Indian government looks to reinvigorate the flagging Wind Energy sector

January 22, 2014 by  
Filed under Green Energy News

The removal of long standing accelerated depreciation subsidy as well as the removal of generation based incentives has caused this problem. This coupled with inadequate transmission capacities has made wind energy slow down considerably. While GBI has been reintroduced, the animal spirits are missing in the wind industry today. Most people are looking to exit the industry at cheap prices, due to a number of uncertainties in operations.

The Indian government now plans to reinvigorate the industry (NYSEARCA:XLE)  with a National Wind Energy Mission (NWEM), which will look to remove the non-commercial barriers to enter into the wind(NYSEARCA:FAN) farm business. The new policy will be modeled after the JNNSM which was developed to promote solar (NYSEARCA:TAN)energy in the country.

Salient Features of the New Wind policy

Some of the salient features of this new policy might be:

1)     Identifying of high wind resource regions in the country

2)     Easing the transmission constraints faced by wind electricity

3)     Facilitating the acquisition of land

4)     Regulating the disparate incentives and tariffs given to the wind industry.

Note Indian wind energy capacity additions have fallen below the 1 GW mark in this fiscal, with only 2 and half months left before the year closes. Last year also the wind energy industry saw a decline. It is hoped that the 50p/Kwh or 0.8c/Kwh generation based incentive can again see some life get infused into wind developers.

India also plans to set up an agency to develop offshore wind energy in the country. Note developed countries such as Germany and USA are already powering ahead with China also building offshore wind farms. Unlike onshore wind farms, offshore wind is more expensive and requires large investments in transmission infrastructure. However, the yield is much higher and there is zero investment in land acquisitions. For a land constrained industry with a very long coastline, offshore wind energy in India makes a lot of sense. Also most high wind resource regions in India have been saturated.

Will the new Government Agency help?

I am not sure whether another government agency will help the industry. The Indian government and bureaucracy is bloated as it is with multiple agencies overlooking the same industry. The mish mash of policies and regulations can create more hurdles than solve them. The agencies start a turf war creating major headaches for private investors. Some agencies however do good work and it is hoped that offshore wind energy agency can create a fertile ground for the development of wind energy off the coasts. It will require a lot of hand holding and subsidies to get the industry kick started in India. It requires a big eco-system of developers, financiers, equipment suppliers etc. for offshore wind, given that the capacity sizes and investment ticket size is quite large.


Contributed by Sneha Shah, Green World Investor




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