This mostly settles the PPA issues in Andhra Pradesh. Now only Karnataka is pending due to recalcitrant attitude of the Karnataka electricity regulator…hopefully it will be resolved soon. The centra minister RK Singh has taken up the wind auction matter in a big way…4000mw before March 2018… After that 10000mega watts per year…nd also 5000 mw of offshore too.
Technically, looks like suzlon is at the very bottom of the price cycle…not much scope for further fall and huge upside potential…
I hope you have seen the latest news that in Alberta, Canada tariffs have crashed to 3.7 cents per unit. At 50Rs per Canadian dollar, this is 1.85 Rs per unit. Not sure how Suzlon or any other WTG manufacturer will even survive let alone thrive in globally crashing tariff environment.
Do we know which company is able to execute wind projects at the lowest cost right now?
And would Suzlon be tying up for the 2 GW that has just been auctioned since they said that they don’t think 2.44 Rs is a very sustainable price, in their concall.
Would love to hear views from more experienced members.
No interstate transmission charges and losses for Solar and Wind projects commissioned till 31.03.2022; Waiver applicable for 25 yrs; Waiver would be applicable for all entities including Discoms under long term PPA for compliance of RPO; Waiver allowed only to those that are awarded through Competitive bidding.
According to this article, T&D losses on an average are 23% in the country but govt. will allow tariff computation assuming 15% T&D loss which means the remaining 8% will count as loss to discoms. I am not sure if we can conclude that local T&D losses from Solar/Wind power will remain exempt from this proposed order - I think they won’t. So if I may hazard a guess, the transmission losses from the point of generation to the point of consumption - i.e., state grid are only exempt. Once state discom gets the power, any T&D losses from that point are not exempt. If say a NE state buys Wind power from Gujarat or TN then the interstate transmission distance is way higher than the transmission distance within the state so such cases should benefit.
Thanks Kauban, Has Suzlon won any order from this IPPs any idea based on SECI 1,2. Also, Q3con call they mentioned of not supporting 2.43., does that mean they have 0 coming from this auctuon or there can be some missing dots. Would like to hear yours and other experienced analyst thoughts.
You have mentioned that this waiwer is only applicable to projects won in competitive bidding. But Suzlon do not participate in bidding directly, instead it partners with clients. So, with my understanding, I doubt it will help them.
Yes, Suzlon has won about 500MW in SECI I & II combined.
Remains to be seen if ReNew and Green Energy order wins translate into Suzlon’s order book or not from this round. Tanti mentions in the con call that the Gujarat wins were not by ‘large’ IPPs and hence he questions if they know what they got into by bidding such low rates. But now in SECI III large established IPPs have also bid almost the same rates. Can Suzlon afford to not go after these orders? I think not and sooner or later everyone will end up selling at reduced rates. And, WTG manufacturers with the lowest cost AND highest PLF will enjoy relatively better margins that others.
Inox claims they are the lowest cost, but I do not know to what extent it is true and even if it is, what is the main driver for their lower cost structure?
However, technology wise Suzlon is better. Also, Suzlon’s order book is not restricted to only SECI unlike Inox. They also have Captive/PSU orders (20%) which aren’t linked to PPAs which might give them a cushion.
The other point wrt these low bids is that not all of this reduction will get absorbed by equipment price. the LCOE depends on multiple factors, including cost of the equipment, the PLF, prevailing interest rates and the discount rates use (which depends on the IRR expected by the IPP). The IRR expected by the IPPs (who are mostly funded by PE money) will also drop, given the reduced risk due to policy certainty, upfront clarity of PPA.
The industry is changing from low vol higher margin to much higher vol, low margin game.
To add to your answer, Inox is bidding for projects itself. This means they will have to raise debt to set up these plants, In short-term, their order intake and sale on account of WTG will look better but the end game has to be to sell these plants to someone else. If that does not work out, they would be in trouble. Relatively, Suzlon’s model of staying away from owning plants by itself looks better to me. Asset light if I may use that term?
Inox mngt has clarified that there are buyers who are ready to buy the projects bid and executed by inox as soon as the statutory lock in period is over.
With regards to suzlon, the mngt has said that they have pre bidding tie ups with IPPs and post bidding exclusivity Clause. Thus if any of suzlon client wins the auction, then suzlon will mandatorily get that order