By Sarthak Takyar
The government has been proactive in reviving the wind power segment over the past few years, restoring it to its former glory when it received substantial support from the government through feed-in tariffs, generation-based incentives and accelerated depreciation. In the past year, two key policy initiatives stood out in this segment. These were the transition from competitive bidding to closed bidding, and the release of a strategy for the promotion of the offshore wind segment.
Apart from this, 2023 was the deadline for several initiatives undertaken in the wind segment. For instance, in order to provide relaxations on account of Covid-19, the part commissioning of wind power projects with a capacity of 10 MW or more under Solar Energy Corporation of India (SECI) Tranches II-VIII was permitted till March 31, 2023 (with an additional time extension of up to three months beyond the scheduled commissioning date). Furthermore, based on the Ministry of New and Renewable Energy’s (MNRE) recommendation, concessional customs duty benefits for several wind turbine components were extended till March 31, 2023.
Renewable Watch provides an overview of the key policy initiatives in the past year, cost economics trends and the future outlook for the wind power segment…
Transition to closed bidding
A key policy change from the MNRE was the revision of the auction process for wind energy projects – from reverse auctions to closed bidding. Under this mechanism, bids for a cumulative capacity of approximately 8 GW will be issued each year from January 1, 2023 onwards, until 2030. Further, to ensure the development of wind energy capacity in all eight windy states, each bid will be composite, consisting of state-specific sub-bids for each state. The generated power from the capacity established via each of the state sub-bids will be pooled and offered at a pooled tariff to all procurers. The pooling process will be as per the Electricity (Amendment) Rules, 2022.
Moreover, the bids will be conducted on a single-stage two-envelope closed-bid basis. One envelope will contain the technical bid and the other will contain the financial bid. The envelope containing the technical bid will be opened first, and only the financial bids of those who qualify in the technical bid will be opened. In addition, the bids will specify the capacity to be installed and each sub-bid will be specific to one state. The cumulative size cap for any one of the eight states in one year will not exceed 2 GW. SECI or implementing agencies may determine the minimum and maximum bid size, based on the states’ wind renewable purchase obligation targets. Further, SECI will issue bids with a cumulative capacity of approximately 8 GW every calendar year from 2023 up to 2030. Finally, the necessary amendments to the guidelines for the tariff-based competitive bidding process for the procurement of power from grid-connected wind power projects for this purpose will be notified separately.
Strategy for offshore wind development
On August 17, 2023, the MNRE released a revised strategy for the development of offshore wind energy projects in India. The policy provides a framework for offshore wind power development up to a seaward distance of 200 nautical miles from the country’s exclusive economic zone. To facilitate the development of offshore wind farms in the country, three models have been proposed.
Under the first model, development will be undertaken in demarcated offshore wind zones where the MNRE and the National Institute of Wind Energy (NIWE) have conducted detailed studies and surveys, supported by viability gap funding (VGF) from the central government. The NIWE plans to develop 1 GW capacity zones off the coasts of Gujarat and Tamil Nadu under this model. In Phase I, bids will be invited for identified zones in Gujarat and Tamil Nadu, for 0.5 GW of capacity each.
Under the second model, offshore wind power projects will be developed for open access/captive/third-party sale without any VGF assistance from the central government. The MNRE and the NIWE will initiate a competitive bidding process for the provisional allocation of identified offshore wind energy sites to interested developers for a period of two years on a lease basis. The allocation will follow a single-stage, two-envelope bidding process. Each offshore site will have a minimum installed wind power capacity requirement.
Under the third model, developers can identify offshore wind sites within the exclusive economic zone in Gujarat and Tamil Nadu, excluding sites considered under Model A and Model B, and submit proposals to the NIWE for conducting studies and surveys. Subsequently, the government will initiate a bidding process to allocate the seabed.
Recently, the MNRE released proposals for the development of offshore wind energy under Model B and Model C. Further, the government is currently working on a 4 GW tender of four sites off the coast of Tamil Nadu under Phase I of Model B. The tender is expected to be floated on December 1, 2023. Bids for an additional 3 GW under Phase II are expected to be invited in 2024-25. Overall, the government plans to develop around 14 GW of offshore wind capacity across 13 sites in four zones in Tamil Nadu by 2027-28 under the open access model.
Cost trends
MEC Intelligence has conducted a comparative analysis of original equipment manufacturers of wind turbines that manufacture, import components and assemble in India, as well as local manufacturers in China. According to their analysis, Chinese turbines are considered the most cost-effective in the global market. This is because the wind industry in China has invested heavily in manufacturing technology, and raw materials are domestically available at lower rates compared to other regions. As a result, the cost of turbines ranges from Rs 34 million-Rs 38 million per MW, which is almost 30 per cent lower than the cost of locally assembled Indian turbines (Rs 46 million-48 million per MW). Meanwhile, wind turbines manufactured in India are the most expensive, ranging from Rs 56 million-Rs 63 million per MW. In terms of the entire project cost, the National Electricity Plan (NEP) 2023 (Volume 1, Generation) estimates the capital cost of wind power plants to grow at a compound annual growth rate of 2.64 per cent, going from Rs 61.6 million per MW in 2022-23 to Rs 77.9 million per MW by 2031-32.
Future outlook
According to the Global Energy Wind Council (GWEC) India, the country will install 26.2 GW of onshore wind capacity between 2023 and 2027, reaching 68.1 GW by 2027 in this ambitious scenario. The 26.2 GW is divided into 23.4 GW from central and state tenders and 2.8 GW from the commercial and industrial (C&I) segment. Of the 23.4 GW capacity, 12.5 GW is from the existing pipeline (including 400 MW of tender cancellations) and 10.9 GW from new tender awards. GWEC India projects that, in the base case, India will install approximately 21.7 GW of wind capacity (19.4 GW from central and state tenders, and 2.3 GW from the C&I segment), reaching a cumulative installation of 63.6 GW by the end of December 2027. Meanwhile, in the conservative case scenario, cumulative installations are expected to reach 59.3 GW during the same period.
The Central Electricity Authority’s NEP 2023 estimates are more ambitious, predicting that wind installations will reach 72.9 GW by 2026-27 and 121.9 GW by 2031-32 in the base case. The installations remain the same in scenarios with high hydro, high battery storage and high energy demand but reduce to 61.4 GW by 2026-27 and 92.1 GW by 2031-32 in the conservative scenario.
While it is important to have a clear projection of wind installations in place for investor confidence, it is essential to note that the segment has experienced low capacity additions for several years (often lower than 2 GW per year). As of October 31, 2023, the installed wind power capacity in India reached 44,292.38 MW. Capacity additions for the segment have been slow, with only 1,659.25 MW added during April-October 2023. This is less impressive when compared to the capacity addition of 5,237.7 MW for solar during the same period.
The cumulative installed wind capacity is also low vis-à-vis the potential in the country. In a written reply to the Rajya Sabha on August 8, 2023, the union minister for power and new and renewable energy stated that India’s estimated wind power potential is about 695.5 GW at 120 metres and 1,164 GW at 150 metres above ground level.
Therefore, the wind power segment has a long way to go. In order to accelerate progress, it is imperative that the issues faced in the onshore segment (such as fewer high-wind sites, slow progress in repowering, inaccurate forecasting and scheduling, and land and transmission challenges) are addressed expeditiously.
Nguồn: https://renewablewatch.in/2023/12/06/reviving-wind-policy-push-to-promote-segment-growth/