“With the swirl of a pinwheel, we all grew up, held loft against the flow of the wind, chasing one another, into oblivion“
Seldom did we imagine, a toy so simple, a wheel with paper plastic curls attached to a stick by a pin, held by all of us during our childhood, could have so much significance in times to come. It ingrained in us the very concept of conversion of wind into energy which even the quick-witted educator from school failed to impart.
Over time the world has evolved and the dependence on fossil fuels for energy has been a thing of the past and renewable energy is gradually paving way for the future. While renewables majorly range from biomass, solar and wind with various combinations, however it is the wind energy which remains the most sought-after renewable source of energy. For those of us who had the privilege of viewing a wind farm, might have observed a soothing view of aligned wind turbines, carefully placed one after the other within a calibrated distance so as to ensure sufficient wind to generate electricity, thereby keeping the promise of making the world a better place.
Wind turbines made their presence in India around 1986 with a feed in tariff (FIT) regime which had gradually moved towards competitive bidding through electronic reverse auctions (eRA). Competitive bidding, as the name suggests aims at discovery of the lowest competitive prices. The transition from FIT regime to eRA led to a fall of tariff from INR 4-5 per unit to INR 2.4 – 3 per unit within period of 5-6 years.
The answer to that would be in negative. In the search of the lowest tariff, we lost the very zeal of the industry to grow and evolve. The industry, in fact, was forced to suffer and fight for its basic survival! The entire industry eventually succumbed to the pressure of competitive bidding with each one fighting to win the bid at whatever price without realising the obligations to be undertaken in terms of the bidding.
(A) Complex land procurement, while searching for windy parcels, a must to marginalize the low tariff. (B) Right of Way issues, which becomes a routine for all project execution activities. (C) Delayed transmission system and depleting connectivity capacities, while searching for a perfect balance. (D) Adherence to all possible policies. (E) Delayed approvals, despite having a statutory timeline which is seldom recognised as a force majeure. (F) A perfect alignment of project and tran1smission commissioning, nevertheless falling prey to the vicious circle of paying liquidated damages either to the off taker or the transmission utilities. (G) finding a perfect balance between environment, health and safety while delivering projects on time. (H) shrinking list of wind turbine suppliers, while developers biting their nails off to find the perfect and lasting one.
The competitive bidding shifted the mindset from “ What would be a viable tariff to build a project? ” to “ What would be the tariff to win the project? ”
The end result of the same is quite visible with so many projects being shelved by developers so as to minimize their losses, choosing to forego their guarantees rather than building the loss-making project.
Recently we witnessed a positive approach from the Ministry of Power with the revision of tariff based competitive bidding guidelines in July 2023, giving liberty to the procurer to issue bids, by either (a) setting a ceiling tariff or (b) holding eRA or (c) opting for closed bidding i.e., no benchmark tariff and let the market decide the tariff.
With the revised guidelines, the wind power developers have an additional responsibility of setting the trend right. The intent should be, not to compromise on project feasibility, just to win the project, rather, it should be to promote tariffs which materialise into actual projects which would further add to accomplishment of the renewable targets. Along with the right tariff from the developer, the procurer also need to ensure that the sanctity of the tariff discovered through the bid process is actually upheld and the power is tied up to off takers/ discoms within the defined timelines as stipulated under the bidding guidelines. In the event of prolonged delays, the entire project economics goes for a toss, since the quoted tariff do not have margins for any delay. We recently saw the cancellation of the RfS for 1300 MW ISTS connected wind power project on account of such delay.
The way forward would be a close-knit alignment between the procurer and the developer to jointly work towards viable tariffs with assured power offtake, along with continued support during project execution so as to ensure accomplishment of renewables targets.
Anjana Sharma
Assistant General Manager – Legal
