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Proposal to hike wind energy costs upsets Mahavitaran

Wind power may not be all that it’s cracked up to be. Increased wind energy costs proposed in a draft renewable energy tariff for 2013-14 by the Maharashtra Electricity Regulatory Commission (MERC) has upset the State power distribution utility, which has submitted a petition challenging it at a recent public hearing where consumer groups and wind energy companies were not represented.

The Maharashtra State Electricity Distribution Company Limited (MSEDCL) or Mahavitaran says it cannot accept the high cost of wind energy and is against passing on that cost to consumers. The Electricity Act of 2003 makes it mandatory for some provision of renewables and it is left to the States to decide this component. Mahavitaran says it has been including up to eight per cent of renewable energy and in 2013-14 it could rise to nine per cent.

Mahavitaran is opposing the “irrational” pricing of wind energy on various grounds. Unlike solar energy there hasn’t been any breakthrough technology. For a stagnant technology the MERC is proposing a tariff range of Rs. 3.86 per unit to Rs. 5.80, it says. Since Maharashtra follows the zoning system based on wind velocity, the lower cost is for areas other than zone one.

However, these areas have saturated their potential and so the cost range is misleading, an official points out. Most of the new projects will be in zone one which has the least wind velocity and the highest cost of power. The power utility has a basket cost of Rs. 3.30. However for wind, the cost per unit is almost Rs. 2 higher and going by this increase the price per unit is calculated at Rs 7.42 in the future, the official says.

The utility charges MERC with safeguarding the interests of private investors and cherry-picking. Mahavitaran says the tariff for wind energy in Tamil Nadu is Rs. 2.75-3.51 per unit, Rs. 4.23 in Gujarat, Rs. 4.53 in Rajasthan, Rs. 4.70 in Andhra Pradesh and Rs. 3.70 in Karnataka. Tariffs for wind power have increased the most in Maharashtra – from Rs. 3.37 to almost Rs. 6 per unit. Mahavitaran has called for competitive bidding, which demands long term agreements with companies and reviews of the zoning system, and is not practised at the moment, for wind projects.

Wind is an infirm source of power and not reliable or affordable thanks to the various policies and subsidies, the official points out.

In Maharashtra, wind energy has the following facilities: electricity duty is exempted for captive as well as third party sale for first 10 years, 100 per cent refund of Octroi Tax/Entry Tax for equipment, refund of 50 per cent of expenses on evacuation arrangement from Green Energy Fund and refund of 100 per cent expenditure on approach road as subsidy from the Green Energy Fund.

The Maharashtra Energy Development Agency (MEDA) says zoning was introduced since 2010 and most subsidies were removed from wind energy in 2002 and in 2012. The State has an installed capacity of 2959.71 MW. The zone-wise wind energy tariffs was introduced by the Central Electricity Regulatory Commission (CERC) three years ago and MERC is the only State to have adopted those guidelines, says Ashwin Gambhir from Prayas Energy Group, a Pune-based think-tank.

The Centre for Wind Technology (C-WET), Chennai and MEDA have to certify the zones. However there could be significant variation in actual turbine performance at those sites and it remains to be seen how close the approximation will be to real performance. Worldwide, Mr. Gambhir points out, the cost of wind power is going down but in India it is rising in nominal terms in the last few years. Many State Electricity Regulatory Commissions are using an indexing formula which accounts for inflation in steel and cement to calculate the capital cost of wind turbines each year; however such a formula cannot take into consideration technology and wind resource improvements, which are significant.