In an effort to incentivise power distribution companies to increase procurement of wind power the Ministry of New & Renewable Energy in India plans to implement a wind energy auction roadmap.
The Ministry of New & Renewable Energy recently issued draft guidelines for auction of wind energy projects and sought comments from various stakeholders. The guidelines are similar to the ones mentioned in the tender documents of the first-ever wind energy auction held in February this year.
As per the proposals of the Ministry, any wind energy developer can bid for minimum 5 megawatts capacity at a single site and at least 25 megawatts capacity in an auction. The power distribution company looking to acquire electricity is free to choose the tariff structure for the auction.
The power purchase agreement shall not be for less than 25 years. In case of under-performance by the wind energy project the developer shall have be liable to penalties.
Significantly for the project developers, the guidelines also specifically mention clauses related to payment security. Non-payment of dues is perhaps the biggest challenge the Indian renewable energy sector faces today. Payment security measures proposed by the Indian government would lend much needed support to the project developers. These measures could include a Payment Security Fund and guarantees issued by the state governments themselves.
Project developers may also receive compensation if they are unable to feed the grid due to lack of adequate transmission capacity at any given time. This will help address another major challenge faced by the renewable energy projects which are often forced to reduce generation by power distribution companies.
The first-ever wind energy auction in India yielded the lowest-ever tariffs of Rs 3.46/kWh (5.2¢/kWh). Four companies – Mytrah Energy, Green Infra (owned by Sembcorp), Inox Wind and Ostro Energy were awarded 250 megawatts capacity each while Adani Green Energy secured rights to develop 50 megawatts capacity. This tariff is significantly lower than the tariffs currently being paid by various power distribution companies across India.
The sharp fall in tariffs discovered through the auction have resulted in several states backing-out from commitments to sign new power purchase agreements. Power distribution companies in the states of Gujarat and Andhra Pradesh have declined to sign any fresh PPAs with wind energy project developers. The power distribution companies in these states have expressed reluctance to the respective regulatory bodies in signing PPAs at feed-in tariffs higher than the recently discovered tariffs.