Opportunities & Challenges in Developing Wind Energy in India

Opportunities & Challenges in Developing Wind Energy in India

By:- Devesh Gautam

B.Tech (Electrical Power), IIT Delhi

Sep’2014

Key Factors Driving Wind Energy in India

• Over 21 GW installed – world’s 5th largest

• Dedicated ministry and established regulatory framework

• Strong policy support with multiple revenue options and incentives

• Established long term preferential tariff mechanism

• Aggressive targets & commitment under govt.’s national action plan (NAPCC)

• The harnessable wind power potential in India is over 102 GW, out of which almost 81% is still untapped

• Access to latest technology, supply chain and expertise

• By 2020 India could have 65 GW of wind power in operation

Wind Power Potential of India

• Nodal development agency, CWET has recently reassessed the estimates of total wind energy potential in the country from earlier 48 GW to over 102 GW

• Wind potential is concentrated in southern, western and north-western regions

• Grid connected projects operational in 8 states

• MNRE in its “Strategic Plan for the New & Renewable Energy Sector for the period 2011-2017” has targeted a growth in capacity addition of 27,300 MW by wind alone out of total Grid Interactive RE

Wind Density Map of India at 50 m agl

Incentives & Regulations for Wind Energy

Generation Based Incentive (GBI) by Central Govt.

• No minimum capacity is fixed under this scheme, unlike Solar where only projects in the capacity range of 100 KW to 2 MW is considered

• Scheme is applicable for the projects commissioned on/after 01/04/2012.

• Following are the eligibility criteria for availing this scheme;• Projects should sell the electricity to grid at tariff fixed by SERC or State Govt.• Project should not avail accelerated depreciation.• The scheme is also available for Captive Wind Power Projects including Group

Captive to the extent of sale of electricity to the grid only.• Scheme is not available to any wind power project selling power to third

party, viz. merchant power plants.

• The projects have to register on-line with Indian Renewable Energy Development Agency (IREDA)

Main Features of GBI Scheme

• GBI will be provided @ Rs 0.5 per unit of electricity fed into the grid.

• The incentive is over and above the tariff that has been fixed by SERC/State Govt.

• GBI is available for a period not less than 4 years and a maximum period of 10 years.

• Maximum cap is Rs 100 Lakhs per MW.

• Total disbursement in a year will not exceed one fourth of the maximum limit of the incentive i.e. Rs 25 Lakhs per MW during first four years.

• Scheme is applicable for entire 12th Plan period i.e. 2012-2017 having a target of 15,000 MW

• No clarification issued as of now by MNRE in case target quota is fulfilled before 2017 i.e. projects coming up after quota of 15000 MW and before Apr’2017, may or may not get GBI scheme from GOI.

Central Incentives for Wind Power Plants

• Indirect Taxes• Rebates offered on various equipment’s.

• 5% for special bearing, gear box, yaw components, wind turbine collectors, raw material for manufacture of blades of rotor.

• 25% for sensor, brake hydraulics, flexible coupling, brake calipers

• Wind operated electricity generator, its components and parts thereof are exempted from Excise Duty

• Exemption/Reduction in Central Sales Tax & General Sales Tax are available on sale of renewable energy equipment’s in various states.

• Direct Taxes• 80% Accelerated Depreciation in the first year of installation of the projects.• Tax Holiday for a period of 10 years out of the total 15 years period.

Clarification Announced by MNRE for Wind GBI

• It was clarified that GBI can be claimed irrespective of the rate of depreciation opted by Wind Power Producers.• 15% + 20% (additional) on W.D.V basis or,

• 7.69 % on S.L.M basis

• It is applicable only for the projects commissioned on or after 1st April 2012

Tariff Regulations & WMS Data

Tariff Regulation of Various States for Wind Power

State Distrcits

Capacity Utilization Factor (CUF) (W/m2) GBI ROE/Annum

Useful Life

(Years)

RPO Obligation for

WindCDM Benefits

200-250 250-300 300-400 >400

CERC 20% 23% 27% 30%19% for 1st 10 Years 24 % from 11th Year Pre Tax

1st Year - 100% to Developer 2nd Year Onwards 10 % increase every year till 50 % for both

