Wind Power Industry In India

A Snapshot
 Contents
Basics – Wind power & industry

Regulatory framework – Indian RE power industry

Benefits – General & business

Demand - Supply – Power in India

Incentives Schemes – Central & state governments

Wind power as a business – Revenues, business model, concerns

Way forward – Opportunity for Soma, contacts, tentative costs (initial budget)
 Basics
Wind Power & Industry
• Wind is the natural movement of air across land or sea, caused by uneven heating
and cooling of the earth's surface and by earth's rotation
• Wind electric generator converts kinetic energy available in wind to electrical
energy by using rotor, gearbox and generator
• Wind power is one of the fastest growing energy sources in the world
• Cleanest and most practical option, for power generation
• Global warming forcing countries
to generate clean power
• Regulatory policies at central and
state level are shaping towards
promoting clean power generating
• Even international are being
framed towards supporting and
sustaining greenl projects
 Quick facts
Indian Wind Power Industry
• Expected to deliver at least 10% of the world’s energy production by 2020
• Potential of 48561 MW across India considering only 1% of land availability
• Wind installed capacity, over 14000 MW till date (fifth in the world)
• Only country in the world to have a dedicated Ministry of New and Renewable
Energy (MNRE)
• Fairly evolved processes and policy framework
• Several established turbine manufacturers, consultants functioning in India.
• Turn-around time of less then one year from concept to commission
 Regulatory Framework
Indian RE Power Industry
• Ministry of New and Renewable Energy (MNRE) – Central authority for all policies,
regulations and approvals relating to renewable energy.

• Central Electricity Regulatory Commission (CERC) - deals with the national grid and
inter-state transfer/trading of power,

• State Electricity Regulatory Commission (SERC) - manage regional distribution and

transmissions. They play a key role in the promotion of renewable energy as they
have the sole authority to ascertain the feed-in tariffs and other policy matters,
such as the Renewable Portfolio Standard (RPS).
 Regulatory Framework
Indian Power Industry …Cont.
• Energy Development Agencies (EDAs) - represent the MNRE at the state level. Their
main purpose is to assess and promote renewable energy frameworks for
individual states, and to advise the MNRE, state governments and SERCs.

• The Indian Renewable Energy Development Agency (IREDA) promotes financial

assistance for renewable energy and energy efficiency projects in India.

• C-WET – center for Wind Energy Technology – entrusted with carrying out Research
and development in the field of wind power
 Benefits - general

• Reduces climate change and other environmental pollution

• Cheapest source of electrical energy
• Can be utilized as a shield against increasing power prices.
• Fuel source is free, abundant and inexhaustible
• Creates employment, regional growth and innovation
• It can be tapped from almost any where, even most
remote of locations
 Benefits - business
• Least equity participation required, as well as low cost debt is easily available to
wind energy projects.
• A project with the fastest payback period.
• A real fast track power project, with the lowest gestation period; and a modular
concept.
• Low Operation and Maintenance
(O&M) costs
• No marketing risks, as the
product is electrical energy.
• Promotional incentives from
central, state governments in
India
• Potential revenue from Certified
Emission Reductions (CERs)
 Demand
Power in India
• Per capita energy consumption in India is currently at 631 KWH per annum.
• India constantly growing at over 7 to 8% annually. Power production needs to
pace up to fuel this growth
• Expected to touch 1000
KWH per annum by 2012
• 11th five year plan aims to
add 79000 MW to current
capacity
• Power generation needs to
be more than double the
current capacity to fuel the
power needs by the year
2020
 Supply
Power in
India (wind)
 Incentives
Central Government
• Under the Income Tax Act, the Govt. of India permits 80% Accelerated Depreciation
on specified Non Conventional Energy Devices / Systems (including wind power
equipment) in the first year of installation of the projects.
• A ten year tax holiday has been allowed in respect of profits and gains of new
industrial undertakings set up anywhere in India for either generation or for
generation and distribution of power.
• The Govt. of India has announced Generation Based Incentive (GBI) @ 50 paisa per
KWH in respective of developers who are not availing accelerated depreciation
benefit as per MNRE lr no. 53/1/2008-WE dated 17/12/2009. This scheme is not
applicable for third party sale and merchant plants but is applicable for Captive
power generation
• The RPS – renewable portfolio standard announced by the government shall
guarantee sale of RE power generated for at-least next 10 years
• Soft loans from IREDA at lower interest rates (approx 11.75 to 12.9%), along with a
moratorium of 1 year and repayment period of 10 years
 Incentives
State Government (Andhra)
• Each Eligible developer may be allocated available Govt. land to harness upto a
maximum of 200 MW of wind power initially. After commissioning of 100 MW
capacity Wind farms in 1st stage in the allocated Govt. land, the Government may
allocate land for another 100 MW capacity Wind Farms. The application from the
developers for Government land will be considered on a first-cum-first-served
basis.

• The state Government has permitted DISCOMs to offer Rs.3.50 / KWH for wind
power projects for 10 years from the date of commissioning of the projects, subject
to obtaining the consent of AP Electricity Regulatory Commission. The tariff for the
period 11th year to 20th year shall be as fixed by APERC.

• The DISCOMS (distribution companies) shall have the first right of refusal on Power
Purchase if the Plant continues to operate after the 20th year of operation from
COD. The tariff beyond 20th year shall be as mutually agreed by both the parties
(company & discom).
 Incentives
State Government (All States)

State Incentives -
Wind Power
 Wind Power as a Business
Potential Revenues
• Tariff –
– Varies from state to state (generally ranges from INR 3 to 5 per KWH
– Tariff regulated for at-least 10 years from date of commissioning by a Power Purchase
Agreement (PPA)
– Higher tariff could be charges in case of merchant selling of generated power
• Generation based incentive
– It is INR 0.50 per KWH
– Applicable only to generating companies who do not claim the accelerated depreciation
of 80%
• REC –
– It is approximated at INR 1.5 per KWH (not yet finalized)
– It is applicable in case state tariff are not followed
• CER –
– It is approximately EURO 8 per CER (Approximate)
– One CER is awarded for 92% of each MW power sold (Approximate)
 Wind Power as a Business
Business Model

Cost of setting
up wind power
projects cost in
the range of
INR 7 to 8 Crore
per MW
 Wind Power
GENERATION (MW)
Generation in India

YEAR
 Wind Power as a Business
Concerns
• Clarity in Grid Code yet to be achieved. Leading to difficulties in integrating
wind power efficiently with the grid, resulting in low capacity utilization factor.
• Many people find them loud and unsightly.
• Even the most advanced turbines can extract only a maximum of 45 percent of
the wind’s energy.
• Major reliability on unpredictable source of power makes it difficult to rely on
power availability and hence asks for large capacities of stand-by power
• Land acquisition, costly and complicated
VIKRAM PAREKH
vvparekh@gmail.com