TODAY’S STUDY: THE POWER OF WIND IN INDIA

GWEC India Wind Outlook 2012

November 2012 (Global Wind Energy Council)

Status of Wind Energy in India

In 2012, despite a slowing global economy, India’s electricity demand continued to rise. electricity shortages are common, and over 40% of the population has no access to modern energy services. India’s electricity demand is projected to more than triple between 2005 and 2030. In the recently released National electricity Plan (2012) the Central electricity Authority projected the need for 350-360 GW of total generation capacity by 2022. Despite major capacity additions over recent decades, power supply struggles to keep up with demand.

India had another record year of new wind energy installations between January and December 2011, installing more than 3 GW of new capacity for the first time to reach a total of 16,084 mW. As of march 2012, renewable energy accounted for 12.2 percent of total installed capacity, up from 2 percent in 1995. Wind power accounts for about 70 percent of this installed capacity. by the end of August 2012, wind power installations in India had reached 17.9 GW1.

Under the New Policies Scenario of the World energy outlook (2011), total power capacity in India would reach 779 GW in 2035. To reach 779 GW in 2035, capacity must grow at a CAGr of 5.9 percent, or over 20 GW per year from 2009 through 2035. The largest addition per year up to now was nearly 18 GW during fiscal year 2011-20123; this scale of expansion could pose a challenge for the government [IeA, 20124] without a significant role for renewables. During fiscal year 2011-2012 wind energy alone delivered over 3GW to India’s new installed capacity, accounting for over 16.5 percent of total new installed capacity.

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Renewable Energy in the 12th Five-Year Plan [2012-2017]

Historically, wind energy has met and often exceeded the targets set for it under both the 10th Plan (2002-2007) and 11th Plan (2007-2012) periods. During the 10th Plan period the target set was of 1,500 mW whereas the actual installations were 5,427 mW. Similarly during the 11th Plan period the revised target was for 9,000 mW and the actual installations were much higher at 10,260 mW.

The report of the sub-group for wind power development appointed by the ministry of New and renewable energy to develop the approach paper for the 12th Plan period (April 2012 to march 2017) fixed a reference target of 15,000 mW in new capacity additions, and an aspirational target of 25,000 mW. Importantly the report recommends the continuation of the Generation based Incentive scheme during the 12th Plan period. The report also prioritized the issue of transmission, which was a weak link in the value chain until now. A joint working group of the mNre, the ministry of Power, the Central electricity Authority and the Power Grid Corporation of India is looking at this issue.

However, for India to reach its potential and to boost the necessary investment in renewable energy it will be essential to introduce comprehensive, stable and long-term support policies, carefully designed to ensure that they operate in harmony with existing state level mechanisms so as to avoid reducing their effectiveness.

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Wind Power Resource Assessment

Presently, India has an installed power generation capacity of a little over 207.8 GW5, of which renewables account for about 25 GW, and wind makes up a majority of this installed capacity. In 2011 the state-run Centre for Wind energy Technology reassessed India’s wind power potential as 102,778 mW at 80 metres height at 2% land availability6, up from the earlier estimate of approximate 49,130 mW at 50 metres, also at 2% land availability7. If the estimated potential of 102 GW were fully developed, wind would provide only about 8 percent of the projected electricity demand in 2022 and 5 percent in 2032 [LbNL 2012]8.

Over the past year other research organizations have estimated wind potential using differing models for mapping the wind resource9. In one such study conducted by the Lawrence berkeley National Laboratory, assuming a turbine density of 9 mW/km2, the total wind potential in India with a minimum capacity factor of 20 percent ranges from 2,006 GW at 80-meter hub-height to 3,121 GW at 120-meter hub-height10 [LbNL 2012].

These research studies need ground level validation through long-term wind measurements at 80 and 120-meter hub height. Nevertheless their findings may have a significant impact on India’s renewable energy strategy as it attempts to cope with a substantial and chronic shortage of electricity.

In a positive development the ministry of New and renewable energy (mNre), has now signed a memorandum of Understanding with the Lawrence berkeley Lab to collaborate on several issues related to the estimation of wind resource potential and grid integration.

