The Windy Subcontinent
Wind energy in India
As the 3rd largest annual wind power market in the world, India can provide great business opportunities for domestic and foreign investors. The sector experienced record annual growth in 2011 with more than 3 GW of new installations added. Diverse incentives supported by a long-term policy and regulatory framework at the central and state levels have played a crucial role in achieving this goal. Wind power has been long recognized as a clean and renewable energy source in India.
India’s energy demand is on a constant rise, with electricity demand expected to triple between 2005 and 2030. In March 2012, renewable energy comprised about 12.2% of total installed capacity, from 2% in 1995. About 70% of installed capacity consists of wind energy; in August 2012, wind power installations reached 17.9 GW.
According to India’s 12th five year plan period (April 2012 to March 2017), the target to be reached in new capacity additions ranges between 15,000-25,000 MW and for a grid interactive wind power of 11,000 MW. Long-term support policies are essential for India to invest in renewable energy to reach its potential and to maintain a high level of effectiveness.
Wind installations by state
Wind installations are mostly situated in the states of Tamil Nadu, Karnataka, Maharashtra and Gujarat, with Rajasthan, Madhya Pradesh and Kerala on the rise. In March 2012, total installed capacity had reached a total of 17,351.6 MW. More than 95% of the sector’s development is concentrated in the states of Tamil Nadu, Karnataka, Maharashtra, Andhra Pradesh and Gujarat, located in southern and western India, accounting for more than 85% of total installed capacity after the last plan period.
An Offshore Wind Energy Steering Committee was created in April 2012 to deal with development of offshore wind energy. With a coastline of over 7,500 km the most promising areas are the coastline states of Andhra Pradesh, Gujarat, Maharashtra, Odisha, Kerala, Karnataka, West Bengal and Tamil Nadu.
Need for replacements
The oldest wind turbines, some of them dating back to the late 1980s need to be replaced with larger and more efficient machines. Re-powering the old turbines has the advantage of generating more energy from the same site, with an estimated potential of around 2,760 MW. There is, however, a lack of much needed policy guidelines and incentives, effective on a national or state level.
Barriers to growth
An important challenge for India is how to maintain and augment the growth of its wind power capacity. Targets have been met in the past and have been exceeded with a record of 3.1 GW installed in 2011-12. The 12th Plan approach considers that for 9% GDP growth per year an energy growth of 6.5% per year during the five year period is required. Wind power manufacturing and resource potential face several barriers that do not permit to reach higher growth, such as: the lack of regulatory framework to facilitate energy exchange between states; difficulties in obtaining statutory clearances to acquire land to build the structures: high borrowing costs; and the reduction of federal benefits due to the global economic slowdown. Despite these obstacles, the wind sector has a very high job creation potential with the growth of the domestic industry that brings high demand for trained manpower.
Laws and incentives
The 2003 Electricity Act changed the legal and regulatory framework for India’s renewable energies, which previously had no specific regulation. It mandates the promotion of renewable energy sources by the federal government, state governments and respective agencies. Regulatory and policy incentives are envisaged, such as tax reductions, facilitations for Foreign Direct Investment (FDI) in renewable energies, and favorable provisions for wheeling, banking and third party sale by wind power producers.
The wind energy sector fell in 2012 due to the scrapping of the Generation Based Incentives (GBI) scheme where companies obtain a financial incentive per unit of electricity generated. Wind power developers are therefore shying away from investing and have been campaigning for bringing back the GBI. The accelerated depreciation (AD) scheme, whereby a company can write off 80% of the project value in the first year as depreciation thus reducing tax payout, is also sought after by wind power developers.
Investing in wind power
In 2011, India invested about $10.3 billion in clean technologies, comprising 4% of the world’s investments in that sector. Of that sum about $4.6 billion was invested in wind energy. However, after that record year, 2102 saw a reduction of investments in renewable energies worldwide, despite an increase in wind and solar energy installations, mainly due to price reductions with repercussions on the Indian market as well.
To achieve sustained growth in the wind sector, government subsidies and private investment for wind energy projects are needed. Direct subsidies, involving large amounts of financing could be substituted with interest subsidies for debt, enabling the government to contribute more easily through smaller investments. Governmental participation is also important to ensure the timely payments for wind project developers to receive funds for the energy they produce.
Scenarios for growth for 2020 and 2030
According to the International Energy Agency (IEA), the Indian wind market will shrink from 3,000 to 1,900 MW per year by 2020. Total installed capacity will be of 32 GW by 2020 and 66 GW by 2030. Investments will regress from a current €3.7 billion per year to €2.4 billion by 2020.
Global Wind Energy Outlook (GWEO) scenarios are more optimistic with about 59 GW of installed wind capacity by 2020 and 124 GW by 2030, while investments will be of around €5.3 billion per year by 2020 and €8.3 billion in 2030, with over 98,000 new jobs by 2020 and over 126,000 in 2030. By 2030 wind power should be responsible of generating nearly 504 TWh yearly, thus avoiding the emission of around 304 million tons of CO2 every year.
For achieving sustained growth in the wind sector subsidies and investment for wind energy projects are needed.
One major challenge for the future will be increasing energy access to India’s growing population. According to the 2011 national census, around 75 million rural households lack access to electricity, while 95% of urban households have access to electricity, although the service is not always guaranteed. Wind energy can be a way to offer Indian citizens access to clean and affordable energy while contributing to poverty reduction and economic growth in the country.
Download the report here
Edoardo De Silva, Lubomir Mitev and Rajnish Ahuja contributed to this article which is based on the report India Wind Energy Outlook 2012 by the Global Wind Energy Council (GWEC), the World Institute of Sustainable Energy (WISE), and the Indian Wind Turbine Manufacturers Association (IWTMA), presented at the Wind Power India 2012 conference held in Chennai, India, on November 28-30, 2012.