Harnessing Offshore Wind: Progress, challenges and outlook

Progress, challenges and outlook

Souvik Bhattacharjya, Sr. Fellow and Associate Director, Integrated Policy Analysis Division, TERI
Kartikey Sharma, Research Associate, Integrated Policy Analysis Division, TERI

It has been more than seven years sin­ce the National Offshore Wind Energy Policy was green-flagged by the Gov­er­­n­ment of India, with the notion that the se­g­ment will contribute to the growing mo­mentum of wind energy adoption across the country. The wind energy segment has seen a monumental rise in adoption in India. Between March 2016 and 2020, the segment consistently came out on top of so­lar energy with respect to end-of-the-year numbers in terms of overall installed ca­pacity. Further, with countries across the world looking to diversify their supply cha­in practices, the move opens up opp­or­tunities for India within the renewable en­er­gy sector to become a technology de­ve­loper, exporter and manufacturer.

While the growth for the industry has experienced minor stagnation owing to the Covid-19 pandemic, the global sentiment around it remains extremely bullish. The global offshore wind energy market has grown by 24 per cent annually since 2013, with 36 GW of installed capacity by the end of 2020. The market is expected to grow from an estimated $31.8 billion in 2021 to $56.8 billion by 2026, at a compound annual growth rate of 12.3 per cent. Al­though offshore wind assets constitute only 5 per cent of the total dep­loyed wind assets globally, projections have indicated that they will grow rapidly in the future to meet the renewable energy targets well beyond 2030.

Offshore wind energy advantages

India’s renewed renewable energy target of 500 GW by 2030, coupled with its 2070 ambitions of a transformative net zero economy, has really bolstered both inves­tor and consumer sentiment in the long term with respect to the development of a sophisticated clean energy market. Tra­diti­o­nal onshore wind power and solar energy projects have seen a tremendous upside over the last decade owing to progressive policy and regulatory decisions that help­ed economise their ownership at both the industry and retail level. India’s energy de­ma­nd is set to grow by 3 per cent per year up to 2040, and as the country looks to elevate its renewable energy-based ca­pa­city additions, it is imperative for it to diversify its energy portfolio to include all po­ssible renewable energy sources. Diver­sity ensures energy supply stability and warrants energy security.

With a 7,600 km long coastline and the ability to fulfil 1.2 million GWh of demand, the Indian peninsula’s potential for offsh­ore energy generation is compelling. One of the reasons it can succeed in India as an alternative source of energy is its “la­nd­less” characteristic. At a time when ac­quiring land for energy projects is beco­ming difficult, offshore wind projects can thrive and continually contribute to India’s clean energy mission. In addition, the mo­­men­tum behind the blue economy, with its emphasis on utilising the “ocean as a resource”, has further promulgated the need to significantly utilise this vital source of energy.

In the wake of the recent energy crisis that has engulfed Europe there is now a renewed focus globally on helping strengthen the no­tion of energy security. In fact, China has identified offshore wind as a strategic emerging industry and is prioritising its addition due to higher capacity factors and predictable energy su­pply. The UK also began reviewing its policy fo­cus towards offshore wind as a mea­ns to realise its ambitious 2050 target of net zero emissions. The importance of har­ne­ssing offshore energy for strengthening energy security is one of the seven priority areas identified under the Draft Blue Economy Policy. It calls for bringing key institutions under a common platform and engaging in mission mode for tapping renewable energy sources including offshore wind.

From a technical standpoint, offshore wi­nd has a reputation of being a superior technological innovation. It possesses a higher capacity utilisation factor, which allows the wind farm to operate and generate energy for long hours. On an average, projects in deep oceans can deliver a utilisation factor of 50-55 per cent. In addition, since India has a strong wind turbine manufacturing base, the price of offshore wind turbines and tariff rates are expected to be competitive and at par with onshore wind turbine rates, especially at the time of commercial deployment.


Although India has a strong turbine manufacturing base, it currently does not have installed offshore wind energy projects. The 1 GW project that was supposed to be installed in the Gulf of Khambhat, Guja­rat, is yet to take off. The major barriers to the deployment of offshore wind power in India largely relate to the high costs of offshore wind facilities, the technical challenges surrounding installation, and infrastructural shortcomings. While the notion must be to help build capacities in both offshore and onshore projects, the government has indicated that the per mega­watt cost of offshore wind turbines would be two to three times the cost of onshore wind turbines. Offshore wind is costlier to install due to underwater construction constraints, and it can make discoms very reluctant to buy this expensive power.

