Is the answer to India’s energy future blowing in the Wind? – by Ritesh Pothan

Ritesh Pothan offer us an in-depth analysis of the wind industry present and future in India. “Wind is still considered an area of growth by the MNRE however the situation on the ground is a different story,” says Ritesh. “There is significant area of improvements and untapped potential by increasing hub heights which would result in future growth.” That said, our blogger is not convinced the answer to India’s energy future is blowing in the wind. – Renewable Energy Magazine

Is the answer to IndiaIndia is ranked fifth on the list of wind generating nationsand a majority of India’s ~20GW renewable power portfolio is currently contributed by Wind. As of 2011, installed capacity crossed 14.5 GW’s, essentially driven by the Income Tax Holiday for 10 years as well asAccelerated Depreciation. India has been experiencing sporadic growth stories in renewable energy and wind energy was amongst the foremost renewable energy (RE) technologies that led the Indian RE revolution in India over the past two decades. A significant chunk of wind projects are in Tamil Nadu (though now slowing down due to the 14 month delay in payments), with the rest playing catch up.

Table 1: Wind Capacity Utilization Factors and Generation in windy states

Wind Capacity Utilization Factors and Generation

The spurt in wind began at a time when the economy opened up and organizations needed conduits to defray supernormal profits. The accelerated depreciation route in investing in wind turbines saw a large number of unrelated organizations invest in mega wind farms, DLF amongst them, now selling all their wind holdings with other non-core assets.

Key factors pushing wind energy over the last few years, especially prior to 2008, were lower taxes (80-IA, AD), introduction of GBI as an interim measure in 2009 with validity till 2012 and later on Renewable Energy Certificates(RECs) in 2010 with trading beginning in 2011. Generation Based Incentives (GBI) are supported by IREDA, who are responsible for distributing the money however GBI has found few takers, as it bars developers and IPPs from using the wind farm to offset profits via the accelerated depreciation (AD) route. Though the recent removal of AD for wind turbines, has also raised the hackles of the wind industry, as it makes an already difficult proposition more unviable.

Some key terms of GBI, were that the initial 4000MW (though less than 400MW of projects have availed of GBI) installed till March 2012, (owners / IPPs) would be able to avail Rs.62 Lakhs per MW installed for all purposes excluding third party sales, subject to the fact, that such turbine owners not claim accelerated depreciation or any tariff above the installed SERC rates.

GBI Claims are currently only being processed for applicants who have claimed depreciation @ 7.69% and other applications where depreciation is claimed at a rate other than 7.69% are being kept on hold. Also claims would now only be released on annual basis after receipt of IT return of concern period.

Wind is still considered an area of growth by the MNRE however the situation on the ground is a different story. Increasing paucity of windy sits >25% PLF (Plant Load Factor) across the sub-continent has made projects a difficult sale though industry veterans still maintain that there is significant area of improvements and untapped potential by increasing hub heights which would result in future growth. This is open to debate.

Chart 1: Various proposed growth scenarios for Cumulative Wind Energy in India

Various proposed growth scenarios for Cumulative Wind Energy

There are few high >25% PLF wind corridors left to generate significantly more and the maximum power generation would only be equivalent to a third of a similar rated conventional thermal Coal / Biomass power plant.

A majority of wind turbines installed prior to 2005 were low capacities. To address this, various CWET approved turbine manufacturers have now introduced WTG updates using low wind factor technologies. A vast majority of Indian turbines over the years have been installed by SuzlonGeneral ElectricGamesaVestasKenersysEnercon, though not necessarily in that order.

Map 1: Wind Power Density map from Indian Wind Atlas (2010)

Wind Power Density map

The total estimated wind potential amounts to just 5% of all energy generation projected for 2030 with most capacities concentrated in Tamil Nadu, Rajasthan, Karnataka, Gujarat and Maharashtra. However since wind is an inconsistent power generator relying heavily on “banking” of power with state distribution utilities, it is unviable for base load and thus not yet a conventional power replacement. There have been efforts in planning & forecasting of wind generation which haven’t really taken off.

Chart 2: Capacity and Electricity Generation from Renewable Energy Sources (2008-2009)

Capacity and Electricity Generation

Source: IDFC RE Report

There are still quite a few manufacturers selling 500KW or below turbines which are essentially a drain on precious wind sites. A number of IPP organizations serious on wind assets have started acquiring such old and low WTG prime wind sites with defunct assets to reengage. The reasons being, states facing energy shortages host sites with additional wind power potential are not used efficiently due to lower sized turbines needing to be replaced with more powerful turbines that would bring more power to the grid with minimal change in supporting infrastructure.

