India

India

Government goals let down by policy

India's wind market may be the fourth biggest in the world, but equipment suppliers and project developers will head for richer pickings if government policies are not much improved, warned speakers at this year's Renewable Energy India 2008

With around 200 exhibitors and 1500 participants, Renewable Energy India 2008 Expo in Delhi was a celebration of what India has achieved to date in fostering sector growth. It was also a chance for other countries -- most notably Germany -- to promote their renewable energy industries as partners for India going forward. The German delegation, among exhibitors from 19 countries who had come to learn about the Indian market, even celebrated German Renewable Energy Day at the event. Wind power dominated the exposition, but by the end of the three days from August 21-23, the message to government was clear-much improved policies are needed if the industry's past success is to continue into the future.

"The most ambitious and entirely market driven program of wind power has been highly successful, with an installed capacity of 8757 MW," said Vilas Muttewar, minister of state for new and renewable energy. India's 11th five year plan for its economy, covering the 2007- 2012 period, is aiming for 61 GW of new generating capacity, and Muttewar wants to see 14 GW of that come from renewables, with wind at 10 GW. Around $15 billion will be needed to reach the 14 GW target, says the Asian Development Bank. If achieved, renewable energy will account for 10% of the country's generating capacity by 2012, providing 4-5% of its electricity supply.

If Muttewar's plan is to be reached, cumulative wind power capacity will need to more than double in the next four years -- to close to 20 GW. Small hydro is not expected to contribute more than 1400 MW of the 14 GW target, while 1200 MW will come from cogeneration and 500 MW from biomass. With wind's pivotal role in mind, Muttewar was quick to reassure delegates that government policy will continue to make private investment in wind power profitable. Relief from import and excise duty will continue to apply to key wind turbine components, along with a ten year tax holiday on revenue from sales of wind generated electricity. Most significantly, a pilot program of incentive payments for electricity produced from wind power stations with rated capacities of 5 MW to 49 MW has also been introduced (box).

Financing agencies are interested in India, said Craig S O'Connor from the United States Export-Import Bank (Exim), which wants to grow its portfolio of environmental investment. "We welcome projects from India," he added. The bank's main products include direct loans, loan guarantees, export credit insurance, and working capital guarantees with no minimum or maximum project size, said O'Connor. It is also providing $2.45 billion in funding to nine Indian financial institutions including the India Renewable Energy Development Agency (IREDA). The funding is targeted at projects using US goods.

From Ernst & Young, Kuljit Singh said that India is seen as a key growth market for renewables. He cited the national shortage of electricity, good resource availability, government incentives and increased financing as key drivers for investment. Even so, India's domestic wind turbine industry is increasingly turning its back on its home market in search of better returns abroad. Speakers at Renewable Energy India renewed calls for a new dedicated renewable energy policy. India "is becoming a global manufacturing hub," said Rajindra Valsalan of turbine manufacturer WinWind, a Finnish company that has just set up operations in India. But it is not the domestic market that companies are interested in.

Better abroad

"Manufacturers are seeking the export market for better profitability since they get higher realisations abroad," said Valsalan. With static energy prices in India, profits for wind power investors are being squeezed, he added. "Players with a robust supply chain management could survive better," he added.

Madhusudan Khemka of Regen, which manufactures wind turbines under licence from Germany's Vensys, was even more forceful in highlighting the weaknesses in India's market. "Wind resources need to be evaluated more, tax structures need to be strengthened and the 80% depreciation is being used as a tax shield," he said. Shrenik Ghodawat of wind turbine supplier Ghodawat Industries agreed with this assessment: "Eighty percent of investment is used for capital and tax benefits...We need to change our mentality here."

Land issues are also hurting and costs need to be brought down, said Juergen Jesenko of AMSC Windtec, which has licensed its technology for a 1.65 MW machine to Ghodawat (Windpower Monthly, May 2008). He cited China as a good example to follow. "India has the advantage of skills, know how, spirit and quality compared to China, but China has built its industry to 1000 turbines a year," he said. "The component supply chain is being managed well there. Why is it not possible in India?"

The comparison with China is unfair, according to a Tata Power representative. "If China decides to put up a wind farm, the government will set it up at whatever the cost. In India, wind power is financed by bank loans backed by securities," he said, highlighting the fundamental difference between the two markets. "Besides, China has many wind sites, India has only seven states with ample wind speeds."

Renewable Energy India attracted about 1500 visitors. The main wind industry exhibitors were Vestas, Suzlon, RRB Vestas, WinWind, and Ghodawat Industries.

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