India's wind power sector, worth around $1.6 billion a year, is booming. Market growth is running at 40% while year-on-year installed capacity grew 48% from 3595 MW in the 2004/05 financial year to 5340 MW in 2005/06, reports the Ministry for Non-Conventional Energy Sources (MNES). With the 5000 MW by 2012 target already surpassed, the government says it wants a further 5000 MW installed by 2012.
With over 1700 MW in new additions last year, India was the fourth largest wind market in the world after Germany, Spain and the United States. "We are confident of sustaining the growth rate of last year," says Anil S. Kane of the Indian Wind Energy Association (InWEA). Ramesh Kymal of turbine manufacturer NEG Micon (India) Pvt says growth will actually accelerate.
India's technical wind power potential is estimated at 9000-12,000 MW given current grid capacity. States with most potential are Tamil Nadu, Gujarat, Andhra Pradesh, Karnataka, Kerala, Madhya Pradesh and Maharashtra. Most of these, notably Tamil Nadu, which with 3300 MW of wind plant accounts for more than half the country's capacity installed so far, have already become wind development hotspots. Others, such as Kerala and Madhya Pradesh, have barely scratched the surface of their potential.
Indian wind power's robust growth is, says the industry, due to cost reductions brought about by technical progress and increased economies of scale. The wind turbines available today are more efficient in low and medium winds than previously, returning plant load factors of 35-38%. Vilas Muttemwar, minister for non-conventional energy sources, says the government has actively stimulated wind development through a series of incentives. These include reduced import duty on some wind turbine components, excise duty exemption, a ten year tax holiday on income generated from wind power projects, and the benefits of accelerated depreciation and loans from the Indian Renewable Energy Development Agency (IREDA) and other financial institutions.
The incentives are to continue. "Wind power is being given preferential tariffs in potential states," the minister says. "Continuous efforts are underway to identify new wind power potential areas through wind resource assessment studies by the Centre for Wind Energy Technology, Chennai."
Even so, not all states with good wind resources have set about exploiting them yet. To kick them into action, the government produced new tariff policy guidelines and revised grid codes requiring all state utilities to establish targets for the purchase of electricity from renewable sources by the close of April. To nobody's surprise, few complied with the deadline, although some have since made up for lost time.
Where targets and policies have been announced by state electricity regulatory commissions (SERCs), all had some form of market framework in place before the central government's ruling. The SERCs of Andhra Pradesh, Gujarat, Madhya Pradesh, Karnataka, Rajasthan, and Maharashtra have preferential wind tariffs for new installations of INR 3.25-3.97/kWh ($0.070-0.085/kWh), while Tamil Nadu's current tariff is INR 2.90/kWh ($0.062/kWh), only a small increase of INR 0.020/kWh on the old price (Windpower Monthly, July 2006).
Although the industry has objected to the relatively low rate in Tamil Nadu, the Gujarat Electricity Regulatory Commission (GERC) points out that wind turbines typically installed in Tamil Nadu, a particularly windy region, tend to be state-of-the-art multi-megawatt machines compared with the smaller, less efficient turbines employed in other states. GERC has concluded that a higher tariff of INR 3.37/kWh is more appropriate in its region. The other states, which all lag far behind Tamil Nadu in terms of installed wind capacity, would appear to concur.
Meanwhile, several state governments, including those which have already set wind rates, have followed the central government guidelines and directed their State Electricity Boards and licensed distributors to buy a minimum quota of electricity annually from renewable sources, expressed as a percentage of total consumption. The quotas vary from state to state.
