Goldman’s ReNew Warns India Wind Order Will Prompt Losses

July 28, 2013 by  
Filed under Green Energy News

Goldman Sachs Group Inc.’s ReNew
Wind Power Pvt. said an Indian rule requiring wind farms to
predict output will lead to penalties that will wipe out profits
in the industry.

ReNew joins Tata Power Co. (TPWR), both among India’s largest
renewable-energy utilities, in voicing concern as wind-farm
developers seek a court injunction against the directive
ordering day-ahead forecasts for generation. India’s electricity
regulator will fine developers if predictions aren’t correct.

“The level of accuracy they’re asking for isn’t
possible,” said Sumant Sinha, chief executive officer of ReNew,
which is backed by a $385 million investment from Goldman Sachs.
“Most people will end up paying very significant charges.”

The Central Electricity Regulatory Commission imposed the
order this month. The directive, applying to farms built since
May 3, 2010, will affect developers including ReNew, Tata, CLP
Holdings Ltd. (2)
and Morgan Stanley-backed Continuum Wind Energy
Pte, which have added some of the largest projects in that time.

Penalties may amount to as much as 15 percent of revenue,
destroying profitability in an industry that has attracted about
$10 billion of investment since 2011, Sinha said. ReNew, which
doesn’t disclose its operating capacity, will find it “tough”
to meet its own target of adding 200 megawatts a year, he said.

Court Injunction

The Wind Independent Power Producers Association has filed
for an injunction at the Delhi High Court, Sunil Jain, the
lobby’s president, said in a July 25 e-mail. Another industry
body, the Chennai-based Independent Wind Power Association, is
considering doing similar, said Chairman K. Kasthurirangaian.

Objections from the industry have already delayed the order
by two years and developers have had sufficient time to prepare,
Rajiv Bansal, the regulator’s secretary, said by phone.

Forecasting of wind generation, an intermittent energy
source, is carried out in parts of Europe and the U.S. to help
stabilize the grid. In India, scheduling will allow wind power
to be sold across states and help authorities prepare network
upgrades to accept more clean energy.

Wind farms of 10 megawatts or more will predict their
generation for the following day every 15 minutes. Missing
estimates by more than 30 percent will incur penalties.

Foreign wind-forecasting specialists such as GL Garrad
Hassan and AWS Truepower can’t guarantee that kind of precision,
Sinha said. In the low-wind season, generation would only have
to swing by a 3 percent margin to incur fines because of
seasonal variations in turbine efficiency, he said.

“Nowhere else do they do it at this granular level,” he
said.

The measure is necessary for the industry’s long-term
growth, said V. Subramanian, chairman of the Indian Wind Energy
Association. “It’s not a question of possible or impossible,”
he said in an e-mail. “The Indian power sector works with
scheduling of generation and consumption at 15-minute intervals.
Renewable energy cannot be different from other sources of
energy.”

To contact the reporter on this story:
Natalie Obiko Pearson in Mumbai at
npearson7@bloomberg.net

To contact the editor responsible for this story:
Reed Landberg at
landberg@bloomberg.net

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