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According to a report by Crisil, capacity addition in the wind energy sector will slow down over fiscal 2019 to 2023, with only 14-16 GW being added due to a decline in bid responses and profitability of original equipment manufacturers.

Explained:

• Crisil Research expects capacity addition to grow slowly over the next five years, driven by the allotment of central transmission utility’s (CTU) grid connected capacities
• The shift to a competitive bidding mechanism has slowed industry growth due to a significant fall in tariffs, triggering a decline in both bid response and profitability for original equipment manufacturers (OEMs)
• The shift to a competitive bidding mechanism in the wind energy sector has resulted in tariffs falling to Rs. 2.4-2.6 per unit, from Rs. 4-4.5 per unit under the feed-in tariff regime.
• According to Crisil, such low realisations are unviable for the entire value chain at current capital costs of Rs. 6.8-7.2 crore per MW. Capacity additions will primarily be driven by central government allocations with relatively stronger counterparties such as Solar
• Energy Corporation of India (SECI) and PTC India, reducing risk compared with direct exposure to state discoms. State auctioning, on the other hand, has slowed as several States have signed power supply agreements (PSAs) with PTC and SECI to procure wind power under the schemes auctioned by them, to help fulfill their non-solar renewable purchase obligations (RPO) targets.