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Wind Power Installations by State

Historically, the States of Tamil Nadu, Karnataka, maharashtra and Gujarat have been the leaders in terms of total wind installations. The States of rajasthan, madhya Pradesh and Kerala are quickly catching up. by the end of the 11th Plan period in march of 2012, the total installed capacity had reached a total of 17,351.6 mW.

Interestingly more than 95 percent of the nation’s wind energy development to date is concentrated in just five states in southern and western India – Tamil Nadu, Andhra Pradesh, Karnataka, maharashtra, and Gujarat [LbNL, 2012]. These five states accounted for over 85% of the total installed capacity at the end of the last plan period. rajasthan is another emerging State with rising wind turbine installations.

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Offshore Wind Power Development

India has a long coastline of over 7500 kilometers. In April 2012, the ministry for New and renewable energy constituted an offshore Wind energy Steering Committee13 under the chairmanship of the Secretary, mNre, to drive offshore wind power development in India in a planned manner.

The Government is looking to prepare a time-bound action plan for development of offshore wind energy, especially in the coastal states of Andhra Pradesh, Gujarat, maharashtra, odisha, Kerala, Karnataka, West bengal and Tamil Nadu. A policy and guidelines for offshore wind are likely to be announced by the ministry of New and renewable energy in the near future.

The State of Tamil Nadu is likely to take a lead in harnessing its offshore wind resources and is in the process of installing a 100-metre mast for wind measurements in Dhanushkodi. According to C-WeT, as per the preliminary assessment conducted by the Scottish Development International14 (SCI), Tamil Nadu has a potential of about 1 GW in the north of rameswaram and another 1 GW in the south of Kanyakumari. SCI, under the guidance of Centre for Wind energy Technology conducted a detailed survey of the region to assess various parameters required for installing offshore wind farms. The technical feasibility study looked at offshore wind energy potential in favourable areas in the southern Peninsula and Kutch region in Gujarat. In a recent study conducted by WISe, the offshore wind potential of Tamil Nadu has been estimated as 127 GW at 80 m height15, which will need further validation.

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Repowering Potential

Commercial wind power generation in India began in 1986. many of the older low-capacity (< 500 kW) wind turbines installed more than 10 to 12 years ago occupy some of the best wind sites in India. These turbines need to be replaced with more efficient, larger capacity machines. one of the immediate benefits after repowering the old wind turbines is that more electricity can be generated from the same site. A study on repowering potential conducted by WISe for the ministry of New and renewable energy estimated India’s current repowering potential at approximately 2,760 mW16.

However due to a lack of policy guidelines and incentives for repowering, concerns are raised on a number of subjects including disposal of old machines, fragmented land ownership in existing wind farms, clarity on the feed-in tariff offered to newly repowered projects and constrained evacuation of the extra power generated.

For example currently no project capacity increase is allowed in Tamil Nadu after repowering due to transmission constraints, thereby defeating the purpose of repowering an existing site. Consequently limited progress has been achieved in the absence of national or state level policy guidelines for repowering.

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Barriers to Achieving Higher Growth

The 11th Plan had aimed to create 78.7 GW of additional capacity for grid connected power but actual realization was around 50 GW. The 12th Plan envisions installing 100 GW of new capacity of which 30 GW is projected to come from renewable energy Sources, of which wind would account for 15 GW. Historically the Indian wind energy sector has met and occasionally exceeded its allocated target17.

During FY 2011-12, India installed a record 3.1 GW of new wind power capacity. For this scale of growth to be maintained and escalated it is essential that the industry is supported by a stable policy and regulatory environment. India had installed almost 18 GW of wind power capacity by August of 2012 (mNre). With C-WeT’s updated wind power potential numbers and the movement towards promoting offshore wind development, there is a lot more that can be achieved in the country.

According to the 12th Plan approach paper a GDP growth rate of 9 percent per year over the Plan period will require energy supply to grow at around 6.5 percent per year. The ability to meet this energy demand depends on the country’s ability to expand domestic production in critical energy sub sectors on an urgent basis. Power generation (utilities + captive) grew at 5.8 percent per annum during the twenty-year period from 1990-91 to 2010-11.

