Offshore wind has the potential to play a significant role in India’s energy transition. As compared to onshore wind installations, offshore wind farms are more effective in generating power due to stronger and more consistent winds. Vis-à-vis onshore turbines, offshore wind turbines are greater in size with higher capacities. While the segment has not yet taken off in the country, the present sentiment towards offshore wind development amongst the industry and the government has been encouraging. The government has announced its aim to establish 30 GW of offshore wind installations by 2030. Furthermore, as one of the largest consumers of electricity in the world, India may increasingly utilise renewable energy sources such as offshore wind to bridge its power demand-supply gap. The renewables sector will also improve India’s green hydrogen economy.
The country has roughly 7,600 km of coastline, which provides significant potential for offshore wind energy development. Preliminary studies for project development have been conducted in the states of Gujarat and Tamil Nadu. As per a study by the National Institute of Wind Energy (NIWE), 36 GW of offshore wind energy potential exists off the coast of Gujarat and 35 GW exists off the Tamil Nadu coast. However, factors such as high costs and investments, lack of financing options, need for risk assessment studies and lack of port infrastructure have curtailed the establishment of offshore wind energy projects in the country.
Considering the immense potential of offshore wind in fulfilling the country’s clean energy requirements over the coming years, it is essential to analyse the progress and challenges that the segment faces in India, while learning from international best practices.
Progress and milestones in India
Over the past decade, various steps have been taken by the government to promote the offshore wind segment in the country. During 2013-18, the Facilitating Offshore Wind in India (FOWIND) project was carried out by a consortium led by the Global Wind Energy Council (GWEC) and supported by the European Union, with a key focus on Gujarat and Tamil Nadu. As many as 16 zones were identified during the project using offshore wind mapping across an area covering 12 nautical miles off the coastline.
To provide policy support and a legal framework for the establishment of offshore wind projects in India, the government also formulated the National Offshore Wind Policy in 2015. The first offshore wind energy project in India was planned between 2016 and 2019; it was supported by the European Union.
Subsequently, expressions of interest (EoIs) for a 1 GW project off the coast of Gujarat were invited by the NIWE in 2018. About 35 multinational and Indian developers/OEMs submitted EoIs and provided their inputs for the bidding process. A geophysical survey of 365 square km for the 1 GW project capacity was also completed, along with a preliminary environmental impact assessment. However, even almost four years after the introduction of the 1 GW project, it has not commenced operation due to high capital expenditure and lack of financial support. The Ministry of New and Renewable Energy (MNRE) applied for a Euro 800 million viability gap funding in the Ministry of Finance in 2019. However, the funding is yet to get approval. In 2019, the draft Offshore Wind Energy Lease rules were released by the government for public opinion. A partnership between the MNRE, NIWE and the Danish Energy Agency (DEA) was also established in 2019 for building a database for developing an offshore wind market in the country, both with short- and long-term objectives. By 2021, studies on the levellised cost of energy (LCOE) and offshore technologies were conducted under the partnership.
In April 2022, the NIWE and ORE Catapult of the UK signed a joint declaration of intent with the objective of establishing a five-year collaboration programme for the development of wind energy, particularly offshore wind. Under the project, a wind energy technology demonstration infrastructure is planned to be established in Tamil Nadu. Cost-effective offshore wind power areas will also be identified.
Further, leaders in the renewables sector have expressed interest in foraying into offshore wind. In February 2022, for instance, Tata Power announced that it has signed an MoU with RWE Renewable GmbH of Germany to explore the potential of offshore wind projects in India. The MoU is a welcome step in light of India’s rising power demands as well as the government’s target of establishing 30 GW of offshore wind projects by 2030.
In December 2021, India and Denmark entered into an agreement for cooperation between Danish and Indian companies for developing new and renewable energy technologies. The collaboration seeks to build technical capacity for offshore wind projects, develop offshore wind forecasting and scheduling, and establish standards to ensure the quality of wind turbines and other components.
Tender trajectory
In June 2022, the Union Minister for Power and New and Renewable Energy announced at a meeting on transmission planning for offshore wind energy projects in India that bids for offshore wind energy blocks off the coasts of Tamil Nadu and Gujarat of 4 GW would be issued every year for the next three years. Following that, 5 GW of capacity will be bid out every year for the next five years, up to and including financial year 2029-30. The first bid is expected in the next three to four months.
