India’s waters to power its wind energy?

Despite India’s enormous wind energy potential, its wind power sector continues to face multiple obstacles in its quest to achieve 60 GW out of the Government of India’s (GoI) renewable energy target of 175 GW by 2022. In the long term, new opportunities such as repowering, hybrid projects, offshore wind, and corporate PPA’s can help scale up India’s wind power capacity and deliver affordable, clean energy across the country.

•  Wind power has has been unable to meet its annual targets since FY 2017-18. This is because most capacity addition since FY 2018-19 has been based on solar plants – a trend IEA expects to continue well into 2021 and 2022.
• Execution challenges, a tight financing environment, and regulatory delays in tariff adoption are slowing down the pace at which new wind power plants are being commissioned.
• To bridge the gap in its climate action targets, GoI is looking towards offshore wind energy, backed by the potential of India’s abundant coastline of about 8,118 km and ~2.3 million sq. km of exclusive economic zones (EEZs).
• This blog explores whether offshore wind energy is a viable solution for India’s struggling wind power sector, given that offshore wind presents its fair share of challenges (such as lack of infrastructure & lack of skilled manpower) that have so far delayed its commercial launch in India.

Image credit: Pixels

India has the 4^th highest wind power installed capacity in the world, which had reached 39.25 GW (as of 31 March 2021), and has generated around 60.149 billion units during FY 2020-21, as published by the Ministry of New and Renewable Energy (MNRE), GoI. As reported by CRISIL in January 2021, capacity addition in FY 2021-22 is estimated to have dampened owing to the constraints on construction-related activities stemming from the COVID-19 virus outbreak. As a result, instead of meeting the projected 3.3 GW of wind energy capacity in 2020, India only managed to install 1.1 GW, with the balance capacity carried over to 2021 or given up by developers.

The pandemic-induced supply chain disruptions, labor availability issues, and execution delays may prevent India from achieving GoI’s ambitious target of 175 GW of overall renewable capacity, including 60 GW of wind power capacity, by over 50 GW. While utility-scale solar grid capacity targets of 60 GW are close to being met, rooftop solar and wind targets are lagging. However, the International Energy Agency (IEA) is more optimistic. It expects India to create new records in adding renewable energy capacities in 2021 and 2022, given that pipeline projects have been awarded but not yet commissioned due to COVID-19 disruptions would likely be cleared.

While this is positive for India’s overall renewable targets, most capacity addition since FY 2018-19 has been based on solar plants – a trend IEA expects to continue well into 2021 and 2022, backed by foreign capital and investments by large domestic conglomerates, such as Reliance, Adani, etc. However, wind – which predates solar energy in India – has failed to meet its annual targets since FY 2017-18, i.e., since pre-COVID days, and has struggled to retain stakeholder confidence in recent times.

Wind power: Against the trade winds

A recent assessment by the National Institute of Wind Energy (NIWE) indicates a remarkable gross wind energy potential of 302 GW in India at 100 m and 695.50 GW at 120 m above ground level, with over 95% of this potential concentrated in 7 windy Indian states.

Wind energy potential by states

Source: MNRE, Wind Energy, Overview

Yet, the sector is limited by various execution challenges like a slow economy, record low tariffs, tariff caps, curtailments, and numerous other duties and tariffs. Further, while COVID-19 has slowed down progress, the sector’s struggles have persisted since pre-COVID days. During FY 2019-20, execution challenges, grid curtailment issues and payment delays from distribution companies (DISCOMS) had already turned investor sentiment towards the sector negative.

These challenges slowed all tendering activity, with no wind power project awarded post-August 2019 during FY 2019-20. In fact, recently CRISIL reported that payment risks have resurfaced due to the poor financial health of DISCOMs with 4 key Indian States – Madhya Pradesh, Maharashtra, Rajasthan and Andhra Pradesh, resulting in further uncertainty and volatility for wind power producers. Industry experts all agree on the root cause for this negative momentum and declining financial health of the sector: the transition from feed-in-tariffs (FiT) mechanism to tariff-based competitive bidding process introduced by GoI in 2017 for wind power projects and related allocations. This regulatory shift has led to further aggressive lowering of tariff rates, multiple revisions to tariff regimes (causing more unpredictability), squeezing of margins for Original Equipment Manufacturers (OEMs) of wind energy equipment, and financial distress for wind power developers in the following years. CRISIL comments:

This [competitive bidding route] has caused realizations to fall across the value chain with both developers and OEMs reeling under the increased pressure to execute projects at such tariffs […] developers are facing increasing difficulties in tying up adequate quality wind sites coupled with connectivity, prior to bidding […] developers tying up adequate land, with prior wind resource assessment, to ensure rationality while bidding.

CRISIL highlights that another major concern is securing adequate land of suitable quality through proper wind resource assessments to ensure rational bidding at appropriate tariff rates. Given the intermittent and site-specific nature of wind as an energy source, extensive wind resource assessments for potential ‘wind sites’ are critical. However, the most suitable wind sites in India have already been allocated, many of which are presently operating at low generation capacity due to aggressively low and unfeasible rates for project execution and/or operation.

