July 21, 2017

Speaking at Wind PPA Signing Ceremony, New Delhi

Colleagues from the wind or other renewable energy sector industries, friends from the media, ladies and gentlemen.

It’s a very interesting thing that as I entered I saw both the secretaries here – the Power Secretary and the New and Renewable Secretary. And I realize this really is a joint initiative of both the Ministries, particularly, since this is the first time we have done transparent bidding in the wind energy sector and, therefore, the site was not pre-determined. It could be set up anywhere in the country and would have to be transmitted to whoever was the buyer with whom we have executive PPAs today. And, therefore, while the Renewable Energy Ministry prepared the entire framework and conducted the auctions very-very successfully in a very defined time frame. All of it could not have been completed unless power gave the transmission ability free of charge, so I would like to compliment both the Secretaries for this togetherness, this collaborative approach, which has lead to today’s success

मैं बैठा-बैठा नाम दे रहा था… कई बार होता है, हम चर्चा करते हैं कि पंचों की राय ली जाए या पंचायत system हमारे देश में भी चलती है… so this is reflective of a Panch – the Power and New and Renewable Energy – PAN, collaboratively handholding the wind energy sector, so that’s how our Panches are working.  ज्यादा पंच मत कर देना किसी को इस process में कि लोग बोलने लगे कि….. like they said in solar when it became 4 rupees 60 paisa, we had all of you on my back, will this fail, SunEdison is going to fail, the solar sector will collapse and then I heard it in a series of price reductions from 4.60 to 4.19 to 3 something to 2 something and we have being hearing that all through.

I personally feel the price is a very fair price that has been determined in this auction, it was after all a transparent auction, and one thing certainly the Modi government will be always remembered for will be transparency brought into the system, highest level of integrity and honesty in our processes, which completely eliminate chances of profiteering at the cost of India’s consumers, fair profit nobody would like to deny. But I had consistently held that this feed-in-tariff system could be good up to a certain point to handhold the industry up to a point where it matures. With wind energy in India – the fourth largest installed base in the world, almost 32 GW of wind energy already in place I think that handholding period was over. And, of course, the consumers are not going to pay for inefficiencies in the sector. Everybody will have to become more efficient, squatting on sites, pushing your wind into states where you can get large amounts of or large values for the equipment you supply or the product that you produce, all of that is a thing of the past in today’s regime.

The world wants more openness, more transparency and that is what we have tried to do. I have been talking to the wind sector for almost two years about this. It took them some time to realize but when they saw that solar prices have really found a reasonable level, around 2 and a half, 3 rupees, may be in some places 3 and a half rupees. Obviously, prices will vary depending on sites, depending on the solar radiation in each state, depending on counter-party risk, depending on the particular state which is buying, it’s own payment track record, what payment security mechanism is there inbuilt into each contract, into each tender. So, I hope everybody realises that prices will not exactly be the same one tender to the other. They have to be recognized for each tender independently.

Tomorrow when I set up solar in Leh, Ladakh where the radiation is huge, we may get a price, which would be probably unimaginable given India’s interest rate structure and our own circumstances. Of course, there will be a larger transmission cost involved. So, each base will have its own dynamics, each tender whether NTPC is buying, whether SECI is buying or a state government is buying, a DISCOM, and then within that DISCOMs what is their track record, what will be their current payment history, what is the security that we are offering with the tender.

And, therefore, this wind energy discovering a price of 3 rupees 46 paisa, to my mind, for its very first bidding is truly a great achievement. I would like to congratulate Secretary, MNRE, the earlier Secretary who is no more with us, Mr Rajiv Kapoor also, who spearheaded this auction, other colleagues in the Ministry who have looked after the entire process, Mr Ashwini Kumar and his team at SECI and PTC who helped us tie-up the sale of this power with the various state governments.

So, truly a collaborative process between the five stakeholders on the one side sitting here, the Panch and the industry also, save and except, for that email that I had taken serious objection to, and I have already told the wind industry my views about that email that floated around on the day of the auction, in which there was a suggestion made to industry players. I don’t know what that suggestion was meant to be about, but I do hope that in future auctions we see even greater participation. Of course, this time also in the second bid, I am told some 2,800 MW bids have been already received and we will, of course, be eliminating some of them and the rest will be going in for reverse auction.

It’s a good idea that you have proposed that you will have extensive consultations with the stakeholders, mitigate any concerns that industry may have, ensure that payment security mechanism is robust, ensure that PPAs are tied-up. Of course, last time around also I was seeing you did that PPAs within 30 days of the conclusion of the reverse bidding. It’s truly creditable and my own view is we should not be thrusting a particular source of energy on the nation or on any State, if only 6 or 7 States have the ability to do wind, let those States produce wind energy. Why should we be forcing States which are not conducive to wind energy to buy at very high prices or set up wind energy projects in their States at very high prices.