Rajasthan

Jaisalmer,Jodhpur,Barmer

21%No 16 % Pre Tax 25 10%

75 % - Developer 25 % - Discom

Other Districts 20%

Andhra Pradesh 24.50% No 15.5 % Pre Tax 2090 % - Developer 10 % - Discom

Maharashtra 20% 23% 27% 30% NoPre Tax - 19% for first 10 yrs Pre tax - 24% for 11th Year onwards

20 8.50%100 % with Generating Company

Gujarat 24% No 14% 20 7.75%


Tamil Nadu 27.50% No 17.63 % Pre Tax 20 14%


State Wise Comparison of Tariff for Wind Power

State Wind Tariff Industrial Tariff Details of Available Tariff Rate (2012-13 Regulations)

Rajasthan 5.48 5.5 No escalation over project life of 25 years

Andhra Pradesh 4.7 5.73 Constant for 25 years for the PPAs to be signed by 31-03-2015

Maharashtra 5.67 7.1 No escalation for 13 years

Gujarat 4.15 5.8 No escalation for 25 years of project life

Tamil Nadu 3.51 5.5 No escalation for 20 years of project life

CWET Wind Monitoring Stations in Anantapur -APS.No Station District Commenced on Closed On Mast Height (m)

Elevation (masl)

MAWS At 18/20/25/30/50/80/120 m

(m/s)

MAWPD At 18/20/25/30/50/80/120 m

(W/Sq.m)

WPD Extrapol/Measured AT 50 m (W/Sq.m.)

