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We have a pipeline of over 2 GW of wind projects spread in all the major windy states

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Below Are The Excerpts Of Our Recent Interview With Mr. Sudhir Nunes, Ceo (Wind Business), Orange &Nbsp;Renewable

What is current installed capacity of Orange Renewable and How has been your journey so far?

Orange Renewable Group is one of the leading Independent Power Producers (IPP) in the Indian renewable energy sector with a pan-India presence. Orange Renewable, through its affiliates/subsidiaries,has commissioned 567 MWof wind power projects and has over 2 GW of wind power projects under various phases of developmentacross major windy states of India.

Orange Renewable has grown rapidly over the last 4 years from 60 MW of wind power capacity in 2013, tripling to 182 MW in 2015 and almost doubling to 356 MW in 2016. In 2017, Orange added 210 MW to its fleet to reach 567 MW of operational wind capacity. Further, the Group has expanded into solar sector. It is currently developing 180 MW of solar capacity, expected to come on stream by June 2017.

The journey so far has been exciting yet challenging especially on account of regulatory uncertainties. We commenced our journey with a team of less than 20 people in 2013 primarily doing turnkey projects, but rapidly progressed to a self-development model,which now represents nearly one-third of our installed capacity. This evolution has allowed us to build in-house expertise in the field of wind resource assessment, project development and execution, andto createa highly skilled workforce of almost 170 professionals. We have partnered with leading WTG OEMs and developers of the country for development of our wind projects. With our expansion into solar, we are keen to leverage these in-house capabilities forfurther expansion in both the sectors.

Do you think India would be able to reach the target of 60 gigawatts (GW) of wind energy capacity by 2022 especially given the stiff competition the segment faces from Solar energy & withdrawal of certain tax benefits for the wind segment?

India reached a cumulative wind capacity of ~32 GW in March 2017 and in order to achieve the MNRE target of 60 GW by 2022, India needs to add ~28 GW capacity within 5 years.This seems achievable considering the active development and promotion of renewable energy by the Government of India and the investment and development momentum within the wind sector. The addition of 5.4GW of wind capacity in India during the last financial year, while driven in part byexpiry of the GBI incentive and the imminent transition from State Feed-in-Tariff PPAs to Reverse Bidding, is proof of the capacity of the wind sector’s supply-chain, project development, execution and financing to ramp-up to meet demand as high as 5-6 GW annually.

With regards to competition from Solar and withdrawal of certain tax benefits, the recently concluded central bid conducted by SECI for wind projects, wherein a tariff of Rs 3.46/unit was discovered, has relievedconcerns with regards to competitiveness of the wind sector.

While we do not see any insurmountable barriers in achieving the 60 GW target from the supply side, it is critical that both Centre and State governments take adequate steps to create demand for such capacity. The key challenges which need to be addressed are: -

Accelerated development of power evacuation infrastructure: States like Tamil Nadu, Rajasthan and AP represent ~45%- 50% of installed wind capacity in India. During the high wind season when wind projects generate majority of their annual energy, the projects are forcefully backed down due toevacuation constraintsinthe existing grid of the state Transco. In order to facilitate more efficient intrastate as well as interstate transmission of renewable energy, there is an urgent need to acceleratetransmission projects under the Green Energy Corridor.

• Stronger RPO enforcement: At least 21 States and UTs are in non-compliance of Renewable Purchase Obligation(RPO) Regulations issued by respective SERCs. Stronger RPO enforcement is a must to drive demand for future capacity.

• Avoidance of PPA and Payment Delays- Delays in PPA execution in Maharashtra and payments in states like Maharashtra, Tamil Nadu, Rajasthan and Madhya Pradesh have impaired the financial strength of wind projects and their owners.In fact, wind projects have been subjected to higher payment delays than other power sectors. We are hopeful that competitive bidding will deliver tariffs that are economically attractive enough to Discoms to value the contribution of wind to long term energy security, and to put and end to such delays.

What are your views on repowering policies? Do you think they could be game changer for the wind segment?
Most of India’s wind turbines installed until 2000 have sub-500kW capacities and are located at sites with very high wind energy potential. MNRE estimates that over 3GW of wind installation are from turbines of around 500kW or below.States like Tamil Nadu, Gujarat and Maharashtra were amongst early adopters of wind energy in the 1990s and many of these wind turbines are nearing the end of their lifecycle.

The Repowering Policy introduced by MNRE is a step in the right direction, but additional steps are needed to spur repowering. Essentially the only incentive that has been offered under the Repowering Policy is an interest rate rebate of 0.25% to be provided by IREDA, which itself may not be sufficient to compete with interest rates of newly built projects. All the support, initiatives and incentives needed for repowering to succeedsuch as power evacuation facilities, land enhancement and existing PPA managementhave been made the responsibility of the State. Thus until and unless each State issues its own Repowering Policy identifying the support and incentives that will be provided by the State, it would be difficult to predict the impact of MNRE Policy.

Furthermore, our understanding is that repowered projects will have to compete under reverse bidding for PPAs for the added capacity, while the existing capacity prior to repowering must continue to be paid at the rates under the existing PPAs, which tend to be relatively low as the economics of these older projects were primarily driven by tax incentives under the Accelerated Depreciation scheme.This structure will make repowered projects less competitive than new projects even taking into account potential infrastructure cost savings. Instead, State Discoms should waive the requirement that the existing capacity is paid under the existing PPA, given that competitively bid tariffs for all wind projects going forward are expected to be closer to those under old PPAs, applicable for a longer tenure, and that repowering will reduce the overall grid investment required to achieve renewable generation targets. Unless this requirement is waived, repowered projects would require a significant incentive over and above the competitively bid wind tariff to be competitive.Such an incentive would need to come from the Centre, given that State Discoms are not likely to absorb its impact.Overall, a more comprehensive policy thatincludes participation from the States would be required to stimulate growth of repowering in India.

What will be the impact of Reverse bidding on the wind energy sector?

SECI has completed a reverse auction for first tender of 1 GW of wind capacity for inter- state sale to non- windy states at a tariff of Rs. 3.46/unit paid to the seller. The buyer will pay a slightly higher tariff that includes a margin for the intermediary. It should be noted that willingness of buyers to purchase interstate wind power may require an extension of the existing waiver of inter-state transmission charges, in the range of Rs. 1.5- 2.0/unit, which is currently available only for projects commissioned by March 31, 2019.

Overall, we believe that reverse bidding will have a positive impact on the industry. Although increased competition will exert downward pressure on margins, lower tariffs set through a transparent process of discovery will remove the reasons for Discoms to delay PPAs and payments for wind projects. The key benefit of reverse bidding for the industry is regulatory certainty and payment security mechanisms, which have been sorely missed in the wind FIT PPAs. If these two major risks that plague the wind industry are mitigated, investors are likely to moderate their return expectations. This, combined with more competition amongst OEMs, will lead to reduced tariffs, which will surely benefit the end consumers of Discoms.


What is your current order book position and what are the projects that you are currently bidding for?

In the last financial year, we have commissioned 210 MW wind capacity to take our operational fleet to 567 MW delivered by 304 WTGs. Wewill soon commission two solar projects with a cumulative capacity of 180 MW, which will increase our operational capacity to 747 MW of renewable energy projects.

We have a pipeline of over 2 GW of wind projects spread in all the major windy states, which we expect to develop under the reverse bidding regime. We intend to draw on this pipeline to participate in interstate and intrastate bids expected for wind power within the next 6-12 months. Apart from this, we are also actively participating in the current solar bids in the country.