Recent Reverse Auction in Wind Energy

Auction refers to the process of buying or selling in which goods or services are offered by seller and the sold to the highest bidder. In reverse auction, the roles of buyers and sellers are reversed. Thus, while in auction, buyers compete and prices rise with bids; in reverse auction, sellers compete and price decrease as the sellers outbid each other. India’s first reverse auction for wind power was held in February, 2017. This resulted in record low level of wind power tariff to Rs. 3.46 per unit. The winners are five companies viz. Mytrah Energy, Green Infra Wind Energy, Inox Wind Infrastructure Services, Ostro Kutch Wind and Adani Green Energy, which shall now set up wind power capacity of 200MW each.

Reverse auction of wind projects

Through reverse auction the government attempts to increase the investment in wind energy projects. In the auction, the lowest bidder for the tariff per unit of energy will win the project. In the recently concluded auction, the government has allowed the wind energy-producing firms to set up plants in the locations of their choice and then sell the generated energy to the sate run Power Trading Corporations. Tamil Nadu and Gujarat were the main attractions. The bidder has the choice to opt for the location where vast or enough wind resource is available is a welcome step to increase the biddings.

Wind power tariffs closed at ₹3.46 per unit in this maiden auction. This is a major boost to India’s aim to use the renewable energy to overcome energy shortages. Right now, the wind power generated in wind power producing states are being used by themselves. By increasing the number of wind farms in the country, the power can be transmitted from the south Indian states to the land-locked states like UP.

Likely Problems

Likely problems to be faced by the developers and their solutions:

Plant load factor

With such a low tariff, the output of a plant compared to maximum output a plant can produce will be a problem as the focus will be on ensuring low costs. This can be maximised by using latest technology available in India and selection of wind farm sites.

Capital costs

Again, with such a low cost of ₹3.46 per unit of wind power, the government has to provide incentives or subsidies to the developers like waving charges for transmission for renewable energy projects and central assistance in setting up the plant.

Long-term debts

The ability of the plant in getting long-term debt is crucial and it will depend on the output of the plant. The banks should make some intervention for providing long-term loans to renewable energy projects.

Conclusion

The reverse auction of wind projects on the lines of the recently completed reverse auction in Rewa, Madhya Pradesh saw a historical fall in the solar tariff of ₹2.97 per unit with 25 years of the power purchase agreement are the most healthy developments in renewable energy sector. This has increased the participation of the firms in the auctions and opened new ways of fulfilling the commitments made by India under Paris agreement. The growing participation and ability of the firms to deliver viable projects will increase their global competitiveness and foster the growth of renewable energy sector in India.

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