Suzlon, Inox Wind tank up to 5% as Centre weighs reverse auctions of wind power

Wind energy stocks traded lower on March 4 after reports suggested the government was weighing reverse auctions of wind capacity power.

Suzlon shares fell more than 4 percent to an intraday low of Rs 41.75 per share on the NSE, while Inox Wind tumbled 5 percent to its lower circuit at Rs 552.65 per share.

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The Ministry of New and Renewable Energy was revisiting its stance on reverse auctions, considering bringing it back as a result of undersubscription and higher tariff discovery in recent wind bids.

“After the sharp decline in capacity additions, the bidding process was changed to ‘2-parts closed bids’ in early 2023, giving a new lease of life to the sector. Current move, however undesirable from policy uncertainty perspective, is likely to have insignificant impact given the large market size (>10GW/yr) as evident from under-subscription,” said JM Financial in a note.

In the reverse auction mechanism, the bidders bid against each other until a bid is not challenged by a counter-offer. The method did not result in enough wind capacity installations, leading the ministry to scrap the method.

In January 2023, the Centre revised the auction process for wind energy projects. It also set a target to invite bids for 8 gigawatts (GW) of projects each year till 2030, the ministry of new and renewable energy (MNRE) said on January 12.

While the tariffs did come down as a result of reverse auctions, it wasn’t enough to support capacity installations. Following the implementation of the closed bidding system, tariffs began to rise again.

JM Financial maintained its buy rating on Suzlon despite prevailing policy
uncertainties, with a target price of Rs 54, underpinned by strengthening order book, enhanced financial health, and a robust bidding pipeline.

Suzlon shares have gained more than 75 percent over the past six months, with Inox Wind shares surging around 170 percent during the same time period.

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