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MEC ROUNDTABLE ABBREVIATED-INDIA WIND OUTLOOK TOWARDS 2022

On 20 May, MEC Intelligence (MEC+) hosted a roundtable discussion with GWEC and other leading experts to mark the virtual launch of our report “India Wind Outlook towards 2022: Looking beyond headwinds”. Experts unlocked the key findings of the report and discussed the key topics of the industry.

In a brief overview of the report, it was discussed that the Indian wind market is divided into three segments-central, state and C&I. Each of the market segment has its own challenges. Even before COVID-19, the target of reaching 60 GW wind capacity by 2022 was going to be missed because of three main challenges-grid availability, allocation of land and payment delays.

These infrastructure bottlenecks impact the forecasts for capacity installations in India and even though the market remains large in the next 3 years, it is lumpy and led by lop-sided development. In a pre-COVID scenario, we expected that in the base case the market was to reach 50 GW by 2022. This expected capacity is based on the estimates of the pipeline today, the current level of demand depicted by states, and planned grid infrastructure. In the high case scenario, we expect the market to install 3 GW higher primarily because the funds are released by state governments & C&I as per their own budgets. In the low case scenario, we expect that cancellations happen in the existing pipeline and state-based demand completely evaporates due to financial stress.

In post COVID scenario, we expect the market to come down by another 3.5 GW of cancelled existing or new orders.

In the panel discussion between Mr. Feng Zhao, Mr. UB Reddy and Mr. Sidharth Jain, key remarks from Mr. Sidharth were on:

Impact of INR 900 bn liquidity infusion and Electricity Amendment Act 2020 on the sector

Liquidity measure, that has been announced, is a soft loan towards state governments and they must fulfill a couple of conditions to be able to access this loan. Firstly, States will need to clear all their pending bills in a stipulated time. Secondly, states will need to give an affidavit where they must undertake that all these subsidy payments will be paid on time now to electricity consumers. Considering that the financial situation has deteriorated in the country and the states have been primarily hit hard, it remains to be seen to what extent would they be open in taking extra liability. And to what extent will they have the budget to pay these future subsidies on time.

In terms of the electricity act, the amendment for the contract is a good development and reducing the arbitrary charges. Its execution will be complex and filled with a lot of challenges. We are eagerly waiting for new developments.

However, the fundamental shift required in the structure of the electricity sector in India is not picked up by the Amendment, hence we believe it is a band-aid solution to a fracture situation. The real power needs to be moved to the consumers to choose a supplier. The current act is mostly focussed on tightening the state’s focus to choose well for the consumer. We feel even though the Electricity Amendment Act 2020 is more doable, Electricity Amendment Act 2019 was more visionary to suggest retail competition.

Change in electricity procurement through RTC tenders and impact on wind

RTC tender at the price INR 2.9 kWh is a big disruption to how renewables are being perceived in the market today. This has created a lot of optimism in the industry that renewable energy will play a central role going forward in the volumes. Also, nearly 9 GW of such capacity is further notified in the market in the form of hybrid, storage, RE blended with coal, peak power supply.

The only consideration is the acceptabiltity to the buyer. The buyer had requested for such power and was pre-decided, however, in future tenders INR 2.9  per kWh with 3% escalation for 15 years means a tariff of INR 4.4 at end of 15 years for remaining 10 years. Nonetheless, it is still a better deal than coal at INR 4 today, i.e. if DISCOMs adopt a system of cost thinking.

What about Indian Wind market growth beyond 2022?

The demand and economics of renewables are good. The government has also declared its intention. The amount of growth will be dependent on whether solar and wind will complete head-on.

Despite the competition with solar, the wind has a role to play in India’s energy basket 2030. Incessant addition of solar will create generation only at the time of the day, while wind generation is more congruent to the morning and evening packs of demand and prices. Thus, wind’s role is integral to India’s capacity addition plans, visible also through the 140 GW target.

Find out more on the Indian Wind industry:

MEC+ is also planning to organize a series of webinars in the future. The topics will be:

  • Offshore Wind in India: Outlook and Feasibility-Read the above-mentioned article on Offshore Wind
  • C&I market: Challenges going forward
  • Supply chain set up in India: Focus on the Domestic market or Export market?

If you are interested in the above-mentioned webinars or getting insights on any other topic related to India renewable sector, please write to info@mecintelligence.com