While much of India was suffering a period of economic downturn, the fiscal year 2001-2002 saw the wind business thrive -- with the largest increase in capacity since 1995-96 and a new renewable energy policy proposal finally laid before parliament. The policy, part of the Electricity Bill 2001, calls for all state governments to produce at least 10% of their total power generation from renewable sources by 2012. This target would be mandatory.
Despite the good news, the Indian wind community remains uneasy about the state of the market. Concerned about the future survival of the wind industry in India, market players cite irregular wind policies, low tariffs, and a reduction in the level of tax depreciation on wind plant equipment as problems that need urgent attention.
A total of 277 MW installed in the year up to the end of March -- a 20% increase on the previous fiscal year -- was installed during 2001-2002, taking the cumulative installed wind capacity to 1617 MW, according to figures announced by the Ministry of Non Conventional Energy Sources (MNES) at its recent conference, Implementation Strategy for Renewable Energy Programmes for the 10th Plan (2002-2007). The cumulative capacity for all renewables is now 3468 MW, of which 1313 MW was added during the 9th plan (1997-2002). Of this, 726 MW came from wind. Four states accounted for 80% of the renewables capacity added -- Maharashtra, (447 MW, most from wind), Tamil Nadu, (234 MW, wind and biomass), Andhra Pradesh (205 MW, biogas and hydro) and Karnataka (181 MW from bagasse and wind).
Despite this growth, conference delegates were told that targets for renewables for the tenth plan period have been revised down from the original target of 4236 MW. "We will now roll back targets for the tenth plan to 3300 MW as we have been allotted a lower budget of $208 million," explained Ajit Gupta of MNES. Of this, 2000 MW is planned to come from wind. For the year 2002-2003 wind is expected to contribute 200 MW, half of the total renewables target for the year.
Poor state policies
Gupta noted that while 14 states had announced "some sort of policies as per our guidelines, most are not following them in total. We hope within six months to one year the electricity bill will become law so that we can be on a firm footing through a uniform participation by all states." If the bill is not approved meeting the 10% renewables by 2012 will be an "impossible task," he said.
Girish Tanti of Suzlon Energy, the countries dominant wind turbine manufacture of late, agreed. "The market growth in the coming years will depend on favourable policies at a state and central level. To achieve this target the renewable energy program needs support from associated market players like the investors, manufacturers, financial institutions, government and, most important, utilities."
Of immediate concern to the wind industry is the reduction of depreciation from 100% to 60%. In the long term a reduction is unlikely to pose a problem, but the Indian Wind Energy Association warned that in cash-starved times the increased cost of replacing equipment would result in projects losing their viability. Sarvesh Kumar of RRB Vestas agreed, suggesting investors will be reluctant to reinvest in projects. "Already, wind energy has no additional benefits to fall back on," he noted.
Inconsistent state policies, as Gupta pointed out, have left a cloud of uncertainty lingering in the air. Maharashtra, which contributed 71% (197 MW) of the new wind capacity added last year, has withdrawn its policy altogether. The industry is now waiting for news of a performance-linked and tariff-based policy which the Maharashtra Energy Development Agency (MEDA) assures will be announced "soon". Similarly, in Gujarat industry has suffered the withdrawal of a favourable wind policy and is promised a new one "within the next two months." One industry sceptic summed up the mood: "Seeing is believing".
With profit margins wafer thin, Tamil Nadu's 4% introduction of sales tax from April 2002 is not much help either, while in states with good policies, such as Karnataka, the uncertainty is also polluting the atmosphere: "You never know when they might change their minds," said another industry voice.
The news is not all grim however. Kerala, adjoining Tamil Nadu, has approved its policy action plan, while Rajasthan continues to have a good policy. New wind projects in these states continue to be planned. "We have signed a three megawatt project for ITC hotels in Jodhpur," Rangarajan Balajee of Indowind announced at the conference. By September, Indowind expects to install 45 turbines totalling 10.15 MW in Tamil Nadu and Karnataka, he added.