In such a risky scenario, developers and investors opt for solar power, perceived to be a relatively safer venture, instead of investing in newer technologies for wind capacity addition or for repowering existing, underperforming wind sites, leading to grossly underutilized wind power assets.

GoI’s offshore wind policy and roadmap

Offshore wind energy is wind power generation from the deployment of wind farms inside water bodies, which then utilize sea winds to generate electricity. Such offshore wind farms may use fixed-foundation or floating turbines.

India began exploring opportunities in offshore wind energy in 2015, with the notification of National Offshore Wind Energy Policy of 2015, which provides for preliminary wind resource assessments, oceanographic surveys, etc. by NIWR for demarcation of offshore wind sites, along with encouraging private participation and collaboration. GoI has long recognized that India is endowed with a coastline of about 8,118 km surrounded by water on three sides and has good prospects of harnessing offshore wind energy. In fact, MNRE has set a target of 5.0 GW of offshore wind installations by 2022 and 30 GW by 2030 – issued with the objective of boosting confidence to project developers in the sector.

GoI also acknowledges that land resources for onshore wind projects are becoming increasingly scarce and given the exhaustion of the best onshore wind sites, believes that offshore wind energy offers a plausible alternative source of wind power. To this end, NIWE has identified potential wind sites from the coast of Gujarat and Tamil Nadu with a collective 70 GW of technical potential. Following the 2015 Policy, NIWE has issued ‘Guidelines for Offshore Wind Power Assessment Studies and Surveys’ which permits private investors to conduct independent offshore wind resource assessments.

In 2021, NIWE is also gearing up to install 5 LiDARs (Light Detection and Ranging) which would be used to collect precise reliable data critical to developing offshore wind projects. Moreover, MNRE has even approved 100% foreign direct investment for offshore wind energy projects. These encouraging measures bolster the GoI policy objective of boosting industry and investor confidence towards offshore wind energy as a prudent alternate source of wind power generation. Presently, MNRE is pursuing feasible cost interventions from stakeholders for the first offshore wind project in Gujarat, while the apt frameworks for offshore PPAs and auctions are being evaluated by appropriate authorities.

Is offshore wind a viable end-all solution?

In India, where land is growing scarcer day by day and given its peninsular topography, offshore wind farms would be vital. In fact, given the lack of obstruction over sea along with wind speed over water bodies, it is also proven that offshore turbines are more efficient and generate more electricity per installed capacity than onshore turbines. While offshore turbines may be costlier per unit than their onshore counterparts, fewer offshore units would be required to generate the same capacity as a larger number of onshore turbines.

At the same time, offshore wind presents its fair share of challenges that have so far delayed its commercial launch in India. GOI is presently working on the technical and regulatory aspects of this sector. Further, infrastructure and labor issues should also be considered, such as the unavailability of local substructure manufacturers, installation vessels, and trained workers in India.

Offshore wind turbines also require stronger foundations and structures than onshore turbines which results in higher installation costs and can shoot offshore wind tariffs way over the prevailing low onshore tariffs. Another major concern is the regulatory clearance process(es), which may involve the go-ahead of various ministries and departments – this may turn into an arduous and time-consuming process, causing delays and overruns.

It is however noteworthy that, globally, offshore wind has been less impacted than most energy sectors by the COVID pandemic and thus, may prove to be a crucial part of the green recovery package. According to Global Wind Energy Council (GWEC), the COVID pandemic will not significantly impact the global outlook of offshore wind, due to longer project timelines and concentration of installations in the latter half of the decade. GWEC also provides an optimistic outlook for India’s offshore wind:

As a clean, affordable, scalable and sustainable indigenous resource, offshore wind can become an important pillar for India to meet its power demand and wider strategic energy aims.

But one cannot blindly treat offshore wind as the end-all solution to all the challenges faced by the Indian wind sector. But the short-term outlook for the sector is looking bright. In fact, in a joint report by GWEC and MEC Intelligence, India is expected to add 20.2 GW of new wind power capacity between 2021-2025, triggering a growth of 50%, driven by hybrid projects, corporate procurements, and state markets, all of which are untapped but popular avenues. The report however does not discuss offshore wind’s contribution during 2021-2025.

Post-2025, the sector is expected to offer multiple green avenues, including an established offshore wind sector, as well as repowering, and developing India as a wind export hub, along with the largely untapped potential of the largest commercial and industrial consumers in India. In the long term, new opportunities such as repowering, hybrid projects, offshore wind, and corporate PPA’s can help scale up India’s wind power capacity and deliver affordable, clean energy across the country. In this scenario, the GoI’s plans to establish a lofty renewable energy capacity of 523 GW, with a 140 GW target for wind power capacity, by 2030, has a ‘windy’ but hopeful route ahead.