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Home News Power Sector News Wind turbine manufacturers to face headwinds in near term:ICRA

Wind turbine manufacturers to face headwinds in near term:ICRA

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ICRAFollowing the transition from feed-in tariff to bid tariff route, wind turbine manufacturers are likely to face headwinds in near term, says ICRA.
"The wind energy sector is undergoing a transition phase from feed-in tariff regime to a bid based regime, post the success of a reverse auction under the 1000 MW scheme by Ministry of New and Renewable Energy (MNRE) in February this year with bid tariff discovery at Rs 3.46 per unit," it said.

The rating agency said distribution utilities are shifting from the existing feed-in-tariff regime to the bid route with utilities in Gujarat and Tamil Nadu announcing bidding plans for procurement of wind energy.
The auction for wind energy (500 MW) in Tamil Nadu discovered tariff of Rs 3.42 per unit, which is the lowest so far, while the same by utility in Gujarat is still pending.
Further in case of MNRE's plan for second bidding round of 1,000 MW for award of wind energy projects, the bidding date has been recently postponed to October 4, pending clarity from the Central Electricity Regulatory Commission (CERC).
"Wind energy capacity addition in current financial year remains adversely impacted due to migration from feed-in tariff to bid tariff route and with a very limited progress seen in tie-up of incremental wind energy PPAs through bidding route so far," ICRA Ratings Senior Vice President and Group Head Sabyasachi Majumdar said.
He said the credit profile of wind turbine generator (WTG) OEMs, thus, would remain under pressure due to sector specific headwinds in near term.
"In this context, clarity from CERC on inter-state connectivity issue for projects under SECI scheme by MNRE in time-bound manner remains critical," Majumdar said.
Moreover, alignment of renewable purchase obligation (RPO) norms for state owned distribution utilities by state electricity regulators in line with the policy targets, is also a critical factor in ICRA's view.
"This will further enable the incremental demand for wind energy to meet the RPO compliance. Also, the tariff competitiveness of wind energy has improved significantly in bidding route, which is structurally positive for the sector in the long-run," he said.
In addition, ICRA said, the resolution of the PPA renegotiation / cancellation issue as seen in few states recently remains crucial to retain investor interest in the sector.
"On the positive side, however, the long term demand drivers remain intact due to an improved tariff competitiveness of wind and solar energy against conventional energy sources, large untapped renewable potential and favourable policy and regulatory support," Majumdar added.


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