Cost-effective offshore wind turbine installation currently necessitates the construction of portside infrastructure to fabricate and transport offshore wind foundations and other structures, as well as specialised installation vessels that India currently lac­ks. Moreover, the construction and operation of offshore wind farms can disturb mobile and sessile species, leading to the displacement of or reduction of fish and shellfish resources. Regions in India that are primed for offshore wind deployment, such as the Gulf of Khambhat, are ecologically sensitive zones.

Policy developments

Over the last 18 months, in order to bolster the portfolio of offshore wind energy in India, the government has come out with significant regulatory interventions. The Deep Ocean Mission received a budgetary allocation of Rs 40,770 million over a five-year period in the Union Budget 2021-22. Offshore wind energy was explicitly mentioned in the mission since its overarching goal is to accelerate the principle of a blue economy, which can contribute to India’s development and help meet its future energy needs. In July 2021, the central government notified that it has allowed 100 per cent foreign direct investment under the automatic route for renewable energy projects, which also include offshore wind energy projects. Further, the power ministry announced the formulation of a committee to finalise a roadmap for offshore wind development in the country.

India’s power transmission infrastructure is still battling a few infrastructural challenges. In view of this, at a recent central transmission utility meeting, the Ministry of Power suggested supporting cost-free evacuation and power transmission from offshore to onshore transmission networ­ks for projects commissioned by 2030. Further, to maintain steady de­velopment of offshore wind projects, the government has announced that it will start accepting bids for project capacity of 4 GW per annum, for a period of three years starting next year.


The scale and expansion of onshore wind energy is one of the most successful indication of renewable energy growth in India. It is likely that offshore wind will be able to draw from the best practices and implementation framework that made onshore deployment successful. There are still no offshore wind projects in India, and to ensure their responsible development in the future some critical points need to be adhered to.

National policy

While India has an overarching policy for offshore wind, there are still some bottlenecks in its framing, such as no reference of environmental laws, regulations and guidelines that apply to offshore wind projects. The policy also does not mention the development of an institutional mechanism at the decentralised level that will carry out the implementation of different projects. Offshore markets in countries such as China, Vietnam and Japan have witnessed high levels of uncertainty due to the lack of of policy clarity. Thus, it is extremely imperative to have a clear overarching national policy document that addresses all possible issues and challenges. Hence, the central government must look to add specific amendments to the national policy and opt for a broad consultation inviting stakeholders to suggest changes to regulatory proceedings listed under it.


Unlocking India’s offshore wind market will require enabling capital in the range of $2.5 billion-$3 billion per GW. This is a massive undertaking and will require precise financing routes to achieve the end goal. Since debt financing tends to have slightly different lending capabilities than traditional banks, with a preference for fixed rates, and the ability to undertake a long maturity pathway, it can be an effective tool for fin­ancing offshore wind farms. In addition, the central government announced in the union budget this year that sovereign green bonds under the government’s overall market borrowings in 2022-23 will be used to mobilise resources for green or climate-friendly infrastructure. The proceeds from these bonds will be deployed in public sector projects such as offshore wind far­ms that help in reducing the carbon intensity of the economy.


Under the GST law, electricity and power sales are exempted from any form of taxation. On the contrary, wind power generation companies cannot claim input tax credit when they pay GST on the purchase of goods and services for setting up a project. Since most of the equipment that goes into the development of a wind farm is imported, the existing tax system makes their acquisition extremely expensive. Thus, if excise duties and GST could be waived, early offshore project development could become affordable.

Although the offshore wind potential is significant, it should largely be seen as a means for the overall achievement of re­ne­wable energy targets set by the central government, and not as a competitor to onshore wind energy. Both technologies have their own strategic advantages and fulfil different energy and environmental needs. Thus, it is critical to approach policy frameworks in a manner that simultaneously uplifts the two energy choices. Ra­ther, it will help in further decarbonisation of India’s grid and address concerns of stability, given the fluctuations in power from other renewable energy sources.