Even as the government’s new amendments will benefit wind project developers, land acquisition continues to be one of the major impediments for timely completion of projects, according to a note by CARE Ratings.
The revised bidding guidelines allows wind power developers to acquire land on Scheduled Commercial Date (SCD), revise declared capacity utilisation factor (CUF) once within the first three years of commercial operation date (COD) and incentivise early project completion.
“While this bodes well for wind project developers, CARE opines that land acquisition and evacuation infrastructure remain major impediments to timely completion of wind projects,” it said.
As on June 30 this year, the total bids awarded under competitive bidding were at 12.7 GW (excluding hybrid solar-plus-wind projects of 1.6 GW) and 5.5 GW of projects were concentrated in Gujarat. Wind energy tariff went down to Rs 2.43 per unit in an auction conducted by Gujarat Urja Vikas Nigam Ltd. Projects at such a low tariff are viable only in windy states such as Gujarat and Tamil Nadu, and project developers are facing hurdles in land acquisition as most high wind power density sites with connectivity (evacuation infrastructure) have already been taken, stated CARE.
The extant guidelines provides seven months for land acquisition from the date of power purchase agreement (PPA) and the same has been extended to 18 months from the date of execution of the PPA or Power Sale Agreement (PSA), whichever is later. Although new guidelines would provide enough time to acquire land, any significant delay in land acquisition till the SCD would leave little head-room in terms of timelines for project execution, CARE noted.
Further, the revised guidelines allow wind power generators to revise declared annual CUF once within the first three years of COD. This would benefit them as it provides a higher operational track record to arrive at a better estimate while revising CUF, CARE said. Also, the penalty for shortfall in energy generation has been fixed at 50 per cent of the PPA tariff compared to a minimum of 75 per cent of tariff, which provides some respite, CARE added. This respite comes at time when wind capacity additions have been sluggish during the last two financial years. This was due to transition from the Feed-in-Tariffs (FiT) regime to competitive bidding, withdrawal of generation-based incentives, limited availability of financially viable wind resource areas, delay in land acquisition and lack of evacuation infrastructure. Wind capacity additions in FY2017-18 and FY2018-19 were at 1.9 GW and 1.6 GW respectively, when compared to 5.5 GW during FY2016-17.
CARE also expects capacity addition to remain subdued at 3.0 GW during this fiscal, as projects bid out under competitive bidding are running behind SCD, owing to the above-mentioned reasons. Wind capacity addition in Q1FY2020 was a mere 0.7 GW.