The main market driver remains the textiles industry, thanks largely to incentives under the Textile Upgradation Fund (TUF). Now extended to 2007, TUF provides loans at commercial rates to assist the textile industry's modernisation, including gaining access to firm supplies of power by investing in its own power plant.
"With the textile industry being power intensive it becomes a natural contender for wind power solutions," says Tulsi Tanti of India's dominant wind turbine company, Suzlon. "The major expenditure on the cost of production is fixed by investing in wind energy. This helps the textile industry to work up their profitability and become more competitive in its market." Suzlon had sold 321.60 MW by the end of the year with a further 100 MW expected by the end of this month.
In Tamil Nadu, home to 50% of India's $270 billion textiles market, the TUF scheme has been boosted further by the state government's decision to introduce a special lending rate of 12.5% for wind projects supplying power directly to the owner. "As a result of a stable policy and attempts to continue to woo wind, Tamil Nadu saw the highest wind energy installations in India in the last year," says Sarvesh Kumar of Vestas RRB India. The company will have installed 120 MW in the year up to the end of March, most of that in Tamil Nadu and Karnataka. Kumar also notes around half of the orders the company is currently working on are for the textile industry. The trend is likely to continue for at least the next few years.
New electricity act
Despite the wind industry's success, it still only plays a minor role in India's national electricity policy. This was at long last approved last month, having been originally formulated under the Electricity Act 2003, but it failed to live up to the expectations of the wind industry. Rather than mandating that utilities buy a fixed proportion of their power from renewables, they are only being asked to buy an unspecified percentage. The wind industry had been hoping for mandated 10% targets. "Instead it remains just a guideline and goes to show the lack of government commitment," says Suzlon's Vivek Tarneja.
His disappointment, however, is not shared by the industry at large. Significant growth is expected in Tamil Nadu, Karnataka and Rajasthan. Nirmal Gupta of blade manufacturer LM Glasfiber, says business is booming. He has few regrets about the new power policy. LM, he adds, has agreements to equip 500 MW of turbines a year in Karnataka alone.
The new policy does require state regulatory commissions to open non-discriminatory transmission access to wind power producers as soon us possible. This includes upgrading state load-dispatch centres by June 2006. If carried out, the measures go a long way towards levelling the playing field for wind generators. "Today the economy in India is booming so it is not affecting growth of wind power. However, when the growth slows down, as it is bound to, we will realise the role legislation can play. It is the only tool that can push the sector steadily on," says Vestas RRB's Kumar.