Centre set to abolish reverse auction bidding in wind energy sector

Five years after it was introduced, the Centre is set to abolish reverse auction bidding in the wind energy sector, citing that the industry has long demanded for such a move. Since 2017, the growth of wind energy in the country fell to nil compared to a double-digit growth every year during the last decade.

Indu Shekhar Chaturvedi, secretary, Ministry of New and Renewable Energy (MNRE), in a CII conference said it was considering changes in the bidding structure of the wind energy sector to enable greater capacity addition to accommodate a long-standing demand.

“The e-reverse auction arrangement has in principle been decided to be ended and a forward decision will follow soon. In the renewable energy sector, the mechanism of e-reverse auctions has been used largely to discover the lowest tariff, resulting in historically low-bids. The commissioning and deployments of projects got adversely affected in many cases, and developers faced ‘the winner's curse’ as import prices of components soared, and in some cases, bids had to be revised upwards,” Chaturvedi said.

Since 2017, the wind energy sector has witnessed nil or single-digit growth in capacity addition, as tariffs fell in the auctions and industry leaders shied away from participating. Due to lack of projects in the market, several domestic wind turbine makers either shut shop or are facing financial troubles, including the country’s largest wind manufacturing sector Suzlon Energy and Inox Wind, among others.

Senior executives said the ministry was mulling a closed bidding, which will have projects from many states together.

“The lowest tariff, or L1, would be averaged for these states. The power from these projects will be bundled and sold by SECI,” said a source.

Industry executives said for the new model, they have told the Centre that the bidder should have a parcel of land as part of the tender, transmission connectivity and preferably a tie-up with OEM.

In 2017, the central government introduced a competitive bidding mode of awarding projects in the wind power sector. The sector worked under the ‘feed-in-tariff’ regime till then, which means the power price would be in accordance with the project cost. It was done to bring more competition and lower wind power cost. In the first auction, the price fell to Rs 3.46 per unit from Rs 5-6 per unit.

During 2018-19, 742 Mw of wind projects were commissioned. This is when the Centre tendered close to 7,000 Mw of wind power projects in the past two years. Wind projects installation was at a record high of 5,000 Mw in 2016-17, a year before bidding was introduced.

Several wind turbine makers facing unsold inventory laid off employees and shut down factory floors. Unlike solar, which is majorly dependent on imports, wind manufacturing is largely domestic with global players setting up manufacturing and/or assembly units in India.

During April-September 2021, wind power capacity addition has been 0.62 Gw, while that of grid-connected solar has been 3.7 Gw. Though solar power picked up a decade later than wind in India, the cumulative solar power generation capacity is now the same as wind.

The solar power capacity in the country is 57 Gw and wind is 40 Gw.

India has 114 Gw of renewable energy capacity and it has set the target of 175 Gw to be met by this year and 500 Gw of RE capacity by 2030.