The first 12 GW of bidding will be conducted using a single stage, two envelope model, in which bidders will be evaluated based on their technological and commercial skills, with only the technically qualified bidders moving on to the financial evaluation. The financial evaluation is based on the quoted lease fee per square km of seabed. The bidder who offers the highest lease charge per sq km of seabed area will be considered the project’s winner.
To encourage offshore wind development, all offshore wind capacity that will be bid out up to the financial year 2029-30 will receive free evacuation and transmission of power from the offshore pooling substation to onshore transmission.
Impediments
Offshore wind energy provides certain advantages over onshore wind and solar power. Both onshore wind and solar power require large tracts of open land, which is often subject to regulatory restrictions and resistance from local communities. Offshore wind does not have such limitations. Moreover, in the open waters, wind turbines are relatively free from obstructions and are known to function more efficiently and with greater speed. Therefore, wind may be better utilised by an offshore wind turbine to generate greater output of power.
However, despite the initiatives taken up by the government and industry, offshore wind projects have not yet taken off in the country. There are several factors that need to be considered before the development of such projects. The price point is a crucial factor. At present, solar and onshore wind tariffs in India are relatively cheaper. The component costs are also higher for offshore projects. As per a March 2021 report by the Lok Sabha’s 17th Standing Committee on Energy, the per megawatt cost of an offshore wind turbine is two to three times the cost of an onshore wind turbine.
Other challenges are lack of financing, subsea cabling, grid interconnection and operation, and the development of transmission infrastructure. There is also uncertainty regarding data as offshore wind data and studies in India are largely inaccessible or insufficient at present. Moreover, building manufacturing capabilities near the ports would be crucial as component sizes for offshore are much larger and may be more costly to transport across larger distances.
It is also important for the government to create certainty regarding the bidding process and provide a clear timeline to enhance investor confidence. Finally, several potential sites for offshore wind projects may be ecologically sensitive, thereby posing a major threat to wildlife, fish and the overall ecological balance of the region. As per the US Department of Energy, turbine blades can pose a threat to ocean birds and bats. Therefore, conducting thorough environmental impact assessments will be crucial to estimate the likely impact of wind plant development activities. This, however, may also be a costly undertaking.
International experience
As per the GWEC Global Offshore Wind Report 2021, a total of 35 GW of offshore wind had been installed across the world at the end of 2020, with 6.1 GW of capacity added in 2020. China led the world in new installations for the third year in a row with over 3 GW of offshore wind grid connected in 2020. However, Europe remains the largest offshore market, making up 70 per cent of the total global offshore wind installations in 2020. The report also suggests that the outlook for global deployment of offshore wind has grown tremendously, especially due to a drop in its LCOE.
The year 2022 is likely to witness tremendous breakthroughs in the offshore wind segment. There is also a rising focus on floating offshore wind, especially in the European market. France is expected to announce the results of the world’s first auction for a 250 MW floating wind farm. Spain is also developing an offshore wind roadmap, with an aim to build 3 GW of floating wind by 2030. Greece has expressed its intent for an auction this year. In Europe, “zero-priced” bids have been undertaken recently, wherein the project receives only the wholesale price of electricity and no additional support or payment.
The UK, which remains in the top spot globally in terms of cumulative offshore wind capacity, has taken steps such as renewable purchase obligation and introduced the Contracts for Difference (CfD) scheme, which incentivises upfront investment costs for developers and protects them from volatile wholesale prices. The competitive nature of the CfD scheme has been successful in deploying offshore wind in the UK. The country also launched a £20 million competitive funding scheme in 2021. In China, concession bidding began in 2010, followed by the introduction of the feed-in tariff (FiT) mechanism. Subsidies, FiTs and auction-based projects are common to most markets. A key aspect which differentiates India from other markets is the lack of seabed rights under maritime leasing rules. This is an important reason deterring developers from investing in the country. Financial support and incentives for risk sharing are also insufficient in India at present.
Outlook
With clear objectives, a comprehensive regulatory and financial mechanism, bankable research and industry participation, the Indian offshore market will be able to soar high. Taking lessons from experienced markets and adopting bidding and leasing practices that have proved to be successful in other markets may also drive growth in the sector. Creating an equipped workforce for each part of the value chain will also be necessary. A cost-benefit analysis of offshore wind projects may also be done in a holistic manner, keeping in view the potential offshoots from offshore such as green hydrogen plants.
Finally, to ensure that offshore wind truly meets the “clean energy” criteria, it is important to undertake its development in a sustainable manner, ensuring the balance and security of the ocean ecosystem.
By Kasvi Singh