I don’t want to burden the consumers of India or the DISCOMs irrationally, while, of course, recognising that we want to go green, we want to have more and more clean and renewable energy in the system. I am sure, we will all have to also keep in mind the consumer interest, that’s the paramount purpose. As Stephen Covey had said, ‘Begin with the end in mind.’ And the end is customer service at competitive, affordable prices, and may be at some stage, we may also have to review that till when are we going to have separate renewable purchase obligations for solar, for other non-solar sources. I think time has come to have a look, I can see some punching on mobile phones, so I think the headline of the day is made.

As long as they don’t punch us, they can punch on the mobile phones about the Panches sitting here. But, truly, it’s time that we should have a relook, and I would urge all of you both of the Secretaries, one is the regulatory body, one is the operating Ministry to relook whether we really need to have separate RPOs anymore. We should leave it to the States to decide what is in their best interests, how they can serve their people best and who are we to or why should we anymore be looking at different mixes, somebody wants to have 100 percent wind so be it, somebody wants 100 percent solar so be it, at a later stage, once we have formalised our mind on what we will do with the hydro policy, we could get even look at a larger bucket for different States to fulfil their renewable purchase obligation.

So, I think we have to move on continuously, we have to evolve in a dynamic fashion, break the silos and I am sure all of you have seen this government, the entire government under Prime Minister, honourable Shri Narender Modiji breaking silos amongst Ministries also. Similarly, we should break silos within the Ministry in different departments, and try and bring in more cohesive thinking of what is in the best interests of the country. Each of the sources, whether it’s hydro, whether it’s solar, whether it’s wind, whether it’s waste to energy, whether it’s biogas, whatever, all of them converge to a better future for the people of India, which is our objective and in that sense, I think it’s time we had a fresh look in the current framework.

All our policies earlier were in a framework where we were thinking with a mindset of renewable energy being expensive, so, therefore, we had to thrust it on the system. Of course, the volumes were so small, it did not matter also, now we are looking at much larger volumes. We are looking at it playing a very important role in the energy mix and we are looking at it from the prism of very competitive prices. After all, no other source of energy can be today providing energy as competitively as solar or wind does – no other source. It has its own challenges, day time power or windy times power, intermittent power, grid integration, which is what our job is to sort out and we have been working on that.

We recently had a programme on 30th of last month where we released the 10th report on grid integration. You remember that nine 9 reports already on the table and the 10th one done by Narsimhan and a lady. So, we are seriously working on the technical aspects of it, now the commercial aspects will have to be left more and more for the States to design in the interest of the states own requirement.

There are states which need more power in the day hours – NDMC, where we are situated right now. I am told that peak, during the afternoon when offices are all on and air conditioning is at its peak load. Solar energy is wonderful for NDMC. So, different states, Maharashtra would probably prefer wind, once they are able to sort out your scheduling and forecasting and make that more robust, because they peak probably in the evening when there is no chance of getting wind energy. So, I think the mindset of regulation and policy makers and promotion of different sources of energy has undergone a seen change.

We have moved from a mindset of shortages to the confidence of surpluses and in that framework, the entire future will have to be recrafted, redesigned and I am sure both Mr Bhalla and Mr Anand Kumar will keep all these issues in mind and further your decisions on a fast track basis.

Of course, you did mention my request about a bid every month and, of course, you will also observe that how transparent our whole government has become that whatever I have just told him, and he is here, he has already announced from the podium. But I would like to also caution you that if you find that the pricing is going haywire, because people think now there’s too many bids coming in, then you should also go slow on the bidding. So, monitor the price levels and then calibrate your bidding. Don’t get the industry also get that feeling that अब तो bids आने वाले है तो price वापस Jack up कर दो.. So, we have to keep monitoring and calibrating, if we find that the pricing is… and ultimately the people of India want competitively priced affordable power.

In wind, bear in mind, there is also the concern about intermittency and scheduling and forecasting still not maturing into a Science, as good as we would like it to be, causing stress on certain States. So, I think it’s important that we calibrate how the process is moving, but if everybody allows fair and honest competitive bidding, I am sure the wind industry will benefit hugely from larger volumes. On our part, we are trying to also see that PPAs get tied up even before the bidding happens, so that there is no uncertainty in the bidding process, but certainly affordability of power is going to be the crucial determinant of the future of the industry.

I am glad that the days of FIT are largely behind us. I am sure there will continue to be some FIT at the local level in States. Somebody bakes 1, 2, 5 MW projects and all…we will be talking to the regulators to continue the FIT, but with certain restrictive covenants for small captive users or small installations coming up in a dissipated manner across the country. But, of course, the costing of that will also have to be carefully considered and this cost plus is something I am really paranoid about, it’s a root of inefficiency, this cost plus system.

I have, of course, allowed it in certain conditions for hydro, for example, because of the huge amount of uncertainties that the sector continue to face or waste to energy because of different types of technologies and different waste types that are being processed. But, I am sure gradually the nation will move more and more into a competitive framework and in that competitive framework it’s going to be very difficult for anybody to be able to get away with highly priced power. And with UDAY and initial first year, one and a half year successes of UDAY on the table, I am finding States are getting more and more encouraged to strengthen their processes, to improve their financial and operational performance and bring all DISCOMs into profit, into good health over the next two years.