Andhra Pradesh has set its target at a minimum of 5% for each year to 2007/08, with half of that to come from wind power. In Karnataka, utilities must secure a minimum of 5% and a maximum of 10% of their electricity from renewable sources, while in Tamil Nadu a quota of 10% from renewables is proposed. Madhya Pradesh utilities must purchase at least 0.5% of their supplies from renewables, while the SERC in Gujarat is demanding 1% from renewables up to the end of the 2007/08 fiscal year and 2% for 2008/09. Orissa's policy is for 200 million kWh of green power to be bought during the current financial year 2006/07, but at a cost not exceeding the highest price of thermal power in the state
Maharashtra's latest policy, published in mid-August, maintains its existing tariff at INR 3.50/kWh in the first year, with an increase of INR 0.15 paise a year for 13 years. The rate is fixed until the end of March 2010. With much of the state's wind power installed within the past financial year, state officials point out that operational experience is limited so far. "A review of tariffs at this stage will not serve any useful purpose," it says. InWEA welcomes the regulatory certainty of a fixed rate for the next four years.
New in Maharashtra's policy announcement is a mandate for 3% of all electricity in the state, whether provided by licensed distributors, from own generation or consumed by open access users, to come from renewables by the end of March 2007. The percentage of renewables must increase by 1% a year to reach 6% by March 2010.
The Maharashtra quota is a minimum, however. The 2010 target requires 750 MW of wind capacity, a volume that the Maharashtra Energy Development Agency notes will be achieved this month. It projects the addition of 3000 MW of new wind power capacity in the state within the next four to five years, or about 600 MW of development a year. With an initial six month grace period, electricity suppliers failing to meet the mandate will face financial penalties, set at INR 5/kWh of shortfall in 2007/08, INR 6/kWh in 2008/09, and INR 7/kWh in 2009/10.
While seven states have followed the guidelines issued by central government, 25 have yet to comply. The wind industry has stepped up calls for measures to make sure they do. It is asking for greater uniformity and consistency in policy across the country. As well as different targets and tariff structures, it also has to cope with a variety of transmission and wheeling charges, depreciation rates and technical requirements. A dedicated renewable energy policy accompanied by a regulatory framework incorporating legally binding new targets for renewables -- currently being worked up by MNES on the basis of government's latest guidelines -- is vital for the wind sector to fulfil its potential, says the industry.
Improvement of grid infrastructure, particularly in states with the highest potential, and better power system management are of prime importance, says the wind lobby, along with grid codes sympathetic to the characteristics of renewables. Some state electricity boards have openly refused to admit wind onto their systems, while technical demands from others have served as a solid barrier to wind generation.
As in much of the developed world, lack of transmission capacity is the single largest constraint on wind power's growth. These days wind friendly Tamil Nadu is a power exporter, but without sufficient transmission out of state, its earnings from sales of excess wind power are limited. In the peak generating season, wind farm operators are being asked to shut down for up to ten hours a day because of the inability of the Tamil Nadu Electricity Board (TNEB) to evacuate the power. Yet a mandate from the Tamil Nadu Electricity Regulatory Commission requires TNEB to grant wind power "must-run" status.
Aware that wind development may stall unless it can ensure transmission from remote locations to urban centres, TNEB is encouraging wind plant developers to integrate the construction of sub-stations into their project planning. In response, says U.B. Reddy of turbine manufacturer Enercon India, the wind industry has asked TNEB to allow an independent analysis of grid requirements in the state.
Gujarat's electricity regulatory commission has gone a step further than Tamil Nadu. Its new wind power procurement policy order, issued last month, specifically calls for the cost of new transmission to be borne by wind project developers rather than the state grid operator or distribution licensee -- an approach long requested by InWEA. Gujarat has identified potential for 5000 MW of wind power in the state. Today it has 288 MW. According to the state's Vibrant Gujarat policy, "It is intended to rationalise the incentive scheme for wind farms to attract more private investors and also simplifying procedure for allotting government waste land for above purpose."
Gujarat is not alone in its approach to solving the transmission roadblock. Rajasthan has also seen the potential in allowing private development of the network to allow exploitation of it relatively limited desert-based wind potential. Wind power investors are being asked to pay $37,000/MW for grid improvements, construction of sub-stations and connection of them to the nearest high voltage evacuation point. All this has pushed up the cost of wind projects by $56,000-60,000/MW. But it is a price the wind industry seems ready to accept if it secures a market.