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March 01, 2019

Sector Report: Wind and other renewables

This report is available to users in India for ₹40,000 + applicable taxes

 

Table of Contents

 

  • outlook
  • Project economics

 

Wind and other renewables

 

~14-16 GW of capacities expected to be added over next 5 years

 

31-JAN-2019

 

CRISIL Research expects capacity additions to grow, albeit moderately over the next 5 years led by allotment of CTU connected capacities, better technology and states raising their Non-Solar RPO targets. However, incremental challenges pertaining to windsite/land availability, grid connectivity and cost of capital are key constraints to additions at present.

 

~14-16 GW of capacities expected to be added over next 5 years

 

Industry still reeling under pressure from the change in bidding mechanism

 

With the FiT regime ceasing to exist discovered prices for wind energy fell as low as Rs. 2.43/unit (in 500 MW wind energy auctions for GUVNL). Further, relevant stakeholders from the states’ electricity sector have conveyed almost all wind-based energy procurement to be through the competitive bidding route.

 

This has caused realizations to fall across the value chain with both developers and OEMs reeling under the increased pressure to execute projects at such tariffs. This is due to the fact that firstly, capital costs have seen a correction post a fall in FY’18 due to an inventory buildup. Secondly, developers are facing increasing difficulties in tying up adequate quality wind-sites with connectivity prior to bidding. CRISIL Research estimates that developers currently require tariffs near Rs 3 per unit and PLFs in the range of 32-35% for projects to be viable at current capital costs of Rs 68-70 million per MW. This should be in conjunction with developers tying up adequate land, with prior wind resource assessment, to ensure rationality while bidding.

 

Additionally, transmission constraints have hit the sector far more than solar, which has caused bid response to be lower for certain auctions (SECI and NTPC 2 GW). Adequate grid infrastructure remains a key monitorable for wind power.

 

However, on the plus side, SECI has already allocated 7.2 GW of ISTS connected wind capacities over past 2 years. With commissioning timelines of 18-24 months, capacities are now lined up for commissioning nearer to the end of FY’19 and onwards. Further, the Centre also has an ambitious tendering roadmap which will also support additions to an extent. Following from the above, CRISIL research expects wind power capacity additions of ~14-15 GW over the next five years (2019-23) similar to the run rate of ~15 GW over the last five years (fiscal 2014-18).