WIND POWER

P RES E N T E D BY
ANUSHKA JAIN D I V I J A PA N D E L MANOHARA REDDY P SAI MOUNIKA CH SA KSHA M NI JHAWA N S H A S H A N K VAY S V I J AY M O H A N R

Wind Energy Sector Overview

REGULATORY BODIES

India has been very proactive in harnessing wind energy and initiated wind
power programme as early as 1983. Some of the key Authorities governing wind energy in India are:

1. Ministry of New and Renewable Energy(MNRE)- Government of India

2. Indian Renewable Energy Development Agency (IREDA) ( for financing)

3. Centre for Wind Energy Technology (for assessment testing and certification )

4. State Electricity Regulation Commissions (SERCs)

Sources: Salvus Capital Advisors Pvt. Ltd. Ministry of New and Renewable Energy. India Wind Energy Outlook, Global Wind Energy Council

State wise Wind Installed Capacity

Technology Status
Capacity: 250 2500kW Hub heights: 41 100 mt. Rotor Diameter: 28 110 mt. Gear and gearless type turbines State-of-the-art technology available in India 18 major companies with 44 models

Indigenization about 80 to 50%

Current and Future of wind energy in India

Indias wind power potential as 102,778 MW at 80 metres height, up from the earlier

estimate of approximate 49,130 MW at 50 metres. By the end of August 2012, wind power installations in India had reached 17.9 GW.

As of 31 Jan 2013 the installed capacity of wind power in India was 19661.15 MW

Plan 10th Plan (2002-2007)

Targeted 1,500 M W

Achieved 5,427 MW

11th Plan (2007-2012)

12th Plan (April 2012 to March 2017)

9,000 MW
15,000 M W

10,260 MW
aspirational target of 25,000 MW

If the estimated potential of 102 GW were fully developed,

8 % in 2022 5 % in 2032.

source : India Wind Energy Outlook 2012

Regulatory and Policy Incentives for Wind Power

Policy Incentives 100% Foreign Direct Investment in procuring in renewable energy sector allowed

through the automatic route A total of 35% accelerated depreciation is allowed in the first year (effective from 1st April 2012): 15% normal depreciation and 20% additional depreciation for power sector projects. Tax-free income from sale of power for 10 years under section 80 I A of the Income Tax Act, if the renewable energy power plants start generation before 31st March 2013 Value-added tax (VAT) at reduced rates from 12.5% to 5.5% in some States Allotment and leasing of forest land for development of wind power projects Concessional customs duty (5%) on some of the components of wind power machinery Institutionalization of sector financing through the Indian Renewable Energy Development Agency Wind sector is eligible for exemption from excise duty Institutionalization of R&D, training, product certification, testing and resource assessment via the establishment of the Centre for Wind Energy Technology Exemption of Electricity Duty by State Governments

Regulatory Incentives
Preferential feed-in tariff in 13 states for wind power Favorable provisions for wheeling, banking and third party sale by wind power producers National-level dynamic Renewable Purchase Specification of 5% (2009/2010) increasing by 1% every year to 15% by 2020 mandated under National Action Plan on Climate Change Renewable Purchase Specification (RPS) announced in 26 states as mandated by the

Electricity Act, 2003

Renewable Energy Certificate (REC) mechanism introduced for inter-state trading of renewable power (solar and non-solar power separately) Concessional levy of cross subsidy surcharge in the case of third party sales by wind power producers Other Initiatives- National Clean Energy Fund, Renewable Regulatory Fund Mechanism, Land Allocation Policy, Renewable Energy Law, Generation based incentive(GBI)

Key Drivers for the Sector

Till 31.3.2012 were:

A.1 Favourable Fiscal policies: Capital subsidies (Accelerated Depreciation to the tune of 80% of capital cost), Income tax holiday, custom and excise duty benefits and easy loans from IREDA. A.2 Supportive regulatory framework. B.1 All those listed above except AD benefit. B.2 Cost-competitiveness against conventional power. B.3 Generation Based Incentives with preferential tariffs. B.4 Renewable Purchase Obligations. The REC market is a big driver for wind energy.

