New subsidy approach

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India is piloting a long called for Generation Based Incentive (GBI) subsidy for wind power. It will apply to new grid-connected projects up to the end of 2012 ranging in size from 5 MW to 49 MW. The wind industry, however, is objecting to the size cap, with the Indian Wind Turbine Manufacturers' Association already calling for it to be removed.

Under the pilot program, independent power producers will be paid a production incentive of INR 0.5/kWh ($0.011/kWh) for ten years for electricity sold into the national network. The money will be paid at the end of each six month generation period and is in addition to purchase prices paid by utilities under state policies. The incentive is not applicable to merchant plant selling power directly into the market or to companies generating electricity from the wind for their own use, or selling power under contract to third parties. Neither is the incentive index linked.

The Indian Renewable Energy Development Agency is implementing the incentive, which is designed primarily to encourage developers and operators that do not benefit from accelerated tax depreciation on their projects. "The objective is to attract new and large independent power producers to the wind sector and encourage actual energy generation rather than capacity addition only, resulting in optimum utilisation of the wind resource," says India's Ministry of New and Renewable Energy (MNRE).

The 50 MW size cap, however, is a barrier to that aim, says the industry. "We need to welcome the scheme as a qualitative not a quantitative step,'" says Madusudan Khemka of Regen. "But when investors see the little amount that it is applicable for, they will not be interested." Rangarajan Balajee of Auro Mira Energy agrees. "MNRE should think of making this GBI scheme more progressive," he says. "MNRE could have some kind of regulatory committee for streamlining GBI." He also advocates settlement every three months, rather than at six monthly intervals.

Sarvesh Kumar, of RRB Energy, previously known as Vestas RRB India, is also frustrated by the limited nature of the legislation and the failure of government to produce the long awaited Renewable Energy Act. "There is no light in sight," he says.

MNRE, meanwhile, urges the industry to be patient, saying the pilot, in its early stage, is being taken to the finance ministry for further consideration. The cap may be raised to 1000-2000 MW within a year, says a ministry official.

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