Wednesday, April 18, 2012

Wind Energy Sector in India


India is targeted to grow at 9% annually. In order to sustain this growth rate it is imperative for the India to reduce its power demand supply gap. Currently India is estimated to have a demand supply gap of 10.3% (96367 GWh[i]).  The primary sources of power generation are Thermal, Nuclear, Hydro and import (from Bhutan). However, recently, the renewable power generation sector has started becoming more prominent. From 2008 to 2012, the renewable sector is expected to grow to $19 billion and contribute 14000 MW of power.
Among the renewable energy sector (not including hydro), the prospects of wind energy have been very promising. India is currently ranked 5th in the world in terms of installed wind power generation capacity.  India added 2.8 GW of wind energy capacity in 2011, making it third in the world (behind China and US) in terms of new installations. Moreover, in 2011, the wind energy sector in India saw an investment of $4.6bn as compared to $4.2bn[ii] in solar energy sector. At this stage, one is forced to wonder what the key factors are which have created this growth. In my view the factors can be categorized as follows:

Resources
The table below provides the list of the states having wind potential as well as the utilization of this potential.

State
Gross Potential (MW)
Total Capacity (MW) till 31.03.2011
% Utilization
Andhra Pradesh
8968
200.2
2%
Gujarat
10,645
2175.6
20%
Karnataka
11,531
1730.1
15%
Kerala
1171
32.8
3%
Madhya Pradesh
1019
275.5
27%
Maharashtra
4584
2310.7
50%
Orissa
255
0
0%
Rajasthan
4858
1524.7
31%
Tamil Nadu
5530
5904.4
107%
Quite evidently, there is still a lot of scope for further development. Moreover, so far, the focus of wind energy sector has been on onshore development only. The offshore development in India is still in the developmental phase. India has a 6400 km long coast line, and although there is no substantial data, some preliminary analyses have shown that there are quite a few promising areas for offshore power generation.
Apart from areas with power generation potential, availability of labour and material also plays an important role. There are plenty of engineering colleges in India which can easily satisfy the need of skilled labour required for this industry. Moreover, there are more than 25 wind turbine manufacturers in India providing turbines of various size and design. These factors reduce the cost substantially making the market more attractive.

Regulations & Policies
There are many incentives that have been provided to the players in this area. These incentives constitute part of the policy of the government for this sector. They cover various aspects of the project development such as investment, construction production etc. The policies are 1) Central level and 2) State level.
  1. Central Level: These policies are created by the Central government. Ministry of New and Renewable Energy is the nodal ministry. Some key feature of these policies are:
    1. Generation-Based incentives (GBI) of Rs. 0.50/kWh. 
    2. Concessional import duty on specified wind turbine parts. 
    3. 80% accelerated depreciation in the first year. 
    4. Excise duty reliefs. 
    5. Loans through IREDA. 
    6. Income Tax holiday.
  2. State Level: These policies vary from state to state. They mainly constitute determination of tariff as well as details of the state level subsidies.  






Issues
Bureaucracy and Corruption are the most prominent deterrents for growth. India is ranked 95 in the world corruption index (1 being least corrupt). This compounded by the bureaucracy and the redtapism become a major deterrent for companies.
Political Leadership is another major impediment in the growth of this sector. Lately the politics in India has been marred by coalition politics. This has delayed the implementation of many of the key policies. Moreover there have been many instances in which change in political leadership has caused a major revision of government policies; however, renewable energy sector has normally been not affected by these revisions.

Conclusion
Over all I believe that there is tremendous potential for the growth of wind energy sector in India. Most of the states have not even utilized 50% of their available resources. The offshore wind farms are still in conceptual stages.  There are mechanisms and policies in place to make this sector more successful and many companies have scripted their success using them. However, there are issues such as corruption, volatile political atmosphere etc which need to be addressed soon.  

3 comments:

  1. Mr.Saxena, that was indeed an informative article on wind energy sector and its future prospects in India. Demand-supply gap is tremendous and its time that the Govt.of India takes judicious steps conducive for the growth of renewable energy sector and reduce our dependence on imports. India has fruitful opportunities-waiting to be explored and invested in, owing to geographical endowments. State Govts.can play a kep role in exploitation of such renewable energy-generation possibilities.
    Kindly keep us updated with the latest developments.

    ReplyDelete
  2. An interesting story about the renewable energy sector in India, as I was expecting from a strong MBA student. I look forward seeing how you will be helping this sector grow!

    ReplyDelete
  3. Firstly, good initiative with the blog.

    You make a good case for wind energy. However, it is unfortunate that of the top 5 players in the industry (Vestas, GE Wind, Gamesa, Enercon & Suzlon), only one is Indian.

    However, like you mentioned, issues of corruption and bureaucracy continue to stifle investment foreign investment in the sector. Additionally government moves, for example in the case Vodafone and its taxes, create a somewhat hostile environment. It wouldn't be too much of a stretch to compare it to what happened in Argentina with Repsol. In the long run, such things are only going to stifle investment further.

    ReplyDelete