Harnessing the Wind for India’s Ambitious Energy Transition

India ranks fourth globally in total wind installations, but it’s time to step on the accelerator.

India is racing towards 500 GW of clean power capacity by 2030, and betting on wind as one of its two mainstays to meet this milestone. From 9.3 GW in 2008 to more than 43 GW today, India ranks fourth globally in total wind installations. By 2030, the target is to reach 100 GW of onshore wind and bid 37 GW of offshore projects. But there is still a long way to go. Research by the Council on Energy, Environment and Water (CEEW) shows that India will need a wind capacity of 557 GW by 2050 and 1,792 GW by 2070 to meet its net zero carbon emissions target. However, wind capacity additions have slowed down since 2017. It is now time to step on the accelerator.

What limits the speed and scale?

Wind power development in India gained momentum since 2005, although turbine installations date back to the 1980s. Projects were small in size and received significant fiscal support in the form of accelerated depreciation, tax holidays, as well as generation-based incentives. They were connected to the state grids, and the power was bought by host state discoms at tariffs (known as Feed-in-Tariffs or FiTs) pre-determined by the state regulatory commissions. In 2016-17, India deployed 5.5 GW of wind capacity, an all-time high in history. However, during the FiT regime, the tariffs continuously increased. These high tariffs triggered the move to competitive bidding or the reverse auction mechanism in 2017, a transparent way of discovering market-reflective prices. The transition from FiT to reverse auctions is said to have been a key factor impeding the pace of deployment – an average of 1.6 GW annually between FY2018 and FY2022, compared to 3 GW between FY2013 and FY2017.

Competition during reverse auctions showed tariff reductions, a much-desired outcome with the implementation of the bidding regime. The first auction, conducted by the Solar Energy Corporation of India (SECI), discovered a tariff of INR 3.46, which was lower than the prevailing FiTs¹. The tariffs reduced further with the next few rounds of SECI auctions, before stabilising between 2018 and 2021. Subsequent vanilla wind auctions have seen slight tariff increases².

However, there were some side effects of this approach. The wind energy industry preferred only two states, Gujarat and Tamil Nadu. As a result, almost half of India’s total wind capacity is located in these states only. The geographical concentration of these projects poses logistical, infrastructural and operational constraints. Further, project commissioning timelines were impacted, the number of investors present in the sector reduced in recent years, and locations in other wind-rich states with higher tariffs became less attractive for price-sensitive buyers. States also asked successful bidders to match the lowest-quoted tariffs in the bidding process, which typically impacts project viability. This approach also does not help leverage the natural complementary patterns in wind resources across geographies, which is desirable for cost-effective grid operations. All these signs made India’s wind targets distant.

India steps in for wind energy

The Indian government recognised these challenges and took several measures in 2022 to accelerate the growth of the wind sector. Some of them were:

• Dedicated Renewable Purchase Obligation (RPO) trajectory for wind energy to create demand for the power generated across states³. The government also supplemented this by notifying an advanced bidding schedule of 10 GW of capacity every year, between FY24 and FY28.
• Uniform or pooled tariffs for wind projects in different states through central auctions so that buyers are not averse to taking power from projects other than those with the lowest tariffs while also benefiting from future tariff declines.
• Single-stage closed bidding for the wind sector instead of reverse auctions, along with mandatory capacity bidding for all the windy states for faster deployment⁴.
• Draft National Repowering Policy for Wind Power Projects, 2022, which aims to replace turbines of less than 2 MW capacity with advanced technologies that can generate more power from existing resource-rich sites.

Avenues for accelerated, diversified and inclusive growth

Wind sector plays a crucial role in India's economic and energy transition journey. As of FY21, the sector employed a workforce of 25,500, which is expected to rise six times by 2030. It already has 15 GW of annual domestic manufacturing capacity, exporting equipment to countries such as Australia, the United States, Europe, Brazil, and others, besides meeting internal demand. We highlight actions that can help realise the massive potential and reap the associated socio-economic benefits.

• Enable systems for regularly updated and robust wind resource and land-related data. The National Institute of Wind Energy has estimated the onshore wind potential of India to be 695 GW at a height of 120 metres. Efforts to regularly develop, update and publish wind resource maps and identification of eligible land areas across states are critical to de-risk new investments. Models to ensure collection and analyses of granular resource data from existing project sites can help create databases for robust sector planning and conducting resource adequacy assessments at the system level. Project deployment can be fast-tracked if central government agencies such as SECI and the Central Electricity Authority, in collaboration with transmission utilities, dynamically facilitate information on sub-station capacities and augmentation plans for the future.
• Repower old wind turbines on the best sites. Central, state or private sector-driven models for aggregating and buying out old wind energy assets will be key. This could be done through special purpose vehicles or collaboration between institutional investors and the OEMs. Regulatory commissions must allow for selling additional power to commercial and industrial consumers in the state, besides the discoms who would wish to meet their RPO. Karnataka is a good example, where KERC has allowed excess electricity generated from the repowered projects to be sold under third-party open access, captive and group captive modes.
• Promote decentralised wind projects for diversified and inclusive deployment. The Centre and states must coordinate to enable the deployment of wind farms of up to 50 MW that connect to the state grids by utilising spare capacities on the existing substations. Smaller projects can attract many small and medium investors and can lead to distributed growth, local job creation, distributive supply chain development, and the inflow of domestic capital. Therefore, a fixed percentage of 10 GW of annual wind capacity bidding can be reserved for such projects, and appropriate tariff determination methods can be devised to accommodate the margins required by such players who have lower risk-taking capabilities.
• Support the development of offshore wind supply chains. India plans to set up offshore wind projects along Gujarat and Tamil Nadu coasts. The estimated potential in these states is more than 70 GW. Although the technology is commercially advanced and has high capacity utilisation factors, scaling it is challenging because of the high cost of generation. A critical cost reduction strategy for India is to enable the establishment of domestic supply chains and the development of manufacturing and procurement facilities at ports. Demand-side policies and offtake assurances may be needed for some of the world’s most prominent offshore wind companies to design turbines suitable for India’s offshore resources and manufacture various components and equipment within India.

Disha Agarwal is Senior Programme Lead and Anurag Dey is a Research Analyst at the Council on Energy, Environment and Water (CEEW). Send your comments to [email protected].

¹ For instance, 2017 FiTs in Gujarat and Tamil Nadu were INR 4.72/kWh and 4.16/kWh, respectively.
²For instance, the tariffs under SECI tenders in May and Dec 2022, for pan-India projects ranged between INR 2.89 to 2.95, and a Gujarat Urja Vikas Nigam Limited (GUVNL) tender of 500 MW concluded in July 2022 discovered tariffs between INR 2.84 - 3.27.
³Only projects that are commissioned after 31 March 2022 to be considered for compliance
⁴Tamil Nadu, Andhra Pradesh, Karnataka, Gujarat, Rajasthan, Maharashtra, Madhya Pradesh, Telangana

Disha AgarwalAuthor