The current generation mix in India is dominated by coal (78.5 GW), large hydropower (36.9 GW) and gas (16.4 GW). Renewable sources rank fourth with an installed capacity of around 13.2 GW.
Despite the massive capacity additions, the Indian government is struggling to keep up with growing demand. The IEA predicts that by 2020, 327 GW of power generation capacity will be needed, which would imply an addition of 16 GW per year. This urgent need is reflected in the target the Indian government has set in its 11th Five Year Plan (2007-2012), which envisages an addition of 78.7 GW in this period, 50.5 GW of which is coal).
The total potential for wind power in India was first estimated by the Centre for Wind Energy Technology (C-WET) at around 45 GW, and was recently increased to 48.5 GW, and adopted by the government as the official estimate.
In addition, the government recently announced that it would soon be coming out with revised wind atlas which would include measurements in an increased number of states.The C-WET study was based on a comprehensive wind mapping exercise initiated.
However, only 9 states were included in this exercise and the wind measurements were carried out at relatively low hub heights (50 m). At greater heights, the Indian Wind Turbine Manufacturers Association (IWTMA) estimates that the potential is around 65-70 GW, and World Institute for Sustainable Energy, India (WISE) considers that with larger turbines, greater land availability and expanded resource exploration, the potential could be as big as 100 GW.
Steady market growth for wind
Wind energy is continuing to grow steadily in India, with a wind power capacity of 7,926 MW added in the last five years, taking the total installed capacity to 10.9 GW at the end of 2009, up from 9.6 GW at the end of 2008.
Wind power in India has been concentrated in a few regions, especially the southern state of Tamil Nadu, which maintains its position as the state with the largest wind farm installation, with 4.3 GW installed on 31 March 2009, representing 42% of India’s total wind turbines capacity.
This is beginning to change as other states, including Maharashtra (1,942 MW), Gujarat (1,566 MW) and Karnataka (1,340 MW) start to catch up.
The development of a domestic wind energy industry
India has a solid domestic manufacturing base, including global leader Suzlon with a 50% market share, as well as Vestas Wind Tech and RRB. In addition, international companies have set up production facilities in India, including Enercon, Vestas and GE and new entrants like Gamesa, Siemens, WinWinD, and others.
Overall, 16 companies now manufacture wind turbines in India, with an annual production capacity of 3,000-3,500 MW. Greater stability in the Indian market has also stimulated a stronger domestic manufacturing sector; some foreign companies now source more than 80% of the components for their turbines in India.
The policy environment for renewable energy
In the early 1980s, the Indian government established the Ministry of Non-Conventional Energy Sources (MNES) to encourage diversification of the country’s energy supply, and satisfy the increasing energy demand of a rapidly growing economy. In 2006, this ministry was renamed the Ministry of New and Renewable Energy (MNRE).Renewable energy is growing rapidly in India.
With an installed capacity of 13.2 GW, renewables (excluding large hydro) currently account for 9% of India’s overall power generation capacity. The Indian government’s stated target is for renewable energy to contribute 10% of total capacity and 4-5% of the electricity mix by 2012.
For the period of 2008-2012, the objective is to add 14 GW of renewable generation capacity, 10.5 GW of which will be wind energy. However, India does not have a national renewable energy policy, and most of the incentives for wind power generation were introduced at state level.
The promotion of renewables only figures in one clause of the 2003 Electricity Act. This act restructured the Indian electricity industry and established State Regulatory Commissions (SERCs) in charge of setting electricity tariffs, which were also to set Renewable Portfolio Standards for electricity production in their state.
At national level, wind power development benefits from fiscal and financial incentives, such as a provision for 80% accelerated depreciation for wind farms over one or two years and a ten year tax holiday for wind power projects; and favourable provisions on wheeling, banking and third party sales.
In addition, the Indian government set up the Indian Renewable Energy Development Agency (IREDA), to provide loans for renewable energy projects; and the Centre for Wind Energy Technology (C-WET) which does R&D, training, certification, testing and resource assessment for the sector.
In the absence of a national renewable energy policy, 18 out of the 29 Indian States have now implemented quotas for a renewable energy share of up to 10% and have introduced preferential tariffs for electricity produced from renewable sources. In addition, several states have implemented fiscal and financial incentives for renewable energy generation.
FEED IN TARIFFS
Nine Indian states with Renewable Portfolio Standards (RPS) or other policies to promote wind generation, have also introduced feed-in tariffs for wind generation, usually amounting to Rs 3.10 – Rs 4.3 (€5.1 – 7.1 cents) per kWh.
NATIONAL GENERATION BASED INCENTIVE (GBI)
In September 2009, India’s Central Electricity Regulatory Commission (CERC) announced a national generation-based incentive scheme for grid connected wind power projects. Investors which, because of their small size or lack of tax liability, cannot draw any benefit from accelerated depreciation can opt for this alternative incentive up to 31 March 2012.
After this date, the Accelerated Depreciation may be phased out.As of 17 December 2009, the Indian scheme provides an incentive of 0.5 Rupees per KWh (0.8 Euro cents) in addition to the existing state incentives, with an upper ceiling for a total payment of 6.2 million Rupees per MW (102,000 EUR).
The incentive will be paid out over a maximum of 10 years, or until the ceiling is hit, but no less than 4 years. The GBI is limited to the first 4,000 MW fully commissioned (i.e. grid connected) by March 2012.
NATIONAL RENEWABLE ELECTRICITY TRADING SCHEME
In January 2010, the India’s Central Electricity Regulatory Commission announced rules for trading with renewable energy certificates. These can be bought by companies to meet the requirements to purchase a minimum level of renewable energy according to the state renewable portfolio standards.
A national agency would be put in place to administer the certificates trading.Outlook for 2010 and beyondThe new GBI scheme is expected to provide a significant incentive for new entrants into the Indian wind market, and it is expected that a minimum of 2,200 MW of new wind power capacity will be installed in India in the financial year or 2010/2011.