www.businessweek.com
18 Jul 2012
The cost of
wind power has dropped below the price of coal-fired energy in parts of India for the first time as improved turbine technology and rising
fossil fuel prices boost its competitiveness,
Greenko Group Plc (GKO) said.
"Today we're able to supply energy below the cost of conventional power", said Mahesh Kolli, president of
Greenko Group, which is building wind projects with
General Electric Co. in India. "That's the key development for this year".
The cost of wind has closed in on coal thanks to more advanced turbines, which can produce more electricity from lower wind speeds. The shift means new wind farms in India will be able to survive without state subsidies, potentially attracting investors to a country where 57% of installed capacity is coal-based and 31% renewable, including
hydroelectric.
Greenko Group began operating its first wind project in Ratnagiri in Maharashtra state this year using 1.6
MW GE turbines designed for low winds. That farm is "achieving efficiencies never before seen in India", with a 30% plant load factor, Kolli said today by telephone. That's a measure of a site's actual generation compared with its theoretical capacity.
The company, based on the Isle of Man, has signed agreements for more than 1,000
MWs of wind capacity and a three-year contract to buy at least 450
MWs of
GE turbines. State power distributors in places such as Karnataka, Rajasthan, Maharashtra and Andhra Pradesh have a "market incentive to buy
wind power because we're cheaper", Kolli said.
Generation Cost
The executive didn't specify the cost of generation, which varies according to state. Estimates from
Bloomberg New Energy Finance show the most efficient wind projects in India run at a similar cost to new coal-fed plants. The best projects have a levelized cost of energy, which allows for comparison between different fuel sources, of 2.7 rupees (5¢) to 4.4 rupees a kilowatt-hour, compared with coal's 1.9 to 4.8 rupees, Ashish Sethia, an analyst at London-based
BNEF, said in a July 3 note.
The economics of Indian wind developments may lure investors away from markets such as the US, where the end of a tax break for wind-power utilities could cause a 75% slump in new installations next year, according to BTM Consult, a unit of Navigant Consulting Inc. (NCI) (NCI) Kolli said India's decision to suspend a wind subsidy in April won't affect investments.
Subsidy Loss
The generation-based incentive, which paid wind farms a 500 rupee subsidy for every
MW of electricity fed into the grid, is only the "icing on the cake", he said. Its loss won't diminish the 19% return on wind projects that
Greenko Group assumes in its 15 year power sale agreements, he said. The current cost to build wind farms in India is about $1.25 million a
MW, according to Kolli. While that price has largely held steady, the company is buying turbines that are 20% more efficient than in the past, he said.
Greenko Group already has more than 200
MWs of operating
hydroelectric capacity in the country. Hydro and wind projects in India benefit from an abundance of renewable sources of energy, unlike coal and gas-fired generation which has been hurt by fuel supply shortages.
Greenko Group reported a 6.5% increase in net income to 9.5 million euros ($11.6 million) for the financial year through March. Its shares fell 0.4% to 107 pence as of 12:28 p.m, in London today, extending their decline this year to 11%.