1 Kadavakallu 2 Anantapur 20-05-2001 26-12-2010 25 386 6.31 314 437

2 Siganamala Anantapur 05-12-1992 24-01-1998 20 425 6.61 366 392

3 Kadavakallu 1 Anantapur 04-12-1992 14-07-1998 25 368 6.14 303 325

4 Nallakonda Anantapur 20-11-1994 20-01-1998 25 735 6.33 176 324

5 Ramagiri -1 Anantapur 28-08-1988 30-09-1993 20 573 5.42 205 308

6 Tallimadugula Anantapur 20-09-1994 21-01-1998 25 555 6.17 260 288

7 Badhrampalli Kottala Anantapur 25-09-1994 22-01-1998 25 433 5.92 248 277

8 Alangarapeta Anantapur 16-09-2000 17-10-2002 25 360 5.85 244 272

9 M.P.R Dam Anantapur 27-08-1988 29-09-1993 20 404 5.53 228 269

10 Madugupalli Anantapur 20-07-1998 21-11-2000 25 440 5.19 152 266

11 Vysapuram Anantapur 12-08-2011 - 80 479 6.96 285 247


13 Vajrakarur 1 Anantapur 21-03-1997 30-07-2000 20 512 5.3 173 243

14 Mustikovala Anantapur 18-08-1992 21-05-2001 20 570 5.61 201 237

15 Pampanoor Thanda Anantapur 24-09-1994 23-11-1997 25 490 5.44 182 232


17 Kuttalapalli Anantapur 16-08-2011 - 80 697 6.66 248 222

18 Korrakodu Anantapur 14-09-2000 18-10-2002 25 460 5.19 146 220

19 Borampalli Anantapur 19-07-2008 15-09-2000 25 550 5.45 163 219

20 Chinnababayapalli Anantapur 21-07-1998 23-11-2000 25 762 5.14 132 206

21 Talaricheruvu Anantapur 19-03-1997 29-04-1999 25 360 5.03 144 205

22 Vajrakarur 2 Anantapur 15-03-1999 30-07-2001 50 511 5.41 202 202

23 Shahpuram Anantapur 18-03-1997 27-04-1999 25 605 4.81 135 196

24 Teranapalle Anantapur 20-03-1997 16-05-1998 20 245 4.14 110 189

25 Vepulaparthy Anantapur 15-09-2000 15-02-2002 25 515 4.83 122 176

26 Puttaparthy Anantapur 02-06-1993 08-06-1996 25 542 4.92 149 174

27 Boxampalli Anantapur 22-09-1994 21-11-1997 25 639 4.7 129 157

28 Shivapuram Anantapur 16-07-1997 10-11-1998 25 295 3.9 101 146

29 Balapuram Anantapur 29-08-1999 21-11-2000 25 290 4.47 105 141

30 Basavapuram Anantapur 14-08-2011 - 80 587 5.93 186 137

31 Yeradoddi Anantapur 09-12-1992 16-12-1995 25 521 4.39 108 125

32 Devereddypalli Anantapur 15-07-2013 - 100 507

Private Wind Monitoring Stations in Anantapur

S.No Client Station DistrictMast Height

(m)Elevation

WPD Extrapol/Measured AT 50 m (W/Sq.m.)

WS (m/s) WPD (W/m2

1

Axis Energy Ventures Private Ltd. Hyderabad

Amidyala Anantapur 80 486 6.25 219.5

2 Lottavaram Anantapur 80 474 6.15 203.75

3 Pottipadu Anantapur 80 467 6.11 200

4Vidapanakall

uAnantapur 80 465 5.77 174.22

SWOT ANALYSIS

Strengths

• Continuing demand-supply gap

• High preferential tariff offered by some states govts like Maharashtra, Rajasthan etc.

• Escalation in the cost of fossil fuel-based power generation

• Availability of soft loans and government incentives

• Project gestation period is significantly shorter than conventional sources

• 95-96% Plant Availability Factor

• O&M cost is very low, approx. Rs 0.5/kWh

• Capacity addition can be in modular form.

Weakness

• Low capacity utilization of the wind generation plants ( PLF: 18-23 %)

• Rising land costs and developmental issues

• Forced outages due to technical factors such as weak grid integration, mechanical problems etc.

Threats

• Risk of obsolescence in case of technological innovations in other forms of energy

• Wind power subsidies may be rationalize or pegged down

• Legal issues related to land, government laws and liability concern

• Project life is only 25 Years.

Opportunities

• Substantial untapped market (current utilization :24%)

• As per CWET, India has an estimated potential of around 102,778 MW at 80 meters height at 2% land availability.

• CDM credits for clean technologies

• Concept to Commission model offered by few manufactures under which everything from land acquisition, implementation & O&M is carried out by them.

• Due to above factor prior experience not required by the project owners

• Depleting fossil fuels reserves, climate change and ensuring energy security provides an idea opportunity for developing wind energy

Major Challenges for Developing Wind Energy

Major Issues Affecting The Wind Energy Sector in India

• Technological• Lack of Transmission Infrastructure

• Estimation of effective turbine capacity not deterministic

• Noise made by rotating wind machine blades can be annoying to nearby neighbors and thus their resistance.

• Electricity produced by wind power sometimes fluctuates in voltage and power factor, which can cause difficulties in linking with CTU.

• Dearth of good wind sites:- Most of the good sites having PLF in the range of 28% have already been developed or grabbed, no option but to develop low PLF sites

• Wind assessment studies to be vetted:- Wind assessment studies to be vetted by an independent consultant to ascertain whether the micro settings are optimized for installed capacity or for energy generation.


• Regulatory• Complexity of subsidy structure and involvement of too many agencies such

as MNRE,IREDA,SERCs etc.

• Land acquisition problems for exclusive installation and securing ‘Right of Way’ for taking turbines, blades and towers

• As per Wind Powers Association, 470 MW wind power worth of commission is ready and idle due to delay in signing of PPA’s

• In Aug 2013, CERC released an order mandating wind power producers to provide a forecast of their generation the following day on a quarter-hourly basis or face penalties. (Order is being challenged in CERC)

• Delays in acquiring land and obtaining statutory clearances

• Lack of an appropriate regulatory framework to facilitate purchase of renewable energy from outside the host state


• Investment related• Capital expenditure much more as compared to conventional sources

• Moratorium of 12 months :- The cash flows from wind farms are generated only during the high wind season, typically lasting 4-6 months. Moratorium of 12 months from COD for repayment of principal to be stipulated in order not to land the project in trouble in case it gets commissioned during non wind season.