Quite a few sites with potential are currently occupied by more than 8,500 small rating turbines (do not guarantee the power curvefor the machine which brings in a tremendous amount of ambiguity in power generation unlike solar or any other technology.

In addition, maintenance costs with generation issues tend to be higher for aging WTGs which are a direct natural progression of the moving parts in a turbine. The effective capacity utilization factor of low end turbines in Tamil Nadu is estimated at less than 15% as old wind turbines were often installed at low hub-heights of 30-40 meters while occupying land which cannot be used for agricultural purposes or more efficient turbines.

Current development costs in the last year have increased from a few lakhs per point to multiples, further reducing viability for investors. Another weak point is that generation capabilities of wind can only beat Solar PV by a whisker, which is by far the least efficient power form.

Table 2: Estimated Grid Connected Renewable Energy Potential In India

Estimated Grid Connected Renewable Energy Potential

Another cause for concern has been the recent trend to price turbines by the generation numbers. Current per MW costs for an investor can vary as much as Rs. 5.5-7 crores ($1.1mm-$1.4mm) depending on site, location, manufacturer which has reduced the number of sales to only very serious players with a long term view.

A short term view taken by some states as well as wind site consultants has also resulted in increase in cost of acquisition of land, power as well legal clearances further impacting an already fluid industry. The increasing trend of large capacity turbines of 1.5MW+ are a necessary stage in the industry evolution.

Table 3: Comparison of Wind Turbine Generators Technology Options and Development Trends

Comparison of Wind Turbine Generators

Debacles like Suzlon, as well as, Orient green power promoted by Shriram EPC which held a 35.8% stake along with the remaining stake by two private equity firms – Bessemer Venture Partners and Olympus Capital cashed out on the bull run, listing the firm at around Rs. 47 (~$1) per share and are now down to lower than one fourth their value, with all-time lows of less than one fifth. Promoters squeezing the maximum profit at the IPO with not much scope left for shareholders has now become quite the norm rather than the exception leaving no space for investor returns. This trend has impacted the renewable energy listings over the subsequent period and continues to do so, with most energy companies trading well below listing price.

REC’s (which I have covered in some detail in a previous article) to cut a long story short are market driven incentive’s to producing clean power and supplying it to the grid at APPLC price. The wind market has begun trading in REC’s since early 2011 and as yet no solar trades (as of April 1 2012) have happened as yet with only 4 plants signed up.

Table 4: Registered Solar PV Power Plants under REC Scheme

Registered Solar PV Power Plants

Initially most REC’s traded at the floor price and have rising since then which is a good sign for the industry already plagued by high financial interest and poor uptake. The main market is Renewable Purchase Obligations which are mandated by the centre however with the poor performance of state electric utilities especially those who are on the verge of bankruptcy is the issue of poor implementation.

Chart 2: Non-Solar REC traded prices

Non-Solar REC traded prices

Source: RE Connect Energy

REC’s have currently been trading on 2 primary exchanges Indian Energy Exchange and Power Exchange India Limited with all trading currently towards non-Solar REC’s. As of March 2012, no Solar RECs have been traded as yet even though buyers have begun to line up.

Table 5: RPOs targets and compliance across states in India


Source: IDFC Report on Economics, Regulation, and Implementation Strategy for Renewable Energy Certificates in India

Certain states have been consistent RE generators and these states feel a sense of fairness come into the system with the equivocal division of sustainable emphasis on power generation. The latest is that the MNRE Secretary – Gireesh Pradhan is also pushing for RECs in a big way but without enforcement it’s just a tiger without teeth. Paying for expensive power from Renewable Energy Sources will further push state utilities to the brink of a precipice, the solutions right now are for improvements in AT&C losses as well as reduction / grid parity of RE generation prices, which for Solar and Biomass are hovering in the Rs.6-7 range.

Wind has definitely led the race towards energy security but moving forward will play more of a supporting role for Solar and other consistent renewable solutions. And so for the future, the answer is no longer blowing in the wind.

Editor’s Note: Ritesh Pothan leads an advisory organization focused on renewable energy projects and also runs two of the largest renewable energy forums on dedicated to the Indian subcontinent.

You can reach him at and the forums at Renewable Energy and Cleantech Forum – India as well as Solar Energy Professionals – India.

About Ritesh Pothan

Ritesh Pothan, is an accomplished speaker and visionary in the Solar Energy space in India. Ritesh is from an Engineering Background with a Master’s Degree in Technology and had spent more than a decade as the Infrastructure Head for a public limited company with the last 9 years dedicated to Solar and Renewable Energy. He also runs the 2 largest India focused renewable energy groups on LinkedIn - Solar - India and Renewables - India
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