regime.

According to Crisil, such low realisations are unviable for the entire value chain at current capital costs of ₹6.8-7.2 crore per MW.

“Crisil Research expects capacity addition of 14-16 GW over fiscal 2019 to 2023, entailing investments of about ₹1,10,000 crore,” Crisil said in the report.

“Capacity additions will primarily be driven by central government allocations with relatively stronger counterparties such as Solar Energy Corporation of India (SECI) and PTC India, reducing risk compared with direct exposure to state discoms.”

State auctioning, on the other hand, has slowed as several States have signed power supply agreements (PSAs) with PTC and SECI to procure wind power under the schemes auctioned by them, to help fulfill their non-solar renewable purchase obligations (RPO) targets, according to Crisil Research.

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