Curtailment and Delayed Payments Hits Wind Energy Sector Hard in Rajasthan

GURGAON, India, June 14, 2016 /PRNewswire/ --

The Government of India has an ambitious target of achieving 175 GW of renewables capacity by 2022; out of which 60 GW has been targeted to be achieved from wind energy. In the recent past, a lot of work has been done on the policy and the regulatory front, which is providing the requisite boost to the sector. However, with increasing pace of capacity addition of wind farms, the developers are facing several roadblocks in terms of curtailment of energy that is fed into the grid. It is important to note that the revenue from sale of wind power that is being fed into the grid is the sole source of income for wind power projects.

Curtailment of wind power, in the current peak wind season, has emerged as a major challenge in the state of Rajasthan. As of March 2016, Rajasthan has close to 4,000 MWs of installed wind capacity. The curtailment is taking a toll on the revenues of operational projects. In the month of April and May 2016 alone, it is estimated that the industry has lost close to Rs.100-150 crores in revenues.

Wind Independent Power Producers Association (WIPPA), a national level registered body of more than 30 Independent Power Producers (IPPs) that have significant investment on ground or in pipeline in wind energy sector across the country in its emergency meeting held on 11th June, 2016 passed a resolution to submit a representation to the Rajasthan government on the issue of curtailment of energy and requesting the government officials to look into the matter on priority as the wind industry is dependent on the peak wind season for major portion of its revenues. The association in its resolution also highlighted the issue of delayed payment of receivables to wind producers in several states, including Rajasthan, Maharashtra and Madhya Pradesh which has dampened investment climate in the country's wind sector.

Sunil Jain, President WIPPA & CEO of Hero Future Energies, said, "Renewable energy projects work on water tight budgets to deliver projects. Curtailment of wind energy in high wind season impacts the projects' financial viability." 

Parag Sharma, Vice President WIPPA and COO at ReNew Power, said, "The investor sentiment is turning negative in the state of Rajasthan due to curtailment of wind energy in high wind season and situation is further aggravated by delay in payments by the Rajasthan Discoms." 

The Rajasthan Electricity Regulatory Commission provides for the 'must run' status to the wind energy projects. However, State Load Dispatch Centre (SLDC) and State Distribution Utilities (Discoms) are curtailing the energy that is being generated by the wind energy projects. This is in clear violation of the regulatory provisions that provide 'must run' status to the wind energy projects.

The energy from the wind energy projects can only be curtailed in case of a grid security threat. Wind projects are distributed across different substations in the state and curtailment instructions are being received at all the substations. However, given the fact that project developers are receiving the request for curtailment 2-3 times in a day at each substation, it is highly improbable that grid security is under threat for such high number of instances.

Also, the payments have been delayed for more than 6-10 months in states such as Rajasthan, Maharashtra and Madhya Pradesh. Curtailment of energy and delay in payments is a double blow to the revenues of the wind energy projects.

Both these events (curtailment and delayed payments) can impact the future ramp up ability of the renewable energy projects by the project developers. These issues pose a big challenge to government's ambition of 175 GW of renewables by 2022. This can turn the tide from positive to negative investor sentiment in India's renewable energy market and may force the developers to change their plan on future investments.

About WIPPA: 

WIPPA is an association of wind IPPs, or those companies whose main business is that of selling wind power-generated electricity, as opposed to entities who are in other businesses but also put up windmills, mostly for availing tax breaks. It is a national level registered body with more than 30 companies as members.  WIPPA is actively engaged in sustenance and promotion of the wind energy sector in India through policy advocacy and presenting independent views and suggestions to stakeholders at various forums so as to provide further fillip to the sector.

Media contact:
Ishan Nagpal
+91-9560003515
[email protected]
Member of WIPPA, Wind Independent Power Producer Association (WIPPA)