On 28 April, MEC+ hosted a Webcast in partnership with GWEC and Vestas to discuss the future of India’s Wind industry and what critical assumptions will impact the overall volume towards 2022. Experts also addressed the impact of COVID-19 on the Indian wind market, future demand and supply-side risks, and where the industry stands today.

Below, you will find the highlights from the Webcast:

India is one of the world’s fourth-largest wind market by installations with a current installed capacity of around 37.5 GW. Also, the Indian government had set the target of 60GW of installed wind capacity by 2022, which has increased to 140 GW by 2030.

The demand for renewables is high, but wind lost ground after an increase in the number of installations

Year-on-Year Wind installations have been consistently on the rise from 2.4 GW in 2011 to 5.5 GW in 2017. This was driven by a sharp decline in the price of wind-based power projects, wherein, the tender price reduced from INR 5.5 per Kwh to INR 2.4 per Kwh (around 50% decline). This was just before the installations dropped off to 1.6 GW in 2019.

Hence, the market saw a big drop in installations after 2017 despite the big targets set by the government.

Supply-side participation dropped on the tenders issued in 2019

17.6 GW of tenders were announced over the last 3 years by the federal and state government. During 2017 and 2018, these tenders went oversubscribed. In 2019, there was a reverse in the trend where merely 3.2 GW of tenders went completely unsubscribed. The key reasons were: stringent tender conditions; low tariff caps; off-taker risks; unavailability of the grid; and/or land availability.

Fault lines exist in the market impacting the total installation 

The Indian government decided to use the low prices captured in the first six auctions as a benchmark for the upper cap in the last two auctions. These tariffs were not feasible to meet in the face of exhausting grid infrastructure and changes to local land use criteria for awarding new sites.

Furthermore, the states that used to manage their wind procurement themselves have seen contractions in their orders by 60% from 2017 to 2019. This is due to the off-taker risk associated with the weak financial position of state distribution companies (DISCOMs) and chronic payment delays to projects installed pre-2017. Most of these states have moved to central auctions to hedge their payments with federal guarantees. C&I also have a strong business case in India, but they do not have the legal basis to choose multiple suppliers for their power purchase and hence the market is practically confined to 400 MW per annum from some specific companies.

The federal government took cognizance of these issues between Jan-March 2020 and came up with the mitigation steps such as-mandatory alignment of state Renewable Purchase Obligations (RPOs) with national RPOs, mandatory signing of the Letter of Credit (LOC) for new capacity by DISCOMs for payment of security. The government also removed the price cap in the SECI 9 tender for accounting developers to move away from the best wind resource sites and accounting for new land costs in wind bid prices. New substations have also been planned by the government in Andhra Pradesh (AP), Gujarat (GJ), and Maharashtra (MH), which will come up in 2022 and 25 GW of renewable energy parks to be developed by MNRE with a plug-and-play model. For C&I market, a tender is being designed by SECI to remove arbitrary charges by introducing Direct Benefit Transfer

Even before COVID-19, India was expected to miss 60 GW target

The Indian government announced a complete lockdown of commercial activity and movement of labour on Mar 24; restrictions were extended for further three weeks in mid-April. The projection was that the market will reach 51 GW by 2022. In the low case scenario, it was expected that the demand will be immediately driven by the federal government. In the high case scenario, the funds were expected to be released by state governments and C&I as per their own budgets. Additionally, the grid was expected to be augmented to support this higher outlay.

COVID-19 enhances the pre-existing fault lines in the Indian wind industry

COVID-19 will impose a drag on market growth in 2020. The actual market forecast after COVID-19 towards 2022 is likely to be close to 48.3 GW. This is due to extended project timelines and supply chain disruptions, compounded by the non-availability of grid and land challenges already impacting installations. Beyond 2020, uncertainty around new tendering and the overall business environment is likely to prolong the impact. Read more about COVID-19 impact on the Indian wind industry in the Recharge article link provided below.

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
  • 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