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Substation-wise wind energy project auction is in the air.

October 10, 2018
The government has accepted the wind industry’s demand for ‘substation-wise’ capacity auctions, as opposed to the current practice of letting the bidders put up projects at any place of their choice.

“Yes, we are going to do that,” Anand Kumar, Secretary, Ministry of New and Renewable Energy, told BusinessLine , when asked if the government would accept the industry’s proposal.

Asking wind energy companies to quote a price for electricity if they were to put up plants where they could connect to a particular electrical substation was mooted by the industry to enable projects come up across the country.

In the five capacity auctions conducted by the government company SECI for 7,200 MW, all the winning bidders plan to put up wind projects only in Tamil Nadu or Gujarat -- the windiest States.

Until 2016, wind projects were set up in one of the nine windy States. The energy companies will get paid ‘feed-in tariffs’ fixed by the respective State electricity regulator. But in January 2017, the government held the first capacity auctions, via ‘competitive bidding’. This resulted in tariffs falling to a low of Rs. 3.46 a kWhr. In contrast, the least tariff energy companies got was Rs. 4.16 a kWhr, from the windiest State -- Tamil Nadu. The country has around 34,650 MW of installed capacity of wind, and all but 250 MW has come under feed-in tariffs.

Tamil Nadu and Gujarat have also conducted their own auctions for 500 MW and 1,000 MW, respectively. None of the other States, with the exception of Maharashtra which auctioned 500 MW, has had projects coming up in them. Even the windy States (Rajasthan, MP, Telangana, Karnataka and Andhra Pradesh) have preferred to buy power from SECI.

In August, the country’s largest power company, NTPC, tendered out for 1,200 MW of capacity and the winners are again expected to put up their projects in Tamil Nadu or Gujarat. This has created a congestion problem, as they compete for transmission infrastructure. The fifth round of auctions of SECI, for 2,000 MW, was cancelled as the response was lukewarm, due to connectivity concerns. SECI later revised the auction for 1,200 MW. Similarly, NTPC too had wanted to auction 2,000 MW, but decided only for 1,200 MW.

The industry estimates that about 25,000 MW of transmission capacity is idling in various substations in the other States.

But the flipside is, substation-wise auctions will inevitably lead to higher tariffs. Tamil Nadu’s auction for 500 MW in August 2017 was the last that saw tariffs of more than Rs. 3 (the highest quote in that auction was NLC’s Rs. 3.45 a kWhr). Since then, offered tariffs have been way lower, plunging as low as Rs. 2.43. But substation-wise bidding could change that.

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