Wind power is a mature and scalable clean energy technology where India holds a domestic advantage. India has an annual manufacturing capacity for over 9.5 GW of wind turbines today. The country is seeing about 3 GW in annual installations under the 12th Plan target. This modest pace of utilization of the country’s wind power manufacturing and resource potential so far is attributable to several factors, including lack of an appropriate regulatory framework to facilitate purchase of renewable energy from outside the host state, inadequate grid connectivity, high wheeling and open access charges in some states, and delays in acquiring land and obtaining statutory clearances. The broader global economic slowdown has reduced expectations for the fiscal year 2012-13 from the wind sector, which is still coping with the reduction of the Accelerated Depreciation benefit from 80 percent to 35 percent in the first year of a wind turbine’s operation.

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Besides these there are other potential barriers to achieving higher growth rates in the short to medium term. over the last decade the federal government has offered three key incentives namely the Accelerated Depreciation (AD), the Generation based Incentive (GbI) since 2009 and the renewable energy Certificates (reC) mechanism since 201018.

A fundamental reason for the growth of wind sector had been the availability of the AD benefit. With the quantum of this benefit reduced under the current Plan (from 1st April 2012), the other federal scheme called the GbI has now become a vital incentive for the wind sector. Though likely to be revived in near future, at present the GbI is also in abeyance.

The GbI in its first few years of operation has not attracted as many Independent Power Producers as envisaged, since the investors were of the opinion that the current rate of INr 0.5/ kWh [~ 1 US$ cent] was not adequate or at par with the fiscal benefit offered under the Accelerated Depreciation scheme; as the two continue to be mutually exclusive.

The state-wise renewable Purchase Specification (rPS) targets and the tradable renewable energy Certificates (reC) provide further support for the sector. However there are no incentives in the existing framework, especially for state utilities in wind-energy rich states, to adopt rPSs higher than the levels suggested by the National Action Plan on Climate Change. Also the reC mechanism, due to its limited timeframe (five years) faces the challenge of acceptance as a revenue stream by the financial institutions. both the GbI and reC are at an early stage of implementation and require learning and capacity building for all stakeholders especially before the reC markets mature. Further, the multitude of regulatory agencies add to the confusion. The electricity regulatory framework consists of the Central electricity regulatory Commission (CerC) at the federal level and a State electricity regulatory Commission (SerC) at the state level.

The CerC issues guidelines for determining the feed-in-tariff for renewable energy based power generation and these are applicable to central government power generating stations and those who transmit power in the inter-state corridor. However, this is applicable to a very small number of power producers and the vast majority is still covered by the tariff determined by the SerCs19. This duality is not useful, as the tariff determined by the SerCs may or may not be equivalent to that of CerC tariffs. Tariffs vary across the states and remain fixed for a longer control period, this could impact the returns for new projects commissioned under this tariff regime and negatively impact new project development activity. In FY 2011-12 some of the state utilities, like Tamil Nadu, delayed FIT payments to wind power generators by over a year. This adversely affects investor confidence in the sector.

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Inadequate grid infrastructure is another key issue that needs to be addressed urgently. Across most of the states with significant wind potential, the grid does not have sufficient spare capacity to be able to evacuate ever-increasing amounts of wind power.

As a result, the state distribution utilities are reluctant to accept more wind power generation and usually tend to prefer thermal power generation. Thus, there is an urgent need to augment general grid capacity. Also the regional southern grid needs to be connected with the rest of the country on a real-time basis. This requires better forecasting of power demand across the nation, and a modernization of the grid. In most states, availability of land for wind farms is a contentious issue. even if private lands are available, conversion of land use status from agricultural to non- agricultural is a time consuming process. Further if the land is close to a protected area or forestlands then obtaining clearance from forest authorities for using the forestland for wind power generation is time consuming.

Another barrier to the growth of the wind sector is inordinately high borrowing costs. In India, a significant majority of wind power projects are conceived with a 70:30 debt-equity ratio as a project financing method. The high interest rates (at present > 13 percent) make for some very expensive debt under tough macroeconomic conditions. Further it would be beneficial for the small and medium enterprises to have access to concessional financing to bear the risks related to production capacity augmentation, especially for component manufacturers.

Lastly India’s wind sector has tremendous job creation potential as the domestic industry grows. There is likely to be higher demand for trained manpower and accordingly, the technical training and academic curriculum across the States may need to be modified…

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