India’s promising wind energy market
2018 is already proving to be a successful year for Senvion in the Indian wind energy market. After expanding its business to the country in late 2016, there are already multiple projects in the pipeline including the latest 101 MW deal signed in February and another 30 MW contract in March.
With its total potential of approximately 302 GW and an installed capacity of only 33 GW, India is a vast and promising market ready to be conquered. More than that, the Indian government has recently announced their plan to target a striking 175 GW of Renewables by 2022, out of which at least 60 GW will be alloted to wind power.
Just like in all parts of the world, in late 2017 India has shifted from a feed-in-tariff system to an auction-based system. The move came after the government decided to encourage more competition and a better price offering. National auctions are conducted by the government-owned Solar Energy Corporation of India Limited (SECI), while states have their own agencies in place. In the two-stage process, bidders first submit their techno-commercial offers ranging between 50 MW and 300 MW for multiple projects. If qualified, they take part in a reverse auction where the winners are solely decided on the basis of the lowest tariff. While tariffs have been declining for years, they have dropped dramatically under the new system, mirroring a shift in focus from margins to volumes.
Compared to other markets, India is quite different in terms of its business models, project development, financing and the service sector. First and foremost, the market is predominantly focusing on turnkey full-EPC projects. Under the old system, the project development risk was entirely borne by the Original Equipment Manufacturers (OEMs) offering full-EPC solutions to Independent Power Producers (IPPs).However, under the new auction system, the risk is now shared between OEMs and IPPs. Compared to other markets, permitting times for wind projects are lower in India, while land procurement can take longer since land ownership is usually divided in many small divisions. Wind projects in India are mainly financed using non-recourse financing where the typical leverage is 70-80%. Cost of debt is also much higher which is why IPPs have started to insist on shorter construction times. Installed parks are generally serviced by OEMs themselves.
Thus, any company trying to gain a foothold in the Indian market needs to meet specific challenges. With its high product and service flexibility and its agile and modern technology, Senvion is well-equipped to succeed in this environment. Concretely, Senvion has experience with complex auction systems from multiple international markets and is already offering a variety of full-EPC options as well as working with strong local partners that have high expertise in the Indian market.