Changes in bidding norms for wind power to add capacity: ICRA

The government's recent move to change guidelines for awarding wind power projects is a positive move for developers who are experiencing significant delays in project execution due to issues like delays in land acquisition and securing transmission connectivity, according to investment information and rating agency ICRA.

This augers well for the developers, given the large delays witnessed in completing the land acquisition in many of the recently awarded projects, said Group Head for ICRA's corporate ratings Sabyasachi Majumdar.

"The other amendments like providing additional time for revising annual capacity utilisation factor, lowering the penalty rate for shortfall in generation to 50 per cent of quoted tariff from 75 per cent of quoted tariff and allowing sale of power from part commissioned capacity at quoted tariff against 75 per cent of quoted tariff earlier are also positives for the developers," he said in a statement.

ICRA expects wind power capacity addition to increase to about 3.5 to 4 gigawatts in the current financial year 2019-20, supported by large project awards by the nodal agencies and measures being taken to address some of the key challenges.

However, the sector continues to face challenges related to weak counter-party credit profile reflected from deteriorating receivable position in a few states, the viability of the bid tariffs at less than Rs 3 per unit and securing financing in a timely manner for under-construction projects.

The government recently notified amendments to the guidelines for the award of wind power projects through a tariff-based competitive bidding process, relaxing the timeline for land acquisition to 18 months (in line with the commissioning timeline) from seven months earlier.

This move was in view of significant delays seen in the recent past in the execution of projects due to land acquisition issues. Thus, as against more than 12 GW capacity awarded over the past two-and-a-half years, actual execution on the ground has been slow with only 2.3 GW commissioned between April 2018 to June 2019.

The amendments also provide for commissioning projects within 18 months from the execution date of the power purchase agreement (PPA) or power sale agreement (whichever is later) against linkage with only PPA execution date earlier.

Besides, the government initiated measures to resolve the issues faced by the developers related to land acquisition and transmission connectivity by offering incentives in the form of facilitation charge to state governments providing support for land acquisition and fast-tracking projects towards augmenting inter-state transmission infrastructure.

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