India’s 2015 INDC (Intended Nationally Determined Contributions) for the Paris Agreement to limit climate change proposes the following for wind energy targets:
“Wind energy has been the predominant contributor to the renewable energy growth in India accounting for 23.76 GW (65.2%) of the renewable installed capacity, making India the 5th largest wind power producer in the world. With a potential of more than 100 GW, the aim is to achieve a target of 60 GW of wind power installed capacity by 2022.”
Amongst other measures, the government, specifically the Ministry of New and Renewable Energy, announced a wind project repowering policy in August 2016. It estimated that there is close to 3,000 MW worth of wind power capacity installed before 2000 on high wind resource sites with turbine rating of 0.5 MW. Under this policy, they propose that wind turbines of capacity 1 MW and below be made eligible for repowering.
Wind repowering basically amounts to enlargement of the original project in order to produce higher capacity. This is an issue particularly for wind energy, where finding appropriate sites to acquire for wind energy projects can become a major problem. With modern technology, previous sites can yield far more.
Sweetening the pot, all incentives available to new wind power projects will also be available for repowering projects. An additional interest rate rebate of 0.25% (above the rebate rates for new wind projects) is available for projects financed by the Indian Renewable Energy Development Agency (IREDA).
In the INDC, proposed improvement in technologies for wind generation include:
- Development of smaller and efficient turbines
- Wind turbines for low wind regime
- Designs of offshore wind power plants
The government has also notified a National Offshore Wind Energy Policy in October 2015, in order to exploit the large (over 7500 km long) coastline. This is expected to start providing electricity at no less time than 2019. A pilot project in Gujarat’s coastline of about 100 MW may be expected in that time. The possible addition of offshore wind capacity by 2022 is currently unpredictable.
Current situation in Wind Energy
The National Institute for Wind Energy's (NIWE) latest estimate for India's wind power potential is 302 GW at 100 meters. India targeted a wind capacity addition of 4000 megawatts (MW) in the 2016-17 time period. The good news is that this target has been successfully exceeded with an addition of 5400 MW. About 55 per cent of renewable energy capacity addition in this time period was wind power.
Moreover, capacity addition from conventional sources was actually lower than addition of renewable energy capacity in financial year 2017 (ending 31st of March, 2017). 10.2 gigawatts (GW) and 12.5 GW respectively. Moreover, about 25% per cent of conventional energy source capacity addition came from nuclear and hydro, or non-fossil fuel sources. While addition from conventional sources has remained more or less constant, addition from renewable sources has abruptly increased.
Some more good news is that while solar energy has come down to record significant lows in production cost per unit , sufficient to challenge the historic economical value of wind energy, wind energy itself has record lower prices. In February, 2017, it was reported that Mytrah Energy (India) Ltd, Sembcorp Industries and IDFC Alternatives-backed clean energy firm Green Infra Ltd, global private equity fund Actis Llp’s platform Ostro Kutch Wind Pvt. Ltd and Inox Wind Infrastructure Services Ltd bid Rs3.46 per kilowatt hour (kWh) to win contracts for 250 megawatts (MW) each.
The Capacity Utilisation Factor (CUF)-of wind power plants in India ranges from about 20% to over 30%. In April this year, Suzlon’s 120m 2.1 MW wind turbine generator achieved 42%, which is higher than their own previous performance.
Suzlon is a major player in the Indian wind power scenario, with 35 per cent of the country’s installations along with a R&D constituent. It is not inconceivable that their technology could bring up the average CUF of the country’s wind power projects.
The INDC is well on-track to be achieved and perhaps surpassed. Currently, we are past the halfway mark of 30 GW, with over 26 GW of capacity by March 2016. Even without a compound growth rate, the current rate of addition of 5.5 GW per year would give us nearly 60 GW of installed capacity of wind power.
Possible speed breaker
There are two major problems that worry experts in the wind energy sector.
1. Concentration of Possible Project Sites: The possible wind resources in various states vary wildly. Previous capacity addition shows that, for various reasons, wind power projects are concentrated in a few states such as Gujarat and Maharashtra and even these have only a few high capacity sites.
2. Failure in the sector: From April 1, 2017, the tax relaxation for infrastructure projects under section 80IA has already ceased. Further, wind power plants commissioned after this financial year are not eligible for generation based incentives. Accelerated depreciation will reduce from 80 per cent to 40 per cent.
A calculation on financial feasibility done by BusinessLine shows that a tariff of INR 3.46 per unit at prevalent industry conditions – Central Electricity Regulatory Commission (CERC) estimated project cost of about INR 6.2 crore per MW, debt to equity of 70:30, financing at 9.5-10 per cent – indicates that Plant Load Factors (PLFs) of about 33-35 per cent may be required to fetch investors reasonable returns of 15-16 per cent. Despite leaps in technology mentioned before, this is still not the current scenario.
What lies ahead
Wind power technology has not seen the massive drops in cost that solar power has. Going by past performance of even conventional energy sector in India, where both Tata and Adnani requested the right to compensatory tariffs when the price of imported coal was too high for their bid price, it is a possible scenario.
Wind energy has a bright future ahead in India, but the government has to seriously consider how to make the smooth transition from subsidies to a situation where the power projects can support themselves. This is not in itself an argument against replacing fossil fuels with wind energy, as fossil fuel energy like LPG are also heavily subsidized in India. More important to note is that wind energy can only truly be a major part of the electricity production in a few states and areas. The rest has to utilize either conventional fuels like hydro and fossil fuels, or move to nuclear and solar.
(This article has been written by Mohini Ganguly who is working as a Research Associate in CUTS International, under Centre for International Trade, Economics & Environment. She holds a Masters in Climate Change and Sustainability Studies from Tata Institute of Social Sciences (TISS), Mumbai)