India
India had a record year for new wind energy installations in
2010, with 2,139 MW of new capacity added to reach a total
of 13,065 MW at the end of the year. Renewable energy is
now 10.9% of installed capacity, contributing about 4.13% to
the electricity generation mix, and wind power accounts for
70% of this installed capacity. Currently the wind power
potential estimated by the Centre for Wind Energy
Technology (C-WET) is 49.1 GW, but the estimations of
various industry associations and the World Institute for
Sustainable Energy (WISE) and wind power producers are
more optimistic, citing a potential in the range of 65-
100 GW.
Historically, actual power generation capacity additions in
the conventional power sector in India been fallen
significantly short of government targets. For the renewable
energy sector, the opposite has been true, and it has shown a
tendency towards exceeding the targets set in the five-year
plans. This is largely due to the booming wind power sector.
Given that renewable energy was about 2% of the energy
mix in 1995, this growth is a significant achievement even in
comparison with most developed countries. This was mainly
spurred by a range of regulatory and policy support measures
for renewable energy development that were introduced
through legislation and market based instruments over the
past decade.
The states with highest wind power concentration are Tamil
Nadu, Maharashtra, Gujarat, Rajasthan, Karnataka, Madhya
Pradesh and Andhra Pradesh.
Main market developments in 2010
Today the Indian market is emerging as one of the major
manufacturing hubs for wind turbines in Asia. Currently,
seventeen manufacturers have an annual production capacity
of 7,500 MW. According to the WISE, the annual wind turbine
manufacturing capacity in India is likely to exceed
17,000 MW by 2013.
The Indian market is expanding with the leading wind
companies like Suzlon, Vestas, Enercon, RRB Energy and GE
now being joined by new entrants like Gamesa, Siemens, and
WinWinD, all vying for a greater market share. Suzlon, however,
is still the market leader with a market share of over 50%.
The Indian wind industry has not been significantly affected
by the financial and economic crises. Even in the face of a
global slowdown, the Indian annual wind power market has
grown by almost 68%. However, it needs to be pointed out
that the strong growth in 2010 might have been stimulated
by developers taking advantage of the accelerated
depreciation before this option is phased out.
Policy support for wind power in India
Since the 2003 Electricity Act, the wind sector has registered
a compound annual growth rate of about 29.5%. The central
government policies have provided policy support for both
foreign and local investment in renewable energy
technologies. The key financial incentives for spurring wind
power development have been the possibility to claim
accelerated depreciation of up to 80% of the project cost
within the first year of operation and the income tax holiday
on all earnings generated from the project for ten
consecutive assessment years.
In December 2009 the Ministry for New and Renewable
Energy (MNRE) approved a Generation Based Incentive (GBI)
scheme for wind power projects, which stipulated that an
incentive tariff of Rs 0.50/kWh (EUR 0.8 cents/USD 1.1 cents)
would be given to eligible projects for a (maximum) period of
ten years. This scheme is currently valid for wind farms
installed before 31 March 2012. However, the GBI and the
accelerated depreciation are mutually exclusive and a
developer can only claim concessions under one of them for the same project. Although the projected financial outlay for
this scheme under the 11th Plan Period (2007-2012) is
Rs 3.8 billion (EUR 61 million/USD 84 million), the uptake of
the GBI has been slow due to the fact that at the current rate
it is still less financially attractive than accelerated
depreciation.
Currently 18 of the 25 State Electricity Regulatory
Commissions (SERCs) have issued feed-in tariffs for wind
power. Around 17 SERCs have also specified state-wide
Renewable Purchase Obligations (RPOs). Both of these
measures have helped to create long-term policy certainty
and investor confidence, which have had a positive impact on
the wind energy capacity additions in those states.
Support framework for wind energy
There has been a noticeable shift in Indian politics since the
adoption of the Electricity Act in 2003 towards supporting
research, development and innovation in the country’s
renewable energy sector. In 2010, the Indian government
clearly recognised the role that renewable energy can play in
reducing dependence on fossil fuels and combating climate
change, and introduced a tax (“cess”) of Rs.50 (~USD1.0) on
every metric ton of coal produced or imported into India. This
money will be used to contribute to a new Clean Energy Fund.
In addition, the MNRE announced its intention to establish a
Green Bank by leveraging the Rs 25 billion (EUR 400 million /
USD 500 million) expected to be raised through the national
Clean Energy Fund annually. The new entity would likely work
in tandem with the Indian Renewable Energy Development
Agency (IREDA), a government-owned non-banking financial
company.
In keeping with the recommendations of the National Action
Plan on Climate Change (NAPCC) the MNRE and the Central
Electricity Regulatory Commission (CERC) have evolved a
framework for implementation of the Renewable Energy
Certificate (REC) Mechanism for India.1 This is likely to give
renewable energy development a further push in the coming
years, as it will enable those states that do not meet their
RPOs through renewable energy installations to fill the gap
through purchasing RECs.
Obstacles for wind energy development
With the introduction of the Direct Tax Code2, the
government aims to modernize existing income tax laws.
Starting from the fiscal year 2011-12, accelerated
depreciation, the key instrument for boosting wind power
development in India, may no longer be available.
Another limitation to wind power growth in India is
inadequate grid infrastructure, especially in those states with
significant wind potential, which are already struggling to
integrate the large amounts of wind electricity produced. As
a result, the distribution utilities are hesitant to accept more
wind power. This makes it imperative for CERC and SERCs to
take immediate steps toward improved power evacuation
system planning and providing better interface between
regional grids. The announcement of India’s Smart Grid Task
Force by the Ministry of Power is a welcome first step in this
direction.