Wind energy: Sectoral headwinds blowing away jobs

Some wind power companies are resorting to employee retrenchment as part of their efforts for ‘costs optimisation’ as they take hit on revenues due to a shift from feed-in-tariff to auction model and piling-up of inventories.

Written by Anil Sasi | New Delhi | Published: September 20, 2017 2:19:07 am
wind energy, renewable energy, layoffs, india news, indian express news Illustration: C R Sasikumar

The renewable energy sector, one of the big-thrust areas of the government, is witnessing a wave of layoffs. Wind gear supplier Suzlon Energy Ltd and turbine maker ReGen Powertech are learnt to have retrenched over 1,600 employees over the past six months, while equipment maker Inox Wind Ltd has not paid salaries to sections of its staff over the previous two months.

Suzlon is learnt to have laid off around 1,400 employees and ReGen Powertech has reportedly retrenched at least 300. Asked about the numbers, Suzlon did not offer a formal response but a company executive said that “a manpower cost optimisation” exercise is on. The executive did not comment on the number of workers laid off but referred to an analyst call on August 14, when Suzlon’s top brass indicated that the move is part of an “entire value cost optimisation” initiated by the company.

ReGen Powertech, which has retrenched at least 300 people from a factory that it has closed down in Rajasthan, is reportedly still in the process of laying off staff across units, multiple industry sources said. A company insider admitted to a manufacturing unit in Vallabhnagar, Udaipur, being closed down, but ReGen’s official response to queries sent by The Indian Express played down the number of layoffs. “We have laid off nearly 200 people in the company … The initiative of optimising the overheads has been taken by almost all wind turbines manufacturers including Regen Powertech,” Madhusudan Khemka, managing director, Regen Powertech, said in response to the query by The Indian Express.

Noida-based Inox Wind, which has not paid salaries to most employees over the past two months, did not respond to emails seeking comment. Inox Wind manufactures nacelles and hubs at a plant located in the Una district of Himachal Pradesh, and rotor blades at facilities and tower plants in Gujarat and Madhya Pradesh.

According to industry sources, turbine manufacturers such as Siemens Gamesa Renewable Energy and WinWinD are faced with a piling-up of inventory, as wind farm developers are going slow on order execution.

Analysts said that the revenue visibility for wind energy firms is under a cloud, as their order books took a big hit on account of a shift from a feed-in-tariff (FiT) regime — state electricity distribution companies (discoms) buying wind power at stipulated tariffs — to an auctioning model for new projects. Till 2016-17, the wind power was being procured through FiT determined by respective state electricity regulators. However, after the first wind auction for 1,000 MW capacity, in which the wind tariff discovered was found to be much below the lowest FiT, the Centre decided that most of the future wind power procurement would be through competitive bidding process.

The analysts said states have stopped signing power purchase agreements with wind energy equipment manufacturers through the FiT mode because it is more expensive than prices discovered through the competitive auction that took place in February. In a BSE filing earlier this year, Inox Wind said that its conventional order book has lost relevance due to the change in policy.

The new auctioning model for the wind sector is still work-in-progress, considering that the government has had to postpone its second round of wind power auctions for 1 GW capacities that was scheduled for September 19 in view of concerns regarding the lack of clarity on transmission connectivity between states. A number of bidders and developers have raised the issue of inter-state transmission connectivity and the regulator is expected to clear up matters before the next round of bidding goes. Most of the projects awarded under the first round of bidding earlier this year are still in a limbo.

The stress in the green power sector has been accentuated by a stonewalling of the generation from these projects by states. Government-owned power discoms in states such as Rajasthan and Tamil Nadu are reported to be curtailing solar and wind power generation, as well as randomly issuing backing down instructions — asking generators to unplug from the grid.

Discoms in Tamil Nadu, Madhya Pradesh, Maharashtra and Rajasthan are also reported to be delaying payments to generators of wind and solar power by 6-12 months, putting the cash flows of most of the smaller renewable firms under severe stress.

Meanwhile, Madhya Pradesh’s electricity regulatory commission has floated a proposal that would, in essence, take away the “must run” status of renewable energy and subject it to “merit order dispatch” by the state grid operator. This move flies in the face of provisions of the Electricity Act, the National Electricity Policy and the National Tariff Policy to promote use of energy from renewable sources by according it a “must run” status, which emanates from the Indian Electricity Grid Code notified by the Central Electricity Regulatory Commission (CERC) and adopted by the state regulators.

The “merit order dispatch”, on the other hand, is a principle followed for conventional generation sources that essentially ranks available sources of electrical generation based on the ascending order of prices and sequences them accordingly. A shift to the merit order dispatch would push costly solar and wind power down the pecking order. According to analysts, commissioned projects being asked to back down is bad news for new projects.

In a bid to mitigate the move by states to blockade renewable power generation, the Ministry of New & Renewable Energy (MNRE), on August 23, issued fresh guidelines for competitive bidding for procuring solar power. Guidelines for wind are yet to be issued.

All of these come at a time when capacity addition in the renewable energy sector has shown its strongest performance in 2016-17, with a record capacity addition of 11,320 MW, eclipsing the thermal power segment’s 11,551 MW during the fiscal.

As of March 31, the total grid-connected renewable power capacity in the country stood at 57,260 MW (close to 20 per cent of India’s overall installed capacity of 3,29,000 MW).

Based on the current capacity addition targets, India is forecast to meet 19 per cent of its power demand from renewable energy sources in five years, by fiscal year 2022.

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