Recently the Government approved for viability gap funding (VGF) covering 36 per cent of the total project cost for offshore wind energy projects.
- The Union Ministry of New and Renewable Energy (MNRE) and the Union Ministry of Power are responsible for the cost and construction of the entire power evacuation infrastructure.
National Offshore Wind Energy Policy 2015
- Objective: It is designed to stimulate the expansion of offshore wind energy within the nation.
- The policy established a regulatory structure for offshore wind energy growth, spanning up to 200 nautical miles from the coastline and encompassing the country’s Exclusive Economic Zone (EEZ).
- Nodal Ministry: Ministry of New and Renewable Energy (MNRE).
Wind Energy in India
- India’s installed wind power capacity is the 4th largest in the world.
- The wind power capacity is mainly spread across, southern, western and north-western regions of India
- Wind power accounts for nearly 10% of India’s total installed utility power generation capacity in the fiscal year 2022–23, which is nearly 4.43% of total electricity generation.
- Gujarat has the highest share (around 24%) and Tamil Nadu’s was 2nd highest (around 23% share) of the total installed wind power capacity of the country.
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Scheme for Financial Support to Public Private Partnerships in Infrastructure (Viability Gap Funding Scheme)
- Viability Gap Funding Scheme
- It provides financial support in the form of grants, one time or deferred, to economically desirable but commercially unviable infrastructure projects undertaken through PPPs with a view to make them commercially viable.
- Administered by: Department of Economic Affairs, Ministry of Finance
- AIM: This funding attracts private investment into sectors where projects would otherwise be financially unfeasible due to high initial costs or long gestation periods. Both of which we witness in wind energy installations.
- Viability gap funding set to boost offshore wind energy space:
- The VGF scheme is a major step towards implementation of the National Offshore Wind Energy Policy notified in 2015 with an aim to exploit the vast offshore wind energy potential that exists within the exclusive economic zone of India.
- Benefits: VGF support from the Government will reduce the cost of power from offshore wind projects and make them viable for purchase by DISCOMs.
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Case Study: China Did The Same
- China, which struggled to install offshore wind projects in 2010 due to lack of expertise and technology, had taken a similar step.
- In 2017: It provided funding support through subsidies of up to 48 per cent of project cost to developers, leading to capacity addition of around 4.1 GW between 2014 and 2018.
- At present: China is the leader in this segment with 30 per cent global share.
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Anticipated Benefits Of This Initiative
Followings are the anticipated Benefits:
- Clean Energy: 1 GW offshore wind projects are expected to generate approximately 3.72 billion units of renewable electricity annually
- This significant production of clean energy will lead to a reduction of 2.98 million tonnes of CO2 emissions per year, sustained over a 25-year period.
- India’s ocean-based economic activities (blue economy) : It is projected to create a robust ecosystem for offshore wind energy, facilitating the development of an initial 37 GW with an estimated investment of Rs 4,500 billion.
- Infrastructure Development: Upgraded port facilities will ensure the efficient transport and installation of heavy and large-dimension equipment, which is crucial for the smooth execution of offshore projects.
- It will be supported by the Ministry of Ports, Shipping and Waterways.
- Economic growth and energy security: This infrastructure development is expected to drive job creation, attract investment and foster the development of indigenous manufacturing capabilities, contributing to economic growth and energy security.
- No Land Acquisition barrier: It solves the issue of land inadequacy and remains unaffected by physical barriers that can interrupt wind flow over land, overcoming some of the challenges faced by the wind energy sector currently
Offshore Wind
- It is the energy derived from winds blowing across the sea, transformed into electricity and supplied into the electricity network onshore.
- MNRE has set a target of 30 GW offshore wind installations by 2030.
- Potential with India: India is blessed with a coastline of about 7600 km surrounded by water on three sides and has good prospects of harnessing offshore wind energy.
Why Prefer Offshore than Onshore?
- Onshore wind energy: It is the power that’s generated by wind turbines located on land driven by the natural movement of the air.
- Less Obstruction: Absence of any obstruction in the sea offers much better quality of wind and its conversion to electrical energy.
- Larger in Size: Offshore wind turbines are much larger in size (in range of 5 to 10 MW per turbine) as against 2-3 MW of an onshore wind turbine.
- Higher efficiencies: Cost per MW for offshore turbines are higher because of stronger structures and foundations needed in marine environments, the desirable tariffs can be achieved on account of higher efficiencies of these turbines after development of the ecosystem.
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Anticipated Challenges & Way Forward
Followings are the anticipated challenges:
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- Financial Challenges: Would VGF amount be sufficient for Independent Power Producers (IPPs) to generate and sell offshore wind power at competitive rates to state DISCOMs.
- Power Purchase agreement (PPA) tariff is a critical factor: The current rates may not fully cover the costs without further additional support in implementation.
- To address the financial challenges: Considerations for waiving customs duty on offshore wind turbine generators (WTGs), submarine cables and foundations, as the supply chain for these components is not well established currently in India.
- Regulatory Challenges: The support measures must be direct in resolving power procurement risks from DISCOMS and define various environmental standards on off-shore wind which will strengthen India’s wind energy value chain development.
- Restrict Movements: Development of off-shore activities comes under ambit of India’s Exclusive Economic Zone regulatory rules that govern exploration and extraction.
- Current rules restrict movements, which may enhance cost-effectiveness of construction and installations. Such as specialized marines vessels to construct large turbines, off-shore platforms, etc.
- Building Institutional capacity : At the National Institute of Wind Energy needs to be strengthened
- Coordination between Departments: Offices in Gujarat and Tamil Nadu linked to the maritime, fisheries, and environment departments, to help guide, process, coordinate and approve every project’s EIA, development and other statutory process smoothly with no congestion-based barriers.
July 4, 2024
