Davos WEF 2018: Renewable Energy Volumes To Stabilise Wind Tariffs, Says Suzlon MD Tulsi Tanti

Falling wind power tariffs will stabilise over time with a surge in renewable energy sold through competitive bidding, said Tulsi Tanti, chairman of wind turbine maker Suzlon Energy Ltd.

The power ministry's plan to auction 30,000-megawatt wind power in the next three years will support the sector, Tanti told BloombergQuint's Menaka Doshi on the sidelines of World Economic Forum 2018 in Davos, Switzerland. Stability in volumes will translate into stability in tariffs, he said. Tanti sees the price stabilising at Rs 3 a unit.

India switched from feed-in tariffs to competitive bidding for wind power early last year. Wind prices fell to their lowest at Rs 2.43 a unit in the fourth round of auctions held in December last year—even below the cheapest solar tariff. It also put pressure on turbine makers amid already-falling equipment prices.

The feed-in tariff regime guaranteed price protection as power producers were paid a fixed tariff for each unit supplied to the grid. Under competitive bidding, producers are exposed to greater competition from “non-windy” states that were earlier unable to subscribe to feed-in tariff regime, Tanti said.

Also Read: Davos WEF 2018: Downturn In Generics Won't Last Long, Says Sun Pharma Chairman

Pricing pressures also emerged from state governments scrapping their existing agreements and abandoning feed-in regime to revise tariffs, he said. Suzlon held its ground on old contracts and even the government said that there is no room for negotiations on existing pacts, he said.

Renewable energy production in 2018 will drop to nearly a fifth of last year given the challenges, he said. He expects it to increase to 8,000 to 10,000 megawatts in 2019 as bidding process gathers pace. “Of that, Suzlon will maintain its market share at 35-40 percent.”

Road Ahead For Suzlon

Suzlon's operating margin is likely to rise to 15 percent in 2018-19, aided by volume expansion, Tanti said. The company is working to cut debt. “We are very comfortable with our current debt and financial cost position.”

The company doesn't have any big capex plans but expects its order book to grow. It has produced 400 megawatts of solar energy so far, driven by panel imports from China. Tanti sees wind-solar hybrid solutions growing in the next phase of renewable energy push in India.

Also Read: India Needs To Look At Exporting Wind Power, Suzlon's Tulsi Tanti Says