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Wind Power in India Industry Information Insights

2013

Table of Contents 1. Role of Renewable Energy in Power Sector ........................................................... 1

2. Overview of Wind Energy Sector ............................................................................. 2

3. Wind Power Potential in India .................................................................................. 3

4. Wind Power Capacity Installation ............................................................................ 4

4.1 State-wise Wind Power Capacity ........................................................................... 5

4.2 Plan-wise Wind Energy Capacity Additions ........................................................... 5

5. Wind Power Policies & Incentives ........................................................................... 5

5.1 Accelerated Depreciation ....................................................................................... 6

5.2 Generation Based Incentive .................................................................................. 6

5.3 Renewable Energy Certificate (REC) .................................................................... 7

5.4 Central Fiscal Policy .............................................................................................. 7

5.5 Foreign Direct Investment (FDI)............................................................................. 7

5.6 Feed in Tariff.......................................................................................................... 7

5.7 Wheeling and Banking ........................................................................................... 7

5.8 Other Incentives ..................................................................................................... 8

5.9 Offshore Wind Energy Development ..................................................................... 8

6. Issues and Challenges .............................................................................................. 9

List of Figures Figure 1: Source-wise Installed Power Generation Capacity (March, 2013) ................... 1

Figure 2: Source-wise Share of Renewable Energy Capacity (March, 2013) .................. 2

Figure 3: Trends in Cumulative Growth in Wind Power Capacity .................................... 4

Figure 4: Issues and Challenges in Wind Energy Sector ................................................ 9

List of Tables Table 1: State-wise Wind Potential (MW) in India ........................................................... 3

Table 2: State-wise Installed Capacity of Wind (March, 2013) ........................................ 5

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1. Role of Renewable Energy in

Power Sector As of March 2013, India had an installed power generation capacity of 223.34 GW, of

which renewable energy sources accounted for 27.54 GW. Wind makes up the majority

of this installed capacity.

In the National Electricity Plan of 2012, the Central Electricity Authority (CEA) projected

the need for 350-360 GW of total power generation capacity by 2022. To achieve this

target and at the same time to use environmental friendly sources of power, renewable

energy will play a key role.

The 11th five-year 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.

Figure 1: Source-wise Installed Power Generation Capacity (March, 2013)

Figure 1 shows the share of different sources of energy in India’s total electricity

generation mix. The share of renewable energy increased from 7.8% at the end of FY08

to 12.3% at the end of FY13.

Mixed Targets for Renewable Energy

There is no uniform target for share of renewable energy deployment. Integrated Energy

Policy aims for only 6% share of renewable energy generation by 2032, the Ministry of

Thermal 68%

Nuclear 2%

Hydro 18%

RES 12%

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New and Renewable Energy has a target of 10% by 2022 and NAPCC has set 15% by

2020.

2. Overview of Wind Energy Sector Global wind capacity was about 282 GW at end of 2012. Capacity of 43 GW was added

during 2012 worldwide. India is the fifth largest wind energy producer in the world after

China, US, Germany and Spain. Wind capacity in India is completely installed at

onshore projects.

Wind is the most promising renewable energy source in India with installed capacity of

19.1 GW as of 31st March, 2013. It accounts for 68% of the total installed capacity of

renewable power. Small hydro power, bio-energy and solar energy constitute the

remaining capacity. Figure 2 shows the share of different sources in India’s total

renewable power installed capacity.

Figure 2: Source-wise Share of Renewable Energy Capacity (March, 2013)

Wind power is a mature and scalable clean energy technology where India holds a

domestic advantage. India has an annual manufacturing capacity of about 10 GW of

wind turbines.

Wind Power 68%

Small Hydro Power (SHP)

13%

Biomass Power 5%

Bagasse Cogeneration

8%

Waste to Power 0%

Solar Power (SPV)

6%

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3. Wind Power Potential in India In 2011, the Centre of Wind Energy and Technology (CWET) revised estimated onshore

wind energy potential in India from 49.1 GW (at 50 m hub-height) to 102.8 GW (at 80 m

hub-height) at 2% land availability. The maximum estimated potential is in the state of

Gujarat followed by Andhra Pradesh, Tamil Nadu and Karnataka. Table 1 gives state-

wise wind power potential in India at 50 m and 80 m hub height.

