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Wind Power in India

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Overview of wind energy sector, Wind power potential and installed capacity, Wind Power Policies & Incentives, Issues and Challenges

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Wind Power in India

  1. 1. EnergySector.in Wind Power in India Industry Information Insights 2013
  2. 2. 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
  3. 3. 1 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%
  4. 4. 2 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%
  5. 5. 3 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
  6. 6. 4 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%
  7. 7. 5 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
  8. 8. 6 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.
  9. 9. 7 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
  10. 10. 8 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.
  11. 11. 9 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.
  12. 12. E-Mail us at mail@energysector.in Energy Sector Information Service 133-D, Mayur Vihar Phase – II Delhi – 110 091 (India) Phone: +91-95603-66515 Information is the key to success

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