Market Status: India - New initiatives likely to end market slowdown

The global financial crisis saw reduced capital flow into India's wind energy sector towards the end of 2008, which continued throughout much of 2009.

A significant slowdown in demand affected the entire industry. Nevertheless, new additions in the 2009 financial year had reached 1.3GW by January, bringing India's total installed capacity to 10.9GW. This changes the preliminary figures that were reported at the start of the year.

And despite the slowdown in installations in the past year, many initiatives introduced in late 2009 are likely to influence the growth of the wind industry this year. For instance, under the Electricity Act, 2003, fully implemented last year, it has become obligatory for state electricity regulatory authorities to set a minimum percentage of electricity generated from renewable sources. So far, ten out of India's 29 states have introduced quotas for a renewable energy share of up to 10% and have also introduced preferential tariffs for electricity produced from renewable sources. The preferential tariff varies from state to state.

Meanwhile, in early February this year, the Central Electricity Regulatory Commission announced a policy for regulating renewable energy certificates (RECs) to give a boost to renewable energy. The policy will create a national-level market for buying and selling such certificates, the commission said.

Tariff or certificate

Under February's announcement, renewable energy generators have a choice either to sell energy at the preferential tariff fixed by individual state electricity regulatory commissions or to sell the environmental attributes of their activities in the form of RECs. The value of each REC is equivalent to 1MWh of electricity fed into the grid. A utility or power producer that exceeds its renewable energy target will be able to sell surplus certificates to utilities that fail to meet their goals. The aim is to encourage the development of new renewable energy capacity in states where there is potential, by allowing generators in these areas to recover their costs through the trading of RECs with utilities in states that have less potential for renewables.

Meanwhile, in December the Ministry of New and Renewable Energy finalised details of a generation-based incentive (GBI) that will now be rolled out following a pilot. The GBI, worth INR 0.50/kWH ($0.01/kWh), will be payable on top of the tariffs already available for wind energy. "GBI makes wind power more attractive for investors, with the pay-back period for investment in wind farms coming down and the internal rate of return increasing," says DV Giri, chairman of the Indian Wind Turbine Manufacturers' Association.

Giri says that the signs for India's wind sector over the next year and further ahead look promising. "With the recession now behind us, the industry should surpass the 2GW milestone in 2010-11," he says.

Strong orders

Indeed, orders are looking strong. Manufacturer Suzlon saw the sale of 327MW in India from March to December last year. Vestas says it has an order book for installation of 250MW, which it will complete in 2010, and for another 200MW in 2011. Enercon India, too, has a comfortable order book of 900MW for the next two years.

Airvoice Group, an Indian mobile phone and commodity export firm, recently formed a joint venture with power company Satluj Jal Vidyut Nigam to invest $50 billion in a clean energy project over 10 years. It wants to develop 13GW of wind and solar power capacity in Karnataka, southwest India, 3GW of which would come from wind. The first phase, which will include 200MW of wind capacity, is likely to be commissioned in the next 36 months.

Spain's Gamesa Corporacion Tecnologica also has plans for India. At the end of last year it announced the launch of its operations in India by setting up a subsidiary, Gamesa Wind Turbines, and a new manufacturing facility in Chennai, which will have a 500MW annual capacity. It will produce 850kW turbines.

Suzlon holds a 45% share in the wind energy market in India, followed by Enercon at 20%, Vestas at 12%, RRB Energy at 8.5% and others at 14.5% (see chart, page 88).

The top five states in the country in terms of approximate installed capacity are Tamil Nadu at 42%, Maharashtra at 19%, Gujarat at 15%, Karnataka at 13% and Rajasthan at 7%.