Wind energy Tariff evolution vis-a-vis Global

1. Analysis of
Wind Energy
Prices
India - Global

2.  It means the average minimum price at which the electricity must be sold for the project to breakeven
and cover the cost of production. LCOE is composed of following
o Total Installation costs
o Cost of Capital
o Life-time Capacity Factor
o Price of fuel
o Operations and Maintenance cost
o Decommissioning cost
 Although all these factors are important in determining the LCOE of a project but in wind projects cost
of wind turbine is the most significant component of the total installation cost. Wind Turbine alone
accounts for ~50% of the cost of LCoE of an onshore wind project
 Cost of capital and capacity factor are the other significant factors that impact LCOE
Levelized Cost of Energy (LCOE)

3.  The weighted average LCOE for onshore wind have declined globally as
depicted in both the graphs.
 From 2010 till 2021, The global LCoE reduction stood at ~68% which has
fueled the growth of wind sector and made it competitive against fossil fuel
power in most geographies. Brazil (~78%) witnessed highest while both India
and China (~67%) witnessed least LCoE reduction during the period
 Europe, North America had the reductions higher than global average
On-Shore Wind LCoE trend: Global vs India
2010 2021
India 0.090 0.03
China 0.083 0.028
Brazil 0.109 0.024
Europe 0.130 0.042
N. America 0.103 0.031
Global 0.102 0.033
0.000
0.020
0.040
0.060
0.080
0.100
0.120
0.140
Regional
Weighted
Average
LCOE
(2021
USD/kW)
LCOE of on-shore wind projects and global weighted average (1984-2021)

4. Factors driving
decline in onshore
wind LCoE
1. Technological Advancements
2. Reverse Auctions
3. O&M Costs

5. 1. Technological Advancements
 Technological Advancements leading to improvement in turbine technologies has been the leading factor that has
driven down the wind project costs. Modern turbines are higher at energy yield and more reliable and durable.
o Capacity ratings of the turbines have increased. Although a closer look depicts a faster shift to high name plate
capacity turbines across other geographies than in India.
o Focus towards larger swept area, longer and lighter rotor blades have allowed to capture higher wind resource
available. Globally, Rotor diameters in 2010 were nearly ~80m which have now touched ~170m. In 2022, India’s
first prototype with 160m rotor diameter was installed by Adani group.
o Higher hub heights have allowed to capture winds at high altitude which have less turbulence thereby reducing
generation losses due to turbulence and improved their ability to capture high speed winds. This has
significantly improved the energy yield at almost negligible additional resource expense for a project. In India
itself, the hub heights have increased from 80-90 meters to 120-150 meters over the decade while globally it
has touched 199 meters.
o Industry also witnessed focus on optimizing costs in towers through innovation in tower designs.
 Besides turbine technology, micro-siting drawing optimization and loss reductions through better software
technologies have further reduced LCoE
 Improved manufacturing processes and economies of scale have led to the reduction in manufacturing costs

6. 2. Reverse Auction Mechanism
 Clearly this has been one of the primary reasons leading to the sharp decline of wind tariffs in India
post 2017. The developers participated in the wind project auctions through a transparent competitive
bidding process and in order to win bids and secure projects offered the lowest tariffs possible at their
end.
Countries that have implemented renewable energy auctions by early 2015
 ~67 countries around the world
adopted renewable energy
auctions by mid 2016,
compared to only 6 countries in
2005 with the objective of
promoting competition and
driving down the renewable
energy prices.
 Auctions have thereby
intensified the competition in
the sector in a bid to bring
down the LCoE of projects to
quote competitive prices
Source: IRENA Report (Renewable Energy Auctions: A guide to design),

7. 3. Operation and Maintenance (O&M) Costs
 O&M Costs have gone down because of the following factors:
o More reliable and durable new turbines
o Larger capacity turbines reducing the number of turbines to be maintained for a given project
capacity
o Improved O&M practices
o More players entering O&M field has increased competition and driven down costs
o The onshore wind industry has achieved economy of scale in mature markets like US, Europe ,
China and India further driving down O&M costs

8. Tariff trend in India
and Growth in
Wind Sector

9. Wind tariff trend in India
3.46
2.64
2.43
2.44
2.85
2.51
2.77
2.76
2.82
2.79
2.8
2.83
2.99
2.77
2.69
3.43
3.96
2.89
2.84
2.9
2.96
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Lowest tariff determined through reverse auctions
(2017 onwards)
 Feed in tariff mechanism
introduced in Electricity Act
2003 allowed states to formulate
their tariff policies for renewable
power sources including wind
and were further supported by
incentive schemes like GBI, AD,
mandatory RPO for states, REC
etc.
 Adverse policy changes,
Investmen
NOTE: GBI: Generation Based Incentives, AD: Accelerated Depreciation, RPO: Renewable Purchase Obligations, REC: Renewable Energy Certificates
 The trends clearly showcase a sharp decline in wind energy prices post the onset of reverse auction mechanism in
2017. Prior to that in feed-in tariff regime, most states had tariffs ranging in between ₹4.0 to ₹6.0 /unit which
sharply declined and hovered around ₹2.8/unit mark.

10. Growth of wind power
13
16 17 18
22
25
29
33
35 38
40 40 42
0
10
20
30
40
50
0
10
20
30
40
50
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Wind Power Installed Capacity India (GW)
GW Installed CAGR
CAGR
14%
CAGR
5%
 Wind capacity installations in India showed a 14%
growth in duration 2010-2017 which clearly points
healthy growth rate and at par with the global CAGR of
17%
 Growth during 2018-2022 declined to around 5% in
India which is much below the global CAGR of 12%
during the same period, indicating a more severe
slowdown in India than globally.
 The common factors for the global slowdown are the
impact of COVID19, supply chain constraints, high
inflation, higher logistics cost, policy and regulatory
uncertainties leading to low investor confidence
 However, some of the factors are more local to India
o Shift from feed-in tariff to Reverse auction
o Scare Windy land sites and that too at higher price
rendering the projects infeasible
o Stress on high PLF states of Gujarat and Tamil Nadu
leading to stress on land and evacuation
availability in the region
o Delayed commissioning of existing projects leading
to financial challenges
Wind Power Installed Capacity Global
(GW)
Source: GWEC Annual wind Report, 2022

11. How Wind is evolving globally vis-a-vis India