Matching ambitions with reality

I am disappointed for three years. Till 2017-18  Indian wind energy was spanning its wings across the country very rapidly, so we were tremendously engaged in making turbines, developing sites and increasing wind energy contribution to the national grid year on year. 

Wind energy leaders in India, like Mr Tulsi Tanti, Mr Sumant Sinha was also projecting a promising growth picture for this energy sector for the long run. 

Then the transition came in, from Feed-in Tariff to Reverse Auction. Immediately companies joined a rat race to offer unpredictable lower prices to grab the order.

Up to this, it was good. It was as the survival of the fittest. In this course, Companies like Enercon India, Global Wind, ReGen Powertec, Nu Power and some other smaller companies almost overnight gone out of the Indian market. 

Those who were able to stay in business were on a spree to downsizing to reduce cost structure. Even after that wind energy sector of India was grasping severely for oxygen due to lots of lacunas in the new system.

The new system practically was a partially cooked dish served in a hurry.

Wind power can drive a green recovery in India

After working in a growth bound wind energy sector for about 22 years, I have understood the potential of wind energy in climate transformation in India. 

Being a developing country, despite the mega population, its energy consumption per head is low. It is 6,924 kWh per person per year comparing to 16,325 kWh in Brazil, 21,480 kWh in Argentina and 27,452 kWh in China. No need to mention the data of the USA and EU. They are more ahead in consumption.

As India is growing, the electricity demand will also be growing continuously. The projected electricity demand by 2036-37 shows a minimum of 100 per cent increase from the present status.

Lond term electricity demand forecast
Image by Debasis Gupta

The cleanest way to meet this demand is to build a lot of renewable energy parks. Though India now is actively working to build up a 10 GW nuclear plant (the world’s biggest one), it is not a safe source of energy in my opinion.

Wind energy (with other renewable sources) can do a lot in the green recovery of India. Wind energy has a clear potential to generate 302 GW at 100 m hub height onshore and 70 GW offshore as per the latest estimation.

Target of India

India has a great target in harnessing renewable energy. It has to install 175 GW by next year and 450 GW by 2030. 

Within these, 60 GW of onshore and 5 GW of offshore wind energy by 2022 and 140 GW of onshore and 30 GW of offshore by 2030 are the targets.

Though there is some progress made in onshore wind energy installation, neither onshore nor offshore is growing at a pace, to catch up with the immediate target.

The wind energy sector is suffering from a couple of critical challenges that are stopping its progress. It is most urgent to address them to reverse this slump and improve the growth pace. 

Some of the weak links identified by the industry insiders are as below:

Discoms is one of the weak links

 Distribution Companies (Discoms) are not in sound financial health and not paying the wind power developers their dues in time. The delay in payment is rolling over a year in many cases. Up to November 2020 ‘Discoms’ owed a total payment due of Rs.1,41,621 crore to the power producers. This amount is  35% higher than the amount that was due in November 2019 (Rs.1,04,426).

Looking at the situation, the Government of India is now supporting ‘Discoms’ by infusing additional funds. In addition, the government is also initiating steps to reform the distribution system. A competitive and customer-oriented framework of ‘discoms’ is in the making.

wind energy growth hinderance factors
Image by Debasis Gupta

Honouring contract is the next weak link 

Contract renegotiations by the Discoms to bring the tariff down are happening in many cases putting the entire contract sanctity in question.

Another issue is stuck off  PPA and PSA approvals on the table of Discoms for more than a year. Backlogs are creating anxiety for the developers as it would endanger the project viability. Total 16.8 GW of projects PPAs are awaiting approval as of September 2020.

Difficulty in accessing low-cost finance

Domestic developers are particularly in trouble because banks are declining to fund them, as they are not sure about the viability of the projects with a lower tariff.

Moreover, an interest rate of 10 per cent to 12 per cent and repayment tenure of 15-18 years is also adding to the financial risks for the domestic developers.

In the case of international investors, the situation is different. They are arranging loans at a much lower rate. Thus are less exposed to risk and are in a position to bid at a much lower tariff.

India needs a further investment of  $500 billion to build infrastructure, developing firms, transmission & distribution grids to materialise 450 GW by 2030.

The government and the Reserve Bank of India need to figure out an urgent solution to improve the lending situation to make funds available for domestic players.

Delays in land acquisition

Wind energy project needs about 0.75 acres of land per MW, and this land acquisition is a big challenge for the developers. Projects are location-dependent and limited to a couple of states only.

There is a lack of proper land utilization Policy, land ceiling limits. Proper land records are not traceable in cases. Land prices are not in control. And on top of it, difficulty in obtaining clearance from the local bodies etc. are playing as the major hindrances for executing large-scale wind energy projects.

We have seen this in the recent past. Some big projects were getting delayed, some auctions were also getting postponed or cancelled due to this hindrance.

Better understanding and coordination between regulatory bodies, transmission agencies, local government, landowners and project developers are needed to overcome it.

Mismatch in generation and transmission timelines

Transmission infrastructure is a critical area that takes a longer time to get in place. Often unavailability of access to grid connectivity delays the commissioning. Therefore impose a financial burden on the developer.

We have seen that auctions are getting postponed, projects are getting on hold as the transmission infrastructure is not made ready in time. 

Moreover, low grid capacity is a known issue in India, and due to this many times, forceful heavy curtailment in wind energy generation happens to lead to financial loss to the developer putting the project at risk.

The Ministry of Power (MoP) is chalking out a rule for giving ‘Must Run’ status for renewable power plants to address this curtailment issue. The ‘Discom’ would have to pay compensation for the curtailment.

Proper implementation of this rule may ease the situation for the developers to some extent.