India's wind power sector losing steam as capacity addition tapers off

Major wind power companies are staring at thinning financials and dry order books

Wind power tariffs have declined to Rs 2.43 a unit and capacity addition last year was a mere 435 Mw till October despite three rounds of project auctions, forcing turbine manufacturers to rue the surge in installations during 2016-17 when close to 5,000 Mw was added.

Spanish wind energy company Gamesa, which was bought by Siemens last year, said India was responsible for its global sales falling 12 per cent, year on year. “India contributed 626 million euros in revenues and 80 million euros in Ebit (earnings before interest and taxes) in H2 2016 (April-September), and 44 million euros in revenues and (-)37 million euros in Ebit in H2 2017,” it said while presenting its results in November.

India’s largest wind turbine maker Suzlon Energy, which laid off workers a few months ago, has now asked its executives to take pay cuts. The company’s order book was likely to remain slim in 2017-18 with no projects coming up, said an analyst. 

“With the declining tariffs, cost competitiveness and efficiency become key. Cost optimisation continues to remain a focus for us. This has enabled us to become lean and agile,” Tulsi Tanti, chairman and managing director, Suzlon Energy, said. 

Turbine manufacturers estimate unsold inventory of Rs 100-150 billion despite the auctions of 2017.

Tanti said 2017-18 would be a transition year. “The Indian wind energy industry is shifting to competitive bidding from feed-in tariff. Due to shifts from state to central processes there is a temporary vacuum in the market in this financial year,” he added.

The Centre wants to auction wind energy projects every month but evacuation poses a challenge. Green corridors for evacuating renewable energy were coming up at a steady pace, but states were reluctant to purchase renewable energy, with a few exceptions such as Bihar, Delhi, Goa, Madhya Pradesh, an official said.

Around 3,000 Mw of wind energy projects have been auctioned by the Centre, and the Tamil Nadu and Gujarat governments. Tariffs fell to Rs 2.43 a unit from Rs 3.46 a unit within a year. The earlier feed-in tariff was Rs 5 per unit.

Inox Wind, which bid Rs 3.46 a unit in the Centre’s first wind energy auction in February, was trying to sell its older plants, said a person close to the development. Inox Wind could not be reached for comments.

Recently, one of its contractors dragged Inox Wind to the National Company Law Tribunal over Rs 5 million dues. Though the case was dismissed, Inox Wind’s order book is dry. The company’s income from operations declined by 89 per cent in the second quarter to Rs 871.5 million from Rs 8.16 billion in the same period of 2016-17. “We see the wind energy industry to be in the last phase of transition to a complete auction-based regime,” Inox Wind Executive Director Devansh Jain said in a statement to exchanges.

At the same time, IL&FS is selling its entire wind energy portfolio and so is Larsen & Toubro. Private equity-backed firms such as Orange Renewables and Ostro Energy are also looking for buyers for their projects. “The government must make sure that states abide by their renewables purchase obligations. Payment security and power offtake has hurt the sector in the past and will continue to do so if states are not obligated to purchase wind power,” said V Subramaniam, secretary-general of the Indian Wind Energy Association.