Tariff-based bidding in the wind energy sector is expected to pick up momentum in the coming months with both the Centre and states lining up major auctions.
The competitive tariff-based bidding mechanism in the wind industry, which was initiated earlier this year, is set to gain momentum. Tamil Nadu has become the first state to procure wind power using the reverse bidding process. The southern state is seeking long-term purchase of 500 mw, at a tariff not exceeding Rs.3.46 per kwh. Bidders can set up wind power projects of at least 25 mw in Tamil Nadu and the procurement agency Tamil Nadu Generation & Distribution Corporation Ltd (Tangedco) will select the bidders based on the lowest tariff quoted. It may be mentioned that Tamil Nadu needs to procure 500 mw of wind energy to part-fulfil its RPO target of 9 per cent for FY18.
Tamil Nadu will thus be sourcing wind power at a competitive rate of Rs.3.46 per kwh, or lower. This would be much below the feed-in tariffs for wind that have traditionally been in the range of Rs.4 to Rs.6 per kwh. Tariff-based bidding is thus expected to create of war of tariffs in the wind industry as much as it did to the solar industry.
SECI auction sets benchmark
It may be recalled that in February this year, nodal agency Solar Energy Corporation of India (SECI) opened bids for 1 GW of wind power, heralding the tariff-based competitive bidding route for wind energy in India. Mytrah Energy, Green Infra Wind Energy, Inox Wind, Ostro Kutch Wind and Adani Green Energy emerged as the lowest bidders quoting Rs.3.46 per kwh. It may be noted that Tamil Nadu has used the same Rs.3.46 per kwh as the benchmark. SECI is also scheduled to procure another 1 GW of wind energy through the tariff-based bidding route and one can expect rates to be even more aggressive. The basic idea of such auctions is to help non-windy states meet their RPOs by procuring wind energy generated in windy states and transmitted through the ISTS (interstate transmission system).
More states
While Tamil Nadu is already in the market with its 500-mw procurement, states like Gujarat, Rajasthan and Madhya Pradesh are believed to be lining up similar auctions. Though the quantum of their power purchase is yet unknown, these three states are expected to collectively mop up upwards of 1 GW from their auctions. Incidentally, Tamil Nadu is scheduled to open the techno-commercial bids for its 500-mw procurement drive on July 18, 2017.
India has set a renewable energy target of 175 GW by 2022 and wind accounts for 60 GW. As of March 2017, India’s wind energy capacity stood at around 32 GW with Tamil Nadu leading with a 27 per cent share, followed by Maharashtra, Gujarat and Rajasthan, each with a share of roughly 15 per cent. In the next five years, India needs to double its wind power installed capacity base and tariff-based auctions could help set up large-scale capacity, coupled with aggressive tariffs.
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