Wind power tariff is likely to be sustainable at around Rs 2.9-3 per unit in fiscal 2019 because of reduction in payment and offtake risks, lower capital cost per generated unit, and conducive debt financing, says Crisil Ratings.
“These tariffs, despite being 28 per cent lower than the lowest under the erstwhile feed-in-tariff regime, will still offer developers a healthy and sustainable 12-14 per cent equity return,” it said.
The agency pointed out that payment risk in projects has reduced as Solar Energy Corporation of India (SECI), set up by government through the ministry of new and renewable energy, is increasingly taking up the role of the principal counter-party.
“This would have otherwise hinged on discoms, some of which are in financial distress and unable to make payments on time. Average payment delays by SECI have been less than one month compared with four months by discoms of major wind power purchasing states,” the agency said.
Crisil Ratings senior director Subodh Rai said the deemed generation clause in recent power purchase agreements (PPAs) that offer payment for generation rather than offtake is also providing comfort to developers.
“Also tariffs of Rs 3 per unit would be at least 10 per cent lower than the average power purchase cost of 12 out of 14 major power consuming states in fiscal 2017, and competitive versus other sources of power, which allay the risk of back-downs,” he said.
According to Crisil, waiver of inter-state transmission charges will also make wind power more attractive for non-windy states such as New Delhi, Uttar Pradesh, Jharkhand and Bihar.
“This may not only reduce offtake risks, but also provide up to 15 GW demand opportunity over the next four years through unmet non-solar renewable power obligations for non-windy states,” it said.
Crisil further noted that the bid-out tariffs could still be lower than Rs 2.9-3 per unit seen in the recent bids, which were as low as Rs 2.43 in December 2017 and Rs 2.51 in April 2018.
“This is likely as high competitive intensity among wind developers and lower capital costs may prevail for some time as wind turbine manufacturers are continuing to offer discounts to gain market share. However, going forward, with discounts from wind manufacturers expected to reduce, tariffs are likely to be sustainable at Rs 2.9-3 per unit,” it said.
