The insistence on low tariff caps was also restricting bidders to high wind-resource states of Gujarat and Tamil Nadu resulting in land and infrastructure constraints in these states.
In November, the Ministry of New and Renewable Energy (MNRE) categorically said it would continue with tariff caps for tenders. However, after recent allocation rounds saw massive under-subscription, the Government seems to have changed its mind.
In fact, the most recent wind tender (Round Nine) for 1.2GW had to be postponed nearly five times due to a lack of interest from the industry caused partly by the tariff cap of INR 2.93/kWh ($0.040/kWh), which was seen as unviable by a majority of the potential bidders.
The MNRE has issued a directive to the tendering agencies and the state utilities recommending removal of tariff cap from tenders and the next federal tender (Round Ten) is expected to dump this provision.
The change is expected to revive interest in subsequent auctions and help the floundering wind power sector which saw just 2.4GW of new projects in 2019 despite a huge amount of auctioned capacity on the books.
Removing tariff ceilings means developers can now explore projects in other states like Rajasthan, Karnataka, Madhya Pradesh.
"The move to do away with the tariff cap reflects not only the increasing maturity of the sector but also the government's belief that robust bidding processed will ensure tariffs remain at reasonable levels," said Sumant Sinha, managing director of ReNew Power.
Speaking to Windpower Monthly, Francis Jayasurya, India director at the Global Wind Energy Council, called it a positive move by the government.