A major drive by Prime Minister Narendra Modi to make India more industrially self-sufficient could sharply drive up solar power prices and be a game-changer for the competitiveness of the country’s wind industry, which is already proudly localised and helping its own case by bringing more powerful turbines to market.

Amid the chaos and confusion of the ongoing pandemic crisis, Modi’s May announcement of the 'Atmanirbhar Bharat Abhiyan' or 'Self-Reliant India Mission' has prompted meetings between the nation’s renewable energy industry and government officials to discuss how it can play its part.

The most significant proposal so far is to increase custom duties on solar equipment. The power minister has proposed a levy of 20%-25% basic custom duty (BCD) on solar modules for a year from August, which will be progressively increased to 40%; and 10-15% BCD on solar cells, rising to 30-40% after the first 12 months.

The duties will result in solar prices increasing to levels of 2.9-3 rupees per kWh ($0.039-0.04/kWh) (MEC estimates based 40% BCD and 11% cost-of-debt in 2020), rising sharply from the 2.36 rupees per kWh pricing levels reached in latest auctions.

While a rise in solar pricing is not good news for state-owned distribution companies (DISCOMs) struggling with high levels of financial stress, the development would bode well for the wind industry in the country.

Wind tariffs in subsequent auctions are expected to be in the range of 2.9-3.15 rupees per kWh. The wind supply chain is already localised in India to an extent of 80-85% by value, and major components being imported are limited to castings and power electronics. Hence the impact of the localisation mission is expected to be less on wind prices compared to solar, with its heavy reliance on China.

Meanwhile, the wind supply chain is already gearing up to increase its competitiveness in India. In the past two weeks, India’s largest wind OEMs, Siemens Gamesa and Suzlon, have announced 3MW platforms for the country.

Siemens Gamesa’s SG 3.4-145 is specially-designed and optimised for Indian wind sites, while Suzlon in its latest corporate presentation announced a 2.8-3MW turbine to recapture its market shar. GE (2.8MW), Inox (3.3MW) and Nordex (3MW), are other OEMs that have launched 2.8-3MW platforms for India.

The launch of higher-rated turbines suited to low-wind resources, will lower the cost of generation from wind technology, although the exact impact is yet to be measured.

A newly increased competitiveness for wind can unlock a larger pipeline and reinvigorate the interest of developers and offtakers in the industry.

Currently new tenders for wind are limited to 2GW, and proposed to be blended with solar for keener pricing. However, the coin may have flipped in the new market dynamics, which have placed wind on a par with solar again.

Wind was already expected to play a vital role in hybrid tenders even before improved competitiveness due to its generation profile, but now it is likely to be a preferred technology on cost as well.

Sidharth Jain is managing director at MEC+