Wind Energy Stocks Tumbled 5%: Here's What Is The Street Worried About

Wind energy stocks tumbled on Monday on fears tariffs would fall after a report suggested the government was weighing reverse auctions of wind capacity power.

Shares of Inox Wind Ltd. and Suzlon Energy Ltd. tanked nearly 5% following the report.

The Ministry of New and Renewable Energy is planning to bring back the old method of ‘reverse auctions’ for selling wind power capacity to energy companies given the undersubscription and higher tariff discovered in recent wind bids, local media reported as per reports.

Incidentally, the ministry had given up the ‘reverse auction’ method at the beginning of this financial year as the method was not delivering results in terms of wind capacity installations. Unremunerative tariffs resulted in poor capacity installations. However, after the adoption of the closed bidding system, tariffs rose.

"Last time we had a reverse auction, it was a problem as everyone had excess inventory and everyone was desperate to sell their turbine at whatever prices, and the sector was not doing well," Devensh Shah, executive director at Inox Wind, told NDTV Profit during the second-quarter earnings session. "Now, whether you have reverse auctions or closed bids, OEMs will only supply turbines if they make money."

"If the government thinks tariffs are too high and need to be lower, reverse bidding will end up with lower tariffs. I am not sure that this is a good thing. This brings about a more transparent bidding process. If tariffs fall too low, fewer companies will participate, which should correct itself," said Gautam Trivedi, co-founder and managing partner at Nepean Capital.

"If the tariff structure gets so low, so many companies may not participate in bidding," he said.

Shares of Inox Wind tumbled 5% to Rs 552.65 apiece, while those of Suzlon Energy tanked 4.44% to Rs 42 apiece on the NSE as of 11:55 a.m. That compares with 0.14% gains in the benchmark Nifty 50.