Maharashtra slows after good start

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With a policy that has encouraged fast wind development, the Indian state of Maharashtra has been a progressive mover in just three years. Now it is trying to keep the action moving after the central government took away a main incentive

It takes a tense hour to drive along a winding, bumpy, mostly unpaved road from the village of Satara to reach the hilly terrain where the majority of the Maharashtra's wind farms are located some five hours from the capital, Poona. The road has no guard rails and it does credit to inventive Indian methods of haulage that the turbines even got up there. Indeed, Indian resourcefulness is at the heart of the unique way Maharashtra has joined the Indian wind energy caravan.

With a late start from 1997, this state in central west India has adopted a relatively progressive wind policy and incentives program that got more than 75 MW installed in three years, mainly as single units or small projects owned by local industry. More than 20 companies have invested in a wind turbine or group of turbines and at least some of the active participants feel the program has worked generally the way it was meant to until now, according to some developers. "Nobody expected the wind program in Maharashtra to work initially," says J.K. Sharma of RRB Vestas. His colleague, Sarvesh Kumar, adds that the company recognised the potential in the state over three years ago, when it set up the first turbines. "The renewables policy played a major role in giving wind energy a push it needed during the past years of an ailing economy," says Kumar. But a number of factors, such as infrastructure costs and the removal of a key tax incentive, are of serious concern to wind industry players.

Lessons learned

"Maharashtra has adopted a forward-looking policy," says P.S. Salunkhe of the Maharashtra Energy Development Agency (MEDA), which acts as a single window agency for processing wind projects. During the past year alone, he says that over 50 MW was commissioned and more than $27 million was invested by the private sector. "Because Maharashtra started late in wind energy, we learned lessons," he adds. "Without infrastructure, we realised no investments would come. So we concentrated on grid upgrades. We provided the first 33 kVa station.

"Our incentives have been linked to performance and generation because we do not want to create a white elephant like other states have done," Salunkhe says, referring to wind projects put up as tax shelters and all but abandoned. Maharashtra charges developers a $68,000 fee for infrastructure development, which is twice the cost in the state of Tamil Nadu; in Andhra Pradesh no charge is made. Most developers say they consider the figure -- expected to rise by an additional third -- "exorbitant."

"Maharashtra has a good renewables policy," says Enercon India's S.V. Kulkarni. The company has set up 44, 230 kW turbines in the state. "However, infrastructure costs are too high and are constantly increased. The bridges and roads are old and need to be widened."

He is not alone with this view. Improvements are needed, says a second developer. Other problems are also prevalent. "Land prices have been rising due to unscrupulous contractors grabbing land. From $115 per acre two years ago, the land has gone up to $900 an acre," he says, though declines to be named. Part of the problem remains with the forest department holding on to what it calls "forest land," vast spaces of arid barren land that could be a prime location for wind development, he claims.

Lost benefit

Maharashtra's renewable energy policy is aimed at attracting investors and it has been successful in persuading a number of industrial companies that a wind turbine would be a good idea. One major benefit available is an exemption from sales tax for six years on Build-Operate-Transfer projects (Windpower Monthly, June 1999). But the central government has directed the state to withdraw this benefit for projects going up after January 1, 2000. Without this incentive there are fears that investors will disappear. "It is essential that a policy, once introduced, continues for at least six years so that developers can plan and budget their projects," says one developer. "Ad hoc changes put plans in a flurry," admits Winindia's G.V. Kamath. He says that although his company has only three 750 kW turbines up in Maharashtra, Winindia is planning another 20.

"There is a confusion and uncertainty regarding the withdrawal of the sales tax benefit," admits MEDA's Salunkhe. He is optimistic that the benefits will return in the form of other incentives, however, and MEDA has proposed two substitutes. One is a carbon emission tax on power producers in the conventional sector, expected to return some $46 million a year. This money, he says, can be used for loans to develop the wind sector.

MEDA has also approached the World Bank for soft loans, Salunkhe says, since the 13.5% interest rate demanded by the Indian Renewable Energy Agency (IREDA) is unrealistically high. "If we get the [World Bank] loan at 2.5% and charge loans at 5%, we believe it will help developers to move faster," he says.

Tariff dispute

Another development in Maharashtra, seen as potentially positive for wind, is the setting up of a State Electricity Regulatory Commission (SERC) -- the first state to do so. The SERC, which is still finding its bearings, has the power to fix and regulate the electricity tariff. But the Maharashtra State Electricity Board (MSEB), which controls the grid, and SERC have yet to agree on a common tariff policy. Recently when MSEB proposed increasing the tariff by 18.9%, MERC reduced the increase to 6.5% "in the interest of the consumer." Says one industry observer: "There is a confusion of the roles of the two organisations. These are initial stages of MERC. It will take time for it to settle down."

RRB Vestas' J.K. Sharma believes MSEB's tariff revision in the offing will make wind energy more competitive and in demand. But the utility is in a bad financial way. "If the government cannot give us a guarantee on payments, they are not in a position to take charge when private buyers default," is the view of one power producer.

Green power tourism

A number of factors have slowed the pace of wind development in India compared with the wind rush of a few years ago, says MEDA's Salunkhe. Poor planning and micrositing by developers, negative publicity about depreciation-driven investments, inadequate transmission facilities by state electricity boards and delays in site permit approvals have all contributed to the current situation.

In addition to new incentives, MEDA has another idea to get wind development moving again. It suggests a master plan for "green power districts," in which new sites for renewable energy will be identified, infrastructure created and trees planted. MEDA has identified 21 new sites suitable for generation with 27 additional sites being monitored. Plans are for Satara district, which has sites for a potential 500 MW of wind out of a total state potential of 1000 MW, to be declared one of the first green power districts, Salunkhe says.

The central feature of the plan is the development of a 20 acre non-conventional energy park to attract tourists. The main attraction will be wind turbines. The park has already been sanctioned by the Ministry of Non Conventional Energy Sources, which will contribute some starting capital. "Demonstration projects of working equipment like turbines will prove a point of interest to people visiting it," Salunkhe says. "This, we believe, will create awareness of renewables in India with the general public."

The Maharashtra Tourism Development Corp (MTDC) has agreed to help promote the Satara area as a tourism destination. The backwaters in the area will offer boating and MTDC plans to set up a roped path and trekking tours. Turbine manufacturers such as Suzlon have even indicated an interest in setting up a small, good quality motel accommodation, Salunkhe says.

Technology leaders

MEDA is focusing its support on high capacity pitch-regulated turbines recommended for low wind regimes, a requirement which led RRB Vestas to redesign a special low wind turbine. Two of these are being tested by the new wind technology centre in Chennai.

One company, Suzlon, has raced ahead. Its success, say its competitors, lie in the intense and advanced planning the company did before starting its 200 MW project at Vankusawade, 40 kilometres from Satara. In collaboration with German Südwind, Suzlon had commissioned 15 MW by March 1999, 35 MW a year later and now plans to put 150 MW on-line by March 2001. With 148, 350 kW turbines up so far, the company is set to begin using 1 MW turbines soon, says Suzlon's Vinayak Pillai.

Suzlon is one of the few wind power plant developers in the area which has concentrated its wind farms within a consolidated area, which helps keep maintenance costs down. It has also installed two helicopter landing pads at the Vankusawade site to help improve access. One Suzlon representative on site says: "The wind industry has become very competitive. Every customer requires a cost study. While there is not much cream left in the business as costs have become high, to us, saving the environment is a responsibility."

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