After 31.3.2012 Are:

Climate-connect.co.uk

Countrys Windiest State , Tamil Nadu

All time high of 3960 MW contributed to grid on 4.7.2012 2010-11 - 8720.045 MU (11.6 % of total energy fed into grid), 2011-12 - 9763.048 MU. ( 12.6 % of total energy fed into grid)

Long term mean wind speed is increased from 6m/s to 10m/s (67%),the energy production increases by 134% Sensitivity of energy yield to wind speed variation varies with the wind speed. i.e. for a low wind speed site,a 1% change in wind speed might result in a 2% change in the energy whereas for a high wind speed site the value might be only 1.5%.

Commercial Value of a wind farm development is therefore crucially dependent on the energy yield which in turn is highly sensitive to the wind speed.
Enormous change in financial terms for both debt and equity is seen

Sensitivity Analysis
Wind Resource Assessment at the site Electrical Line Losses

mainly mean wind speed at the site Levelized cost of electricity from wind has which includes: a high sensitivity to the load factor Turbulence intensity, variation. Probability distribution of wind speed, load factors range between 21% and 41% for onshore wind turbines, and 34% Prevailing wind direction to 43% for offshore wind farms Terrain effects Capacity of local grid Wind Turbine Specimen Variation (rotor diameter, rated power, hub height) Joint analysis of regional climate, Wind Turbine Power Curve Uncertainty turbine engineering, and economic Energy Losses occurring during the modeling is needed. operation which can be: Availability Losses Fouling and Icing Losses

Forecast
Method Linear Regression
Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Installed Capacity MW 44 134 371 679 858 577.91 381.08 431 602 997 197 694.1881818 730.0134091 765.8386364 801.6638636

Tamil Nadu government

Suzlon has transformed from a small company of twenty people to a

major multinational business Suzlons success illustrates the desperate need for reliable clean energy
moneycontrol.com

IPO was launched in 2005 Sep When everything seemed to be going in Suzlon's

favour, what brought it down. huge debt? wrong acquisitions at the wrong time? mishandling the acquisitions? US companies finding fault with Suzlon's turbines?

www.spiegel.de

Source

www.forbes.com

 Acquisitions have helped the company reach fifth place :

Repower In the United States, Suzlon is currently experiencing the biggest debacle in its relatively short history. Suzlon owes much of its success to lower production costs.

Suddenly they're asking 20 times as much for their land valuable parts to scrap metal dealers real estate brokers had cheated them when they sold their land.

Corporate Debt Restructuring 9500 crores Orders Suzlon worth 37,400 crores German subsidiary Repower 26,500 crores Working capital 1800 crores Reintroduction of GBI , July 2013
Source : businesstoday.intoday.in

Barriers to achieving higher growth of wind energy:

The following are barriers for achieving higher growth of wind energy:
lack of an appropriate regulatory framework to facilitate purchase of renewable energy

from outside the host state.

inadequate grid connectivity high wheeling and open access charges in some states

delays in acquiring and obtaining statutory clearances.

Feed in tariff determined by the SERCs may or may not be equivalent to that of CERC tariffs.

They vary across the states and remain fixed for a longer control period, this could impact the returns for new projects commissioned under this tariff regime and negatively impact new project development activity.
Inordinately high borrowing costs. In India, a significant majority of wind power projects

are conceived with a 70:30 debt-equity ratio as a project financing method.

Conclusions
Reasons for slowing down of the sector due to removal of AD and GBI.

It has been argued that as the industry matures it should lose dependency
on fiscal incentives. However regulatory changes need to be phased out slowly. Sudden changes can arrest the industry.

The original and perhaps smarter plan was to stabilize the Renewable
Energy Certificate (REC) market and Direct Tax Code (DTC) before withdrawing AD and GBI.

Contd..
It should be mandatory for all state and central PSUs to meet renewable energy

targets, either by investing into renewable energy projects or through purchase of RECs. Large corporates should be given a mandatory target of reducing their carbon footprint by 15 per cent, by either investing in renewables or RECs, as a part of their Corporate Social Responsibility. These measures would need to be monitored, perhaps on a quarterly basis and any discrepancies should be penalised. REC settlements should also be done on a quarterly basis to develop faith in the system. There is no doubt that the REC instrument is an innovative, and much needed, scheme. A little push to stabilise the system would go a long way. In terms of financing a real challenge for the wind industry today a few reforms are required to accelerate development and exploit the industrys potential. Project finance should be available for 20 years, instead of the current 7-10 years, with a three-year moratorium on repayment and a ballooning repayment scheme for 17 years. Considering that the life of a wind project is for 20-25 years, this is fully justified.