We have, of course, kept the provision for pass through in case of any change in law even going forward. We are working with the States to ensure the must-run status of renewable is respected, which is why we have allowed the technical minimum of thermal plants to come down to 55 percent against the 70 percent that was there earlier.

We are looking at ways and means to strengthen the storage of power or a spinning reserve in the system, so that we don’t have to worry about backing down of thermal plants. We can do faster ramp up and ramp down, either through hydro or through gas, may be also through storage, through batteries at some stage in the future, and all of these together, will help us create a real sustaining ecosystem that will help this industry flourish, that will help this industry prosper.

I am glad that large scale contracts have been made, 250 MW or thereabouts, each one of these, that will help industry scale up, both from indigenous manufacturing point of view and from the point of view of better competition, economies of scale, better technologies. Industry has been given freedom to look at larger size turbines. I hope that freedom is there. They can do any size of turbine? Right! So, we can look at newer technologies, those 5 MW, 3 MW turbines coming to India.

There will be competition between manufacturers for achieving efficiency and, of course, with scale, I am sure pricing will become more attractive, because most of the components in these windmills will have larger buying, or let’s say, larger volume buying, which will also help to bring down their cost.

I did read some newspaper articles about some stress one or two wind companies have been going through. That’s a natural process of the industry. I am saying this because I expect the media to be badgering me with that as soon as I get out of the stage. But the same thing happened during SunEdison, I don’t think the solar industry died. Companies have wound up in so many sectors. You have seen failures in the aviation sector, in the steel sector, even in the power sector, so what? That’s a part of business, that’s a part of evolution, that doesn’t kill the sector and within the industry also, there will always been churn. In fact, I value churn. I welcome churn, because that’s how we can get the best out of the industry.

Inefficient players getting out is also a way to improve the health of the industry, so each one, all the people will have to look after their own processes, their own efficiencies. We will have to look after the efficiency of the system as a whole, which we are committed to doing in an honest fashion, bringing in greater and greater degree of transparency.

I once would like to thank all of you for the support you have extended to the success of this very first auction on the wind energy. Something that industry restricted for two years, but now is coming back and saying, please only follow this method but do a lot more of it. Certainly, we will do a lot more, as long as the industry also collaborates with the government to bring down prices, to bring efficiencies in the system.

All those who are squatting on sites, we should seriously look at penalising them or blacklisting those people who don’t surrender these squatted sites. So, you give them a time frame, may be one or two months, three months, after that if they have not taken effective steps for implementing their project, then they should surrender the site immediately to the State. And, whatever their excuses, don’t go into their excuses, genuine or not genuine, if they are unable to sort it out they should surrender the sites. I think that will also give you a lot more traction and competition in this sector.

Bidding guidelines you are trying to bring in, the guidelines to be more robust, similar to what we have done in the solar side. I think solar guidelines or the PPA that is now being executed and is largely been accepted across the country is outstanding, bring in more and more of those elements in the wind PPAs also, so that there’s more acceptability. We should discuss with the regulators about forecasting and scheduling, because unless that gets better it will be very difficult to market wind energy for long. That’s going to be a challenge, which industry will have to take care.

By and large, the GST regime has been good for the industry. We welcome that and we are delighted at all the changes that have happened in the GST regime that will make competition more fair, more equitable amongst players, irrespective of where they are located. So that will help industry become more uniform, both from the equipment side and from the wind energy side and any other issues that the industry has, we have an open door policy, please bring it to our attention. If you bring it in the next 24 hours, that’s better still or in the next 12 hours, even better, so that we can also take faster action, more particularly, because tomorrow we will be interacting with all the States on a variety of issues related to the various sectors – power, coal and new and renewable energy.

So, it will be good if any issues and through the media, I would like to appraise all the power sector that if they have any issues of concern on policy or on regulations or on the implementation of those regulations and policies, please bring it to the attention of the concerned Joint Secretaries in all the three Ministries, so that we can fast track early resolution of all these issues.

Thank you very much for all your support. Clean energy, new and renewable energy is the future, is something this government is very committed to, is something Prime Minister Modi is personally passionate about. He believes in it. He would like to leave behind a country, which has less pollution, a country which is a part of the global effort to ameliorate the problems of climate change, to bring down concerns of temperatures rising in the world and India will be a proud participant of this global effort.

I would like to assure all the citizens of this country that we stand committed to a better and cleaner future for the people of India. This industry is today one of the biggest job creators in terms of large installations coming up in the renewable energy sector. And as I had said on one earlier occasion, for every unit of electricity produced by the renewable energy, the number of jobs created is probably 5 or 7 times more than the jobs created through the traditional fossil-based forms of energy. So, this is also helping energy security, it is also helping create jobs and also ensuring the affordability of power in the long run. It’s a win-win for the nation, win-win for the people of India.

Thank you very much


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