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India

State action on policy promises a great year -- India set to pass 7500 MW

India installed 1840 MW of wind plant in 2006, making it the third most active wind market in the world behind the United States and Germany and raising its cumulative capacity to 6270 MW, according to the Ministry of New and Renewable Energy (MNRE). The Indian market is already firing up for another explosive year, driven by state governments setting renewable energy quotas and finalising purchase prices for green power, as required by India's central government under its January 2006 National Tariff Policy guidelines.

Conservative forecasts are already suggesting at least 1200 MW will be added to India's total by the end of this year, taking it to around 7500 MW. Most of this is likely to be supplied by Suzlon, Vestas and Enercon, which again were India's top three turbine suppliers, in that order, in 2006.

Once again, most capacity went up in Tamil Nadu and Maharashtra (map) and now over 51% of India's installed wind plant is located in Tamil Nadu and 20.5% in Maharashtra. Each state confirmed its renewable power purchase requirements on utilities and set tariff rates, although in Tamil Nadu the purchase price has disappointed India's wind industry, while in Maharashtra the size of the requirement has not lived up to expectations.

State policies

Tamil Nadu, while requiring that 10% of the state's energy come from renewables, has set a tariff which is the lowest in India: INR 2.90/kWh ($0.065/kWh) for new projects and INR 2.75/kWh ($0.062/kWh) for projects developed under agreements made prior to its May 2006 order. Prices set by other states so far range from INR 3.15 to INR 4.00/kWh ($0.071-0.091/kWh). Until now that has not been enough to attract investors away from Tamil Nadu in any great number.

Maharashtra's prices are INR 3.15/kWh ($0.071/kWh) for the first year, increasing by INR 0.15/kWh ($0.003/kWh) each year for a period of 13 years, an acceptable rate, feels the industry. But it is disappointed by the state's green power requirement, which increases from 3% in 2006/07 to 6% in 2009/10. The market is restricted further by a 750 MW cap on the volume of wind capacity that may sell its output directly to utilities. The cap is in place until the end of March 2010.

Four states have set wind specific targets. Andhra Pradesh and Madhya Pradesh both want 0.5% of total state power consumption to come from wind plant, while Gujarat wants 1%, and Kerala, 2%. Rajasthan is aiming for 1565 MW of wind power by October 2009 as part of its renewables requirement, which calls for a minimum of 2% from renewables for 2006/07, rising to around 4% in 2009/10.

General renewable energy targets have been set by Karnataka, which seeks a minimum of 5% green power, up to a maximum of 10% each year; Orissa wants 3% to come from renewable energy in 2007/08 and to see that increase by 0.5% each year to 5% by 2011/12; and West Bengal is calling for 1.9% this fiscal year and 3.8% in 2007-08, while specifying that the purchase of higher percentages requires permission from the local electricity regulatory commission. Under most orders issued so far, power purchase agreements relating to new projects must be for 20 years, although Karnataka has set a term of just ten years and Maharashtra stipulates 13 years.

Significantly, no state has yet to put in place any financial penalty clauses for not meeting the targets, even though this is recommended by the national government. Its guidelines say that utilities should be fined for failure to comply with the new purchase requirements. With the country's National Renewable Energy Policy still waiting to be formally approved -- it is still in draft form -- few expect any punitive measures for non-compliance to be adopted anywhere for some time to come.

Even so, with new policies in place in India's best wind regions -- providing developers with a long term outlook when planning projects -- the market is expected to thrive in coming years. Even GE Energy is apparently now giving thought to entering India's wind industry. "Our most likely entry point in India would be to partner with some locals there," Kevin Walsh, the managing director for renewable energy at GE Energy Financial Services has said.

Manufacturers already active in India are expanding their capabilities. Construction of Suzlon's new gearbox factory in Coimbatore, Tamil Nadu, is to start in August with completion slated for early 2008. By 2010, it will produce 1500-2000 gearboxes a year. Also in Tamil Nadu, Danish rotor blade manufacturer LM Glasfiber, which increased its sales in India by 20% in 2006 and forecasts further growth this year, expects its new EUR 150 million factory in the state to kick into operation in May, says the company's Nirmal Gupta. LM has a three year contract with Vestas India, which accounts for 25% of its output and plans to start manufacturing 40.14 metre blades for Vestas at its new facility.

New markets

No longer are Tamil Nadu and Maharashtra expected to be the only significant markets. Between them, the four states which have decided to set wind specific targets are estimated by MNRE to have a technical potential for 5670 MW, nearly ten times their combined wind capacity today. The potential may be greater.

MNRE's estimate is based on old wind resource data and sub-megawatt turbine technology -- Tamil Nadu long ago surpassed its original estimated potential of 2150 MW. MNRE is conducting new wind measurements and has identified over 200 sites of high potential across the country. With positive tariff policies supporting their purchase obligation orders, Andhra Pradesh, Gujarat and Madhya Pradesh are in particular likely to become the regions to watch over the next few years.

Of the outstanding issues the industry is concerned about, lack of transmission capacity looms large, particularly in Tamil Nadu. Most available capacity there has now been used. But with the central government expected to provide a further boost for wind in its forthcoming budget, including tax exemptions for more turbine components and raw materials, the industry feels it has every reason to be optimistic.

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