Uncertainity Looms As India Eyes First Wind Energy Auction

Project developers are apprehensive about India’s latest wind energy policy which calls for large-scale auction of projects.

The uncertainty amongst wind energy project developers in India originates from the fact that there is lack of clarity on the extension of crucial incentives like the accelerated depreciation and generation-based incentive. These two support mechanisms have been the sole driver of wind energy expansion in India.

Suspense looms over the future of these financial incentives beyond 31 March 2017. The government, through the Solar Energy Corporation of India, is planning to auction off 1 GW of wind energy capacity.

According to media reports, the government intends to reduce the cost of generation in the wind energy sector by introducing competition as has been the case in the solar power sector. Competitive auctions for solar power projects led to a 50% correction in tariff over a 5 year period.

Through the introduction of wind energy project auctions the government hopes to make renewable energy much more attractive to power utilities which have so far been hesitant to procure it due to higher cost.

As per current proposals of the government, the Generation-based Incentive, or GBI, is set to expire at the end of the current financial year, on 31 March 2017. Through this incentive developers get Rs 0.50 (US¢0.75) for every kilowatt hour of electricity generated.

Accelerated depreciation shall be reduced from 80% to 40%. Through this incentive project developers can claim higher tax deductions on revenue generated from wind energy projects.

The final call on the future of these incentives may be taken at the annual budget for financial year 2017-18 to be presented in late February 2017.

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