Table 1: State-wise Wind Potential (MW) in India

States / UTs At 50 m At 80 m

Gujarat 10,609 35,071

Andhra Pradesh 5,394 1,4497

Tamil Nadu 5,374 1,4152

Karnataka 8,591 1,3593

Maharashtra 5,439 5,961

Jammu & Kashmir 5,311 5,685

Rajasthan 5,005 5,050

Madhya Pradesh 920 2,931

Orissa 910 1,384

Uttar Pradesh 137 1,260

Kerala 790 837

Uttarakhand 161 534

Andaman & Nicobar 2 365

Chhattisgarh 23 314

Arunachal Pradesh 201 236

Bihar - 144

Pondicherry - 120

Assam 53 112

Sikkim 98 98

Haryana - 93

Jharkhand - 91

Meghalaya 44 82

Himachal Pradesh 20 64

Manipur 7 56

West Bengal 22 22

Lakshadweep 16 16

Nagaland 3 16

Dieu Damn - 4

Total 49,130 1,02,788

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Repowering Potential

Commercial wind power generation in India began in 1986. Many low-capacity wind

turbines (< 500 kW) were installed more than fifteen years ago and occupy some of the

best wind sites in India. These turbines can be replaced with more efficient, larger

capacity turbines so that more electricity can be generated from the same site.

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.

4. Wind Power Capacity Installation Wind power dominates India’s renewable energy portfolio and contributes about 68% to

installed capacity of renewable power. Wind power capacity has grown at a CAGR of

17.9% in the last six years from 7.1 GW in 2006-07 to 19.1 GW in 2012-13. Figure 3

shows the cumulative growth of wind power capacity in India.

Figure 3: Trends in Cumulative Growth in Wind Power Capacity

By the end of the 11th Plan period in March 2012, the total installed capacity had

reached a total of 17,351.6 MW. In 2012-13, wind capacity additions fell to 1.7 GW from

about 3.2 GW in 2011-12 as a result of withdrawal of accelerated depreciation and

generation based incentive scheme.

7.1

8.8

10.2

11.8

14.2

17.4

19.1

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Financial Year

CAGR 17.9%

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4.1 State-wise Wind Power Capacity

More than 95% of the India’s wind energy development is concentrated in just five

states in southern and western regions – Tamil Nadu, Gujarat, Maharashtra, Rajasthan

and Karnataka. Table 2 gives statistics for state-wise installed capacity in India at the

end of FY13.

Table 2: State-wise Installed Capacity of Wind (March, 2013)

States or UT Installed Capacity (MW)

Tamil Nadu 7,162.18

Gujarat 3,174.58

Maharashtra 3,021.85

Rajasthan 2,684.65

Karnataka 2,135.15

Andhra Pradesh 447.65

Madhya Pradesh 386

Kerala 35.1

Others 4.3

Total 19051.46

4.2 Plan-wise Wind Energy Capacity Additions

During the 10th Plan period (2002-07) the wind power capacity target set was of 1,500

MW whereas the actual installation was 5,427 MW. Similarly during the 11th Plan (2007-

12) period the revised target was for 9,000 MW and the actual installation was much

higher at 10,260 MW. Wind energy has exceeded the targets set for it under both the

tenth and eleventh five year plan periods.

In the 12th plan period (2012-17), the Ministry of New & Renewable Energy has fixed a

target of 15000 MW – 2500 MW in first two years, 3,000 MW in the third year and 3,500

MW in the last two years of the twelfth five-year plan.

5. Wind Power Policies & Incentives India needs comprehensive and long-term policy support to reach its potential and to

boost the necessary investment in renewable energy sector.

Prior to the Electricity Act, 2003, there were no specific provisions to promote renewable

or non-conventional sources of energy. The Ministry of New and Renewable Energy

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supported the sector by way of policy guidelines since 1995. The Electricity Act 2003

changed the legal and regulatory framework for the renewable energy sector in India. It

mandates policy formulation to promote renewable sources of energy by the Central

and State Governments.

Integrated Energy Policy of India also supports the renewable energy sector in India.

Chapter 7 (Policy for promoting renewable and nonconventional energy sources)

emphasizes the need to move away from capital subsidies towards performance

incentives for promoting renewable sources.

Wind power has low plant load factor as compared to conventional power projects.

Without supporting incentives, viability of power projects based on wind is not achieved.

Relying only on the feed-in-tariffs does not offer much hope.

Government incentives such as preferential tariffs and renewable purchase obligations

(RPO) support the wind energy sector. Recently, the government re-introduced the GBI

(Generation Based Incentive) scheme for wind power projects in August 2013. The

approval of GBI is expected to revive the wind sector that has been facing with issues

such as policy uncertainty and lack of incentives.

5.1 Accelerated Depreciation

Accelerated Depreciation for wind power projects was withdrawn from 1st April, 2012.

