India Wind Farm Ruling May Hurt Goldman’s Profits

Goldman Sachs is the latest to express concerns about wind farm investments in India in the wake of a court ruling that forces wind farm developers to predict output. India’s electricity regulator will then fine developers if they forecast generation levels inaccurately. So reports Bloomberg.

An official from Goldman’s ReNew Wind Power Pvt., which is backed by a $385 million investment from Goldman, said the ruling could wipe out profits in the industry that’s attracted $10 billion in investment since 2011, as companies rack up penalties for inaccurate forecasts. The Central Electricity Regulatory Commission imposed the order this month, reports Bloomberg. It applies to farms built since May 3, 2010.

Penalties could be as high as 15% of revenue, said Sumant Sinha, CEO of ReNew. And the level of accuracy they seek isn’t even possible, he said.

ReNew joins Tata Power expressing concerns about the ruling. Wind-farm developers, through the Wind Independent Power Producers Association, are currently seeking a court injunction against the directive ordering the day-ahead forecasts. Among the other developers affected are CLP Holdings Ltd.and Continuum Wind Energy Pte, which is backed by Morgan Stanley. So reports Bloomberg.

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

Regulators in the U.S. and Europe already require developers to forecast their wind generation, as they attempt to stabilize their energy grids. But in India, wind farms of at least 10 megawatts must predict their generation for the following day every 15 minutes. Those who miss their estimates by more than 30% will be fined.

Those in the business of wind forecasts, such as GL Garrad Hassan and AWS Truepower, can’t forecast with the kind of accuracy regulators seek, Sinha said. No other country requires this level of precision, he said. So reports Bloomberg.

In the meantime, investment in India’s renewable energy sector is expected to be sluggish, according to a new report by Deloitte. So reports The Economic Times.

“There is a slowdown particularly in the wind sector due to removal of Accelerated Depreciation and confusion regarding generation based incentive,” said Deloitte India’s Senior Director Debasish Mishra, noting whatever is happening in India is part of a global trend.

To read the Bloomberg article cited in this story, click here

To read The Economic Times article cited in this story, click here


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