Wind can be produced as cheap as developers of coal-fired plants because rising demand for the fossil fuel has increased import prices.
Mytrah Energy Ltd (MYT)., an Indian wind-farm builder held by BlackRock Inc. (BLK), says it’s able to produce power as cheap as developers of coal-fired plants because rising demand for the fossil fuel has increased import prices.
“With increased reliance on imported coal in India, we believe that our cost of production of electricity is reaching parity, or better than, new thermal capacity being developed,”Executive Director Alastair Cade said in a London interview.
A forecast 8 percent gain in the price of coal in Asia this year may boost competitiveness of clean energy producers such as Mytrah, which is also backed by Henderson Global Investors Ltd., Capital Research Global Investors and Eton Park International LLP. About half the thermal power stations in India, the third-largest coal user, have stocks of fewer than seven days against normal levels of 15 to 30 days, the regulator said this month.
“Wind power prices have either remained stable or seen a much lower increase,” said Ashish Sethia, Bloomberg New Energy Finance’s India country manager, said by e-mail from New Delhi.“Rates of new build coal power projects have risen steadily in the last two years due to an increased non-availability of domestic coal, pushing developers to opt for imports.”
Developers’ bids in auctions for coal-fired power stations have ranged from $49 to $78 a megawatt-hour, against tariffs for wind farms of $66 to $105 a megawatt-hour, Sethia said.
“We’re producing electricity at around 3.5 rupees per kilowatt-hour at our capital cost, which is either equal to or better than some of the bids that are coming in from new thermal players,” said Cade at Hyderabad-based Mytrah.
The company, listed on the London Alternative Investment Market in October 2010, has $132 million of so-called mezzanine finance and $270 million of senior debt for its projects.
It has also curbed the cost of finding future sites by securing enough land to install as much as 3,000 megawatts of wind power, Cade said. Mytrah contracted Suzlon Energy Ltd. (SUEL), India’s biggest turbine maker, to build projects that are ready to operate. In addition, it signed a turbine deal with Gamesa Corporacion Tecnologica SA (GAM) for 2,000 megawatts through 2017.
Power demand in India means “whatever is produced is used and wind can be erected a lot quicker than other forms,” Cade said, with a first 500 megawatts set to be installed by March.
“Those who have land banks are likely to see faster project execution and better returns as the number of good quality sites depletes and land acquisition becomes increasingly expensive,” Bloomberg New Energy Finance’s Sethia said.
Thermal coal at the Australian port of Newcastle, the benchmark price for Asia, may average $120 a metric ton this year, according to the median of five analyst estimates in a Bloomberg News survey. Prices slipped 12 percent in 2011 after surging by 46 percent in 2010, IHS McCloskey figures show.