CHENNAI: The reverse auction for wind power held on Thursday and Friday threw up some interesting results. Despite an influential industrial lobby – Indian Wind Turbine Manufacturers Association – asking companies to desist from bidding as low as `3.46 a kWh (in reverse auction, the lowest bidder gets the contract) in view of uncertainties due to GST implementation, the auction witnessed aggressive bidding from participants.
The auction was to award contracts to companies proposing to set up 1 gigawatt wind power capacity in India at the lowest tariff. It drew 14 developers who cumulatively submitted bids for 2.7 gigawatts. Five bidders who quoted the lowest tariff – `3.46 a kWh – emerged winners.
The tariff crash in wind energy resembles a similar trend in solar tariffs witnessed earlier this month, when the prices fell to ₹3.29.The central government’s push for clean energy, personally monitored by Prime Minister Modi, could have prompted firms to bid aggressively for solar and wind projects. The net effect of such aggressive bidding is that it clean energy tariffs could become low enough to challenge the tariffs of fossil fuel-fired power.
While these developments are seen as a boost to the Narendra Modi-led government’s efforts at promoting clean energy in the country, this also portends a change in the dynamics of alternative energy.
Alternative and conventional energy businesses follow different models. In the case of wind energy, for example, roughly 75 per cent of the total cost of energy is related to upfront costs such as the cost of the turbine, foundation, electrical equipment, grid-connection etc, says The Economics of Wind Energy by the European Wind Energy Association.
Fluctuating fuel costs have no impact on power generation costs, says the report cited above. Thus, a wind turbine is more capital-intensive than conventional fossil fuel-fired technologies such as a natural gas power plant, where 40-70 per cent of the costs are related to fuel and operation & maintenance. However, even if wind power is more expensive per kWh, it hedges against unexpected rises in prices of fossil fuels in the future, the report notes.
India is currently the world’s third largest greenhouse gas emitter. To bring down emissions, the government has set a target to increase renewable energy generation to 175 gigawatt by 2022. This would be around five times the country’s current usage.