India

India

India - Grid and tax rules change as wind sector takes off

INDIA: India's wind sector looks likely to retain its momentum in 2012 and is on track to add 700MW in the first three months. More than 3.02GW was installed in 2011, taking total installed capacity to 16.08GW, according to the Ministry of New and Renewable Energy. The government has a target to double this by 2017.

Three regulatory developments are likely to affect the sector in the coming months. Any manufacturer supplying more than 15MW of turbine capacity must establish a manufacturing base in India under guidelines issued by the government in September. There are 17 manufacturers already present in India, with a combined annual production capacity of 7.5GW, according to the Global Wind Energy Council.

An accounting method known as accelerated depreciation that enables businesses to write off investments in wind-power equipment is likely to end on 1 April. This has allowed developers to pay less tax during the first few years of a project's lifecycle. A tax code to introduce this change was awaiting approval by parliament as Windpower Monthly went to press. This could create a 400MW drop in demand for equipment, costing the industry business worth INR 24 billion ($483 million), according to Bloomberg New Energy Finance.

This year will also see stricter grid laws being applied to the wind industry. All wind-power producers must take part in scheduling, which involves forecasting output several days in advance and injecting the forecast amount of power into the grid. According to guidelines issued last year by the electricity regulator, producers whose power input onto the grid varies more than 30% from their forecast will be penalised. Wind-power producers will have to install expensive - but nascent and, as yet, untested - forecasting infrastructure, and it remains to be seen if there will be many penalties.

As Windpower Monthly went to press, the industry was also waiting for an announcement by the Central Electricity Regulatory Authority (CERA) of plans to improve transmission of renewable energy. The Indian Wind Turbine Manufacturers' Association (IWTMA) has been lobbying the Ministry of New and Renewable Energy for dedicated transmission corridors for wind energy, especially in the state of Tamil Nadu, where wind turbines often operate at 25% capacity in the peak season due to grid constraints.

The IWTMA also wants to see the introduction of spinning reserves, which can be made available to a transmission system within minutes. CERA has assured the industry that transmission is a priority for the 12th Five-Year Plan, which was also due to be announced as Windpower Monthly went to press.

Wind-power companies based in India are thriving. Suzlon started the year with news of an order for 57 turbines of 2.1MW for a project in the US. In December, it announced it had received orders for 166MW in India in just three months, capping several hundred megawatts of orders through the year. Meanwhile, Gamesa's Indian subsidiary, Gamesa Wind Turbines, announced in May that it had won an order from Caparo Energy India to commission 2GW of turbines in India.

The renewable purchase obligation programme and the trading of renewable energy certificates (RECs), proved very successful in its first year, bringing additional revenue for wind-energy projects and making it easier for developers to secure financing. Trading crossed the 100,000 REC mark in December for the first time. One REC is awarded for each megawatt of wind power produced. REC prices rose consistently to reach INR 2,950 per REC in December.

A shortage of land continues to present an obstacle for wind development. The industry reacted with alarm to a November order by the Madras high court of the state of Tamil Nadu, India's leading wind-power state, that prior permission from the village local government is necessary before installing a wind turbine.

Previously, project developers had to seek permission from the owner of the land on which a wind turbine was to be installed, or simply but the land. Soon after the high court ruling, Suzlon announced that it is building land banks to avoid problems in future by developing projects on land the company already owns.

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