Turbine makers hit by regulatory issues, slow demand, Chinese imports

Foreign companies and imports from China are increasing footprint in India

The troubles at Suzlon Energy, the largest player among domestic turbine makers, are symptomatic of the industry. 

Leading turbine manufacturers with more than 80 per cent market share are staring at weak order pipelines, losses, and regulatory niggles. At the same time, foreign companies and imports from China are increasing their footprint in the country, sparking worries of cost escalation among power producers.
 
At the same time, commissioning of wind power project has slowed down to a historic low. Last financial year, 742 MW of wind projects were commissioned. This is when the Centre has tendered out close to 7,000 Mw of wind power projects in the past two years. Wind projects installation was 5,000 Mw in 2016-17. 

 

On Tuesday, Suzlon defaulted on payment of $172 million in foreign currency convertible bonds (FCCBs). 

Inox Wind suffered a net loss of Rs 31 crore in the quarter ending March 2019. Regen Powertech closed down its Udaipur unit in 2017 and reduced staff strength, following slowdown in orders. It currently has no new order, said an executive. 

The Indian arm of German major Enercon (erstwhile Wind World), which was one of the earliest investors in Indian wind sector, has halted operations in India.
 
Wind power producers which procure turbines from these companies said this has created a vacuum in the wind energy sector. 

“Policy irregularities and retrospective changes are hurting the wind manufacturing sector in India, especially indigenous players. The health of the Indian turbine makers is in bad state and it will impact power production and India’s overall renewable target as well,” said Sunil Jain, chief executive officer, Hero Future Energies.
 
Hero and ReNew Power recently started operations and management of their wind units, as turbine companies fail to oblige contracts because of financial stress, said industrial sources.
 
The Solar Energy Corporation of India (SECI) cancelled a 2,000-Mw tender owing to fewer bids of 800 Mw against it. Andhra Pradesh has recently decided to overturn all the wind projects awarded in the state, thereby impacting investment in close to 4,000 Mw projects. Windy states such as Tamil Nadu, Telangana and Andhra also delay payment to wind power producers, which in turn hurts the margins of turbine makers. 

 
In what could be another challenge for domestic companies, global turbine makers such as GE Energy, Vestas and Chinese Envision are increasing footprint in India. 

“Though the cost economics do not favour the low-tariff expectations of the Indian government,” said a leading private power producer, ruing a slow death of three-decade-old Indian wind manufacturing sector.
 
Vestas recently announced a new nacelle and hub (a component of a wind turbine) assembly line in Chennai last week. It already has a blade plant in Ahmedabad. GE Energy was recently awarded India’s largest turnkey 300-MW wind power project of ReNew Power. China’s Envision, a fairly recent entrant in India, has around 300 MW of turbine orders, said a source. 

 
The Indian government in 2017 retired the 25-year-old Feed-in-Tariff (FiT) mechanism to award wind projects and introduced competitive bidding. The capacity addition fell to a record low of 650 Mw during the same period. But the tariffs also fell by half from existing rates to Rs 2.5/Mw. Under the FiT mode, the electricity regulator decides the tariff.
 
Wind turbine manufacturers then declared an unsold inventory of close to Rs 10,000 crore with no outlook on new projects. Leading domestic wind turbine manufacturers including Suzlon Energy succumbed to cost cutting and employee retrenchment with dry order books.