• Loans of Longer Tenure:- Due to low PLF wind farms require longer tenure loan of say 12-13 years to have a descent DSCR. May also require structured installments.

Financial Framework for Wind Energy

Foreign Investment Policy in Renewable Sector

• Foreign investors can enter into a joint venture with an Indian partner for financial and/or technical collaboration and for setting up of RE-based power generation projects.

• 100% foreign investment as equity is permissible with the approval of the Foreign investment Promotion Board (FIPB)

• The Government of India encourages foreign investors to set up power projects on BOO basis. Investors are require to enter into a power purchase agreement with concerned states.

• No prior approval of the government is required to set up an industrial undertaking with Foreign Direct Investment (FDI) by NRIs or Overseas Corporate Bodies (OCBs)

• The RBI has permitted Indian companies to accept investment without obtaining prior approval from RBI, though investors are required to notify the regional office of RBI, of receipt of inward remittances within 30 days of such receipt.

Information Required for Getting a Project Financed

• A comprehensive wind monitoring study (minimum 1 year data) conducted at the site

• A project feasibility study by a credible consultant

• Proven expertise in managing a wind project or an agreement with a qualified 3rd party project manager

• Zoning & site permitting approval

• Turbine performance data

• A complete interconnection details with grid

• A long term power purchase agreement (at least 10 years)

• A business, financial and risk management plan for the project including complete profroma

Risk & Mitigation

Risk Mitigation

Wind Availability Minimum 1-2 Year site specific data

Equipment's Performance data, warranties

Operations & Maintenance Experienced Managers, maintenance contracts

Revenue Power purchase agreements

Construction Fixed completion dates & penalties, performance bond

Force Majeure Insurance

Transmission Interconnection agreements

Tax Benefit Utilizations

Break-Up of Per MW Cost

S.No Component Amount % of Total

1 Turbine & Accessories 3.68 63.1%

2 Civil Work 0.58 9.9%

3 Electrical Work 0.47 8.1%

4 Grid Integration 0.37 6.3%

5 Installation 0.11 1.9%

6 Others * 0.62 10.6%

Total 5.83

Note:-• *Taxes, Road Work, Consultant fees etc.• Operation & Maintenance cost – Rs 0.5/kWh for first 5 years

Increase of 5% after that

How The Wind Energy Market Operates !

Business Model Options

• Self Development• Managing all resources over project life cycle

• Not recommended for first time developers

• Limited turn-key contract• It involves self management of only the key resources (Land, Regulatory

clearances etc.)

• End to End Solution• Complete turn-key outsourcing over entire project life cycle

Revenue Model Options

• Sale of power to local utility under long term PPA at fixed preferential tariff

• Sale of power to local utility under long term PPA at dynamic APPC tariff + RE Certificate

• Set-off generated wind power against self consumption (captive) + RE Certificate

• Sale of power in market under open access + RE Certificate

Key Policy Benefits

• Preferential Feed-in-tariff under long term PPA

• Generation Based Incentive of INR 0.5 per unit of power in addition to preferential feed-in tariff

• Revenue from trading of carbon credits through CDM route

Way Forward For A Developer• Identification of land/location based on the data of Centre for Wind Energy Technology (CWET).

• Wind monitoring station (WMS) can be setup under National Clean Energy Fund (NCEF) for collecting data and developing wind farm. (Notification issued on 11.07.2014)

• Existing location where data is measure for 20/25/30 m height may be considered for wind resource assessment at higher hub height of 100 m.

• 50% fund to be provided by ministry and balance 50% by CWET depending on the usage by IPP

• Acquiring/collecting wind data of the location for power potential studies.• 790 wind monitoring station data available with CWET.

• Micro Siting – Conducting micro survey around the station and further micrositing considering the topography, contour, roughness etc.

• As of now 97 stations micro survey report available with CWET.

• Techno-Commercial feasibility studies of the identified locations.

• Preparation of detailed project report.

• Approval of DPR by respective State Govt.

• Construction Begins;• Acquiring Land• Placement of order to Equipment Supplier• Erection• Commissioning

THANK YOU