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Goldman’s ReNew warns India wind order will prompt losses

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, 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.”

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