The Ministry of New and Renewable Energy is trying to re-instate the same in

consultation with the Ministry of Finance. At present, a total of 35% Depreciation is

allowed in the first year of the project (15% normal and 20% additional depreciation for

infrastructure project).

5.2 Generation Based Incentive

Generation Based Incentive (GBI) Scheme is offered by the central government since

June 2008 and administered by IREDA. It aims to steer the Indian wind energy sector

away from the simple capacity creation towards efficient electricity generation. Initially, it

was available for independent power producers with a minimum installed capacity of 5

MW for projects commissioned on or before 31st March, 2012. The incentive was set at

INR 0.50 per unit of grid-connected electricity generated for a minimum of 4 years and a

maximum of 10 years, up to a maximum of INR 6.2 million per MW.

The GBI is offered in addition to SERC’s state preferential renewable energy tariffs

(feed-in-tariff). However, IPPs using GBIs cannot also take advantage of accelerated

depreciation benefits.

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The GBI scheme was lapsed at the end of FY12 and was reinstated in FY13. The

revised scheme also provides incentive of INR 0.5 per unit of electricity generated from

projects registered under the scheme. The capping on the incentive has been increased

to INR 10 million per MW and can be drawn between 4 and 10 years.

The main objectives of GBI scheme are:

- To increase the investor base and create a level-playing field

- To incentivize higher efficiencies

- Facilitate entry of independent power producers and foreign investors

5.3 Renewable Energy Certificate (REC)

Renewable Energy Certificate (REC) is a tradable certificate where one certificate is

equal to 1 MWh of wind energy generated. It is purchased by Distribution companies,

Open Access and Captive Consumer to fulfill their renewable purchase obligation

(RPO). The floor and forbearance price of one non-solar REC is INR 1,500 and INR

3,300 respectively.

5.4 Central Fiscal Policy

Exemption on the tax on income from the sale of power for 10 years under 80 I A of the

Income Tax Act. Wind sector is eligible for exemption from excise duty. Certain wind

turbine components have custom duty concessions.

5.5 Foreign Direct Investment (FDI)

100% FDI is allowed in wind power sector through the automatic route. It has helped

greatly in bringing investment to the wind projects especially after introduction of the

Generation Based Incentives.

5.6 Feed in Tariff

Thirteen states have announced preferential feed in tariff for purchase of electricity

generated from wind power projects. The present feed-in tariff varies from INR 3.51 to

INR 5.92 per unit.

5.7 Wheeling and Banking

Wind sector provides favorable provisions for wheeling, banking and third party sale of

wind power. Wheeling charges for the different states are in the range of 2% (Madhya

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Pradesh and Maharashtra) to 7.5% (West Bengal). The states of Karnataka, Tamil

Nadu and Andhra Pradesh charge 5% of the total energy fed to the grid.

Tamil Nadu and Karnataka allow 5% and 2% of the total renewable energy fed to the

grid as bankable energy and can be availed anytime during the financial year.

Rajasthan and Maharashtra provide 6 months and 12 months of banking period

respectively. The state of Andhra Pradesh doesn’t permit banking.

5.8 Other Incentives

Electricity Duty

Renewable energy projects are exempted from electricity duty by state governments.

VAT

Some states have reduced or no VAT (Value-added tax) on renewable energy

components. Tamil Nadu has reduced VAT from 14.5% to 5% and Karnataka offers

5.5% VAT for all the renewable energy components. Gujarat, Tamil Nadu and

Maharashtra offer 5% VAT for all renewable components.

Capital Subsidy

Maharashtra has the provision for capital subsidy to the extent of 11% for wind energy

projects set up by the cooperative sector. Rajasthan provides soft loan equal to one-

third of the capital cost at low interest rate.

5.9 Offshore Wind Energy Development

India has a long coastline of over 7500 kilometers. In April 2012, the Ministry of New

and Renewable Energy constituted an offshore Wind energy Steering Committee 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.

The Ministry of New & Renewable Energy released draft national offshore wind energy

policy in May 2013. It identified offshore wind energy potential along the coasts of Tamil

Nadu, Gujarat and Maharashtra.

Preliminary estimates suggest wind energy potential off Tamil Nadu coast alone at 127

GW at 80 m height.

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6. Issues and Challenges Wind energy sector in India is facing number of issues such as 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, delays in acquiring land and obtaining statutory clearances.

Figure 4: Issues and Challenges in Wind Energy Sector

High financing costs (12 to 13% interest rate) is also a challenge to increase

investments in Wind energy sector. Majority of wind power projects are developed with

a 70:30 debt-equity ratio as a project financing method.

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