India to Auction Wind Projects to Meet 60-Gigawatt Target

  • Government to bring out first wind tender in two months
  • Tender size for bidding to be a minimum of 25 megawatts

India will introduce competitive auctions for wind farms this year in a bid to fulfill Prime Minister Narendra Modi’s goal for 60 gigawatts of capacity by 2022.

QuickTake Wind Power

Varsha Joshi, joint secretary at the new and renewable energy ministry, said the auctions for 1 gigawatt of capacity will start in two months and have a minimum size of 25 megawatts. The ambition is to spur trading of wind power between states.

“The purpose is to achieve the target of 60 gigawatts of wind capacity, which can’t happen only with wind energy being absorbed in the states that produce it,” Joshi said in a phone interview.

The auctions for power-purchase agreements are meant to stimulate investment that hasn’t been flowing fast enough to reach the target. India installed a record 3.46 gigawatts of wind farms last year, bringing capacity to 27 gigawatts. At the same time, hundreds of megawatts of projects are struggling to find buyers, and utilities are reluctant to buy renewable power, which is more costly than what coal plants generate.

New System

The new system will seek to spur wind developments by doling out contracts for power purchase. The government is also making separate changes to rules that will encourage trading of wind power between states, waving transmission charges for renewable-energy projects. That will allow electricity to flow from the most windy states in the south to other areas where demand is acute.

“The government seeks to create a mechanism to discover the right price for interstate sale of wind," Joshi said, adding that interstate wind sale is also essential for grid balancing.

Solar Energy Corp. of India, which is the government’s implementing agency for renewable projects, will bring out tenders in a couple of months’ time.

SECI will first invite expressions of interest for a power trader, which will help find buyers for electricity from wind projects, Joshi said. This power trader will share margins with SECI.

Competitive auctions for wind projects would remove the onus on the handful of the most windy states developing much of the capacity to use all the power that is being produced.

Challenges

Seven states that have all of India’s wind capacity are mostly south and west of the capital, New Delhi. They are Madhya Pradesh, Rajasthan, Gujarat, Maharashtra, Karnataka, Tamil Nadu and Andhra Pradesh. The new system would channel power from there north toward land-locked non-windy states such as Uttar Pradesh and Delhi.

Auctions in the wind-power industry may be harder to execute than in solar because forecasting wind patterns is more difficult, according to Anish De, a partner at KPMG in India.

Auctions also need to be phased in gradually to avoid disrupting the existing pipeline of wind projects, said Rupesh Agarwal, a partner at BDO India LLP.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE