Surviving airbenders are trying to get wind energy back to its past glory

There has never been a dull year for wind energy in India, not in the last decade anyway. One of the earliest green energy solutions, which drew interest from film stars and cricketers, slowly lost its sheen. Foreign companies fled, local ones shut down, and the sector majors went back to the drawing board. In the middle of this, wind energy capacity addition fell to record lows. As the sector dusts itself and rises again, there are not many who have lived to tell the tale.
 

10 years of tempest
 

During the 2000s, the wind energy sector ran on a tax benefit scheme, Accelerated Depreciation (AD), which could be availed of by anyone who set up or invested in a wind farm, irrespective of the power generated. A portion of the project cost was paid back by the Centre. This scheme was solely responsible for the take-off of the sector and investment by high-networth individuals.

Between 2012 and 2016, tax benefits and incentive schemes for wind energy witnessed mercurial changes. The erstwhile United Progressive Alliance government announced generation-based incentive (GBI) in 2011 and retired the AD scheme. GBI provided wind power producers 50 paise per unit on the power generated.
 

In 2012, GBI was abolished, only to be reintroduced in 2013 for four years. During this period, the capacity addition fell to 1.7 gigawatt (Gw) — half of what was added the year before.

In 2017, the National Democratic Alliance government at the Centre introduced competitive bidding for awarding wind power projects. The sector till then worked under the ‘feed-in-tariff’ (FiT) regime, in which the power price would be in accordance with the project cost. The idea was to introduce more competition and reduce wind power cost.
 

In the first auction, wind power tariffs fell to Rs 3.46 per unit from the prevailing Rs 5-6 per unit.
 

From 5 Gw of capacity addition during 2016-17, mainly in anticipation of regulatory changes, wind power capacity addition fell to 1.8 Gw in 2017-18, the year auctions commenced. Next year, it went further down to 1.4 Gw. Since 2017, the sector has witnessed single-digit growth, compared to double-digit in the decade before.
 

During 2020-21, wind power capacity addition was just 1.5 Gw. As capacity addition started to fall, orders for wind turbines dried up. Several foreign turbine makers with units in India left the country.
 

As tariffs fell at the auction, profit margins shrank, and, with falling orders, the bottom line was hit. Overdependence on government incentives and unwillingness to keep up with the regulatory changes pushed several sector majors into the red.
 

In 2022, the Centre said reverse bidding would be abolished in the wind sector and there will be closed envelope bidding in order to stabilise the cost of wind and bring in more players.
 

“It was a painful period. In India, there are only two domestic players left,” says Devansh Jain, Executive Director, InoxGFL Group. “A sector needs policy support at different points in time, but all that is gone and this sector is standing on its own feet. Solar is getting PLI for building a domestic supply chain. Wind doesn’t even require that; there is an indigenous supply chain and wind is cheaper than solar if you look at the passthrough cost. There is no import cost.”
 

Inox Wind Ltd, a BSE-listed turbine maker, is part of the diversified InoxGFL Group spearheaded by Jain. His grandfather, Devendra Jain, founded Inox Group and split it between his two sons in 2021. PLI is the government’s production-linked incentive scheme to promote manufacturing in the country. 

Rising from the ashes
 

Currently there are only two pan-India domestic players: IWL and Suzlon. Among foreign turbine makers, Vestas and Siemens Gamesa have limited presence in the country.
 

Inox Wind is now on the path of redemption, as is Suzlon. The latter last year lost its founder Tulsi Tanti, also known as the wind man of India.
 

During the tumultuous 2020-21, wind industry stared at an unsold inventory of close to Rs 10,000 crore, according to rough industry estimates.
 

As other players left the field, Suzlon and IWL dug in their heels to put their houses in order over the last year.
 

In 2020, Suzlon concluded its debt restructuring with a capital infusion of Rs 392 crore by the promoters and other stakeholders. Its order book jumped to 3.1 Gw in January this year, from 0.6 Gw in March 2023, according to its latest investor presentation. Its gross debt has fallen to Rs 122 crore, as on December 2023, from Rs 13,000 crore in 2019-20.
 

While Suzlon was aided by banks and financial institutions to restructure its debt, IWL relied on its family office.
 

“We survived. We pumped in Rs 1,300 crore through promoter equity sale during the painful period. The turnaround would have happened earlier, had Covid not struck another blow. Selling off or debt restructuring was never the plan for us. Inox has a respectable reputation among the financial industry. So, we decided to wait for the storm to pass,” Jain told Business Standard at his Noida office.
 

The pause helped the company. As the tenders from the Centre and states started flowing, IWL was able to get a lion’s share of both equipment supply as well as engineering-procurement-construction. In 2023, it secured close to 3 Gw of orders and has built an operations and maintenance (O&M) portfolio of 3.2 Gw. Jain said the company has raised Rs 1,500 crore from marquee global equity investors over the last year.     
    

IWL is now looking at a diversified portfolio, from manufacturing to O&M. It is betting on large wind turbine generators (WTG) of 3.3 Mw capacity. The company believes it will boost its margins and profitability. The gross margins on 3.3 MW WTG is Rs 1 crore per MW, compared to Rs 25-30 lakh per MW for the 2 MW platform, according to the company.

The company plans to increase its O&M business and touch 6 GW in portfolio before 2025-26. “This will be through both organic growth from IWL’s WTG commissioning as well as acquisition of third-party wind O&M portfolios,” says Jain.
 

The stock prices of both the companies have revived. Suzlon’s stocks, which took a beating to Rs 8 (March 2023) has jumped to Rs 40 (March 7, 2024). IWL’s shares have jumped to Rs 521 from Rs 100 in March 2023.

There are now large tenders — 1 Gw and above — by Central agency SECI and contracts by public and private companies for both plain vanilla wind and hybrid projects. But there are murmurs of another policy change.
 

Reports suggest a flip back to reverse bidding by the Centre for wind projects. Though unconfirmed, the market reacted strongly, with stocks of IWL and Suzlon tumbling by 5 per cent for three days last week.
 

Experts say the existing wind tenders are all on reverse bidding and closed-envelope bidding is yet to kick in, so the net impact is nil on the sector. The capacity expansion of wind has fallen behind solar. But, Jain says, as the share of renewable energy grows, it is sources such as wind and hydro that will offer grid stability.
 

“Add to it the fact that wind is an indigenous industry with no import dependence. As the demand from the C&I (commercial and industrial) segment grows, wind will play a crucial role in providing round-the-clock green power,” he says.
 

The surviving airbenders are trying to get wind energy back to its past glory. But that will take much more than market optimism.