ICRA pegs wind energy capacity addition at 3-3.5 GW in FY'19

Wind energy capacity addition is estimated at about 3-3.5 GW in FY2019 and the viability of bid tariffs and inter-state connectivity will be key headwinds for developers, ratings agency ICRA said today.

The project awards so far are expected to improve the capacity addition in the wind power segment to about 3 to 3.5 GW in FY2019 against 1.7 GW in FY2018, ICRA said in a statement.

The Ministry of New and Renewable Energy (MNRE) along with the distribution utilities in Gujarat, Maharashtra and Tamil Nadu have awarded wind-power capacity of 7.6 GW over the past 15 months and another 10 GW each are proposed to be awarded in FY2019 and FY2020.

This is in line with the trajectory of project awards announced by the MNRE in November 2017 to achieve the cumulative wind capacity target of 60 GW by FY2022.

However, on a cautious note, the winning bidders in these auctions face the twin challenges of project viability at the quoted tariffs and securing connectivity and long-term access to inter-state transmission network.

"While the regulations recently notified by the Central Electricity Regulatory Commission (CERC) on connectivity for renewable energy projects are positive for these developers, the adequacy of the existing inter-state transmission infrastructure in the states with high wind potential remains a challenge, said Girishkumar Kadam, Sector Head and Vice President, ICRA Ltd.

The connectivity regulations recently notified by the power regulator CERC provide clarity on the procedure and timelines for securing connectivity from the central transmission utility and accord priority to projects holding a letter of award under the tariff-based competitive bidding.

However, it said the uncertainty on availability of adequate evacuation infrastructure persists, given that the existing inter-state transmission infrastructure in the states with high wind potential may not be sufficient to provide connectivity to the projects bid out so far and proposed bids by the SECI.

Moreover, its said the augmentation of transmission infrastructure would take about 24-36 months, whereas the winning developers must commission the wind power projects within 18 months from the date of award.

The significant decline in order volumes during the transition from feed-in tariff regime to competitive bidding regime, coupled with pricing pressures, had an adverse impact on the financial profile of the wind turbine manufacturers.

This remains a concern for the wind power IPPs using the services of such players as O&M contractors, given that the weakening of the financial profile would affect their ability to ensure machine availability for the wind farms, said Vikram V, Associated Head and Assistant Vice President, ICRA Ltd.