Low bidding slows wind, solar capacity addition

Capacity addition in wind and solar sectors has come down significantly this year mainly due to the limited progress in bidding activity, says a report.
According to rating agency Icra, due to the limited progress on bidding by the state-owned distribution utilities to award wind energy projects, the sector is facing near-term headwinds.
"Capacity addition in the wind sector in the near-term remains adversely impacted due to migration from feed-in tariff to bid-tariff route," the report said.
"At the same time, bidding activity for awarding solar projects too has slowed down as of October as reflected in awarded project capacity," it added.

Solar project capacity of 3.75 gw has been awarded this year till October as against 7.2 gw in 2016.
Slowdown in bidding in the solar sector comes amid GST implementation, an upward pressure on PV module price level in recent months as well as the finalisation of the new bidding guidelines for award of solar projects in August 2017, the agency said.

Meanwhile, the report also noted that since February, the wind energy sector is following a bid based regime after the success of a reverse auction under two rounds of 1 gw each by the Union Ministry of New & Renewable Energy with a bid tariff of Rs 3.46 per unit in February 2017 which fell further to Rs 2.64 per unit in October.

"State utilities are going in for this mode as bid tariff level is significantly lower than the approved feed-in tariffs by state electricity regulatory commissions, which is varying from Rs 3.74 per unit to Rs 5.76 per unit for projects across key states with high wind power generation potential," Icra's senior vice president and group head Sabyasachi Majumdar said.
As for solar sector, its tariff levels has also witnessed a sharp reduction with the lowest tariff of Rs 2.44 per unit in the bidding held in May 2017 for the Badla solar park in Rajasthan.
However, Majumdar noted that the recent increase by about 15 per cent in imported PV module prices, "if sustained, could have an adverse impact on the viability of solar power projects with tariffs lower than Rs 3.5 per unit".

The agency further said the viability of competitively bid tariffs (in wind and solar) would depend on capital cost, PLF and debt structuring including cost of debt.
The report, however, expects long-term demand outlook for renewable energy to be strong, aided by favourable policy support from both the Centre and the states.