COVID-19 may delay the pickup expected in capacity additions for fiscal 2021
As per CRISIL Research, fiscal 2021 is estimated to be impacted in terms of capacity addition due to constraints on construction related activities stemming from the virus outbreak. So far, capacity additions have slowed down by ~58% y-o-y in first eight months of fiscal 2021. Consequently, capacity additions, are expected to be lower in the range of 1-1.5 GW for fiscal 2021 with recovery expected post H1 of the ongoing fiscal.
Industry still reeling under pressure from the change in bidding mechanism
With the FiT regime ceasing to exist discovered prices for wind energy fell as low as Rs. 2.43/unit (in 500 MW wind energy auctions for GUVNL). Relevant stakeholders from the states electricity sector also conveyed all wind-based energy procurement to be through the competitive bidding route.
This has caused realizations to fall across the value chain with both developers and OEMs reeling under the increased pressure to execute projects at such tariffs. This is caused by firstly, a correction in capital costs which had fallen in FY18 (due to an inventory buildup with OEMs). Secondly, developers are facing increasing difficulties in tying up adequate quality windsites coupled with connectivity, prior to bidding. CRISIL Research estimates that developers currently require tariffs near Rs 3 per unit and PLFs in the range of 32-35% for projects to be viable at current capital costs of Rs 68-70 million per MW. This should be in conjunction with developers tying up adequate land, with prior wind resource assessment, to ensure rationality while bidding.
