Capacity addition may slow down, says ratings agency CRISIL



With higher capital costs and lower tariff rates, it will be difficult for companies to carry out projects.



Tariffs have fallen to ₹2.4-₹2.6 per unit while capital costs can go upto ₹7.2



Reports suggest that less than 30% of the 2493 megawatt capacity of wind power that was bid out in 2017 has been commissioned.



India got the world’s attention for its record-low tariff rates while also attracting companies from around the globe. The tariff rates for renewable power are affordable for consumers but not for the companies that will generate it.The number of new projects will slow down further and remain low for another five years, according to CRISIL as the business still needs high capital investment.“A shift to a competitive bidding mechanism in the wind energy sector has caused a slowdown in capacity addition as participants are yet to adjust, with tariffs having fallen to ₹2.4-2.6 per unit, from ₹4.0-4.5 per unit under the feed-in-tariff regime,” said the CRISIL report.The current capital costs of ₹6.8-7.2 crore per megawatt (MW) makes the business unviable for the companies.The reticence caused by high cost and low realisation is already visible. According to reports , less than 30% of the 2,493 megawatt capacity of wind power that was bid out in 2017 has been commissioned.“The combination of unviable bidding and delays in Gujarat's land policy has led to idling of capacity for OEMs. The expected timeline for wind power projects in 18 months, but most have missed that deadline,” DV Giri, Secretary General, Indian Wind Turbine Manufacturers’ Association (IWTMA) told Business Standard. Gujarat, which is the second windiest state in India with Tamil Nadu being the first, has been making way for wind power projects. It also added another layer to the bidding process to ensure projects are done on time – the state’s power regulator announced that bidders for wind projects will now also have to mention the the equipment manufacturers and EPC contractors they have tied up with to successfully complete the project.Meanwhile, private players will be challenging the same as it makes it more difficult for companies already saddled with high cost and low revenue potential. “Not a single developer has defaulted so far, why introduce this clause now? This is obviously done to favour the generators,” said an executive of a major IPP to Economic Times. “It will certainly be challenged by IPPs.”