Wind sector stares at cost surge amid supply glut: Industry experts

Triggered by the supply glut during the second Covid wave, the cost of raw materials for the wind turbine manufacturing has gone up significantly. Industry insiders were apprehensive that this could lead to an increase in wind power generation cost in India by Rs 0.7-1 a unit.

 

Compared to last year, the cost of copper has doubled to $8,000 a tonne, which is used in nacelle and transformers. Copper briefly traded at $10,000 earlier this month. Cost of aluminium jumped to $3,040 a tonne in October, a record high since 2008. This was a result of power crises across Europe and China, where coal supply and electricity were limited to the metals industry.

 

Cast iron are hovering around $700 and electrical steel at $1,300 a tonne for wind power developers. It is used in the base frame of wind turbines, and for hubs and electrical steel is used in nacelles. Resin, which is used in the blades, has also seen its cost double in the past one year.

 

Industry experts said the levellised cost of energy for wind power would increase by Rs 0.7-1/Kwh in India, at a time when the Centre was about to offer wind power projects tender after a hiatus of more than two years.

 

“We are expecting 5-7 Gw of wind power projects to come for bidding in the coming three to four months. While the industry is fearing a cost increase, it is likely the bidding would be aggressive because such a large batch of projects are coming after a long glut,” said a senior sector executive.

 

The current prevailing wind power tariff in the country is Rs 2.7 a unit. Sector experts said wind power projects offerings are not as regular as solar, but there is enough desperation in the market to win projects.

 

“We might see several players quoting sub-Rs 2.5 tariffs even as the cost of producing wind power is going up. The real cost of wind power is Rs 3.7 a unit, but we have seen developers quoting Rs 2.7-3 a unit. The investors are taking a hit. But developers want projects to remain in the game,” he said.

 

The Centre in 2017 introduced a competitive bidding mode of awarding projects in the wind power sector. The sector worked under the ‘feed-in-tariff’ (FiT) regime till then, which means the power price would be in accordance with the cost of the project. It was done to introduce more competition and reduce wind power cost. In the first auction, the price fell to Rs 3.46 a unit from the prevailing Rs 5-6 a unit.

 

During April-September 2021, wind power capacity addition has been 0.62 Gw, while that of grid-connected solar has been 3.7 Gw. Despite solar power picking up a decade later than wind in India, the cumulative solar power generation capacity is now the same as wind. The solar power capacity in the country is 39.3 Gw and wind is 39.8 Gw.