On August 17, 2023, the Ministry of New and Renewable Energy (MNRE) released a revised strategy for the development of offshore wind energy projects in India. The policy provides a framework for offshore wind power development up to a seaward distance of 200 nautical miles from the country’s exclusive economic zone.
The country’s offshore wind potential was assessed by the FOWIND (Facilitating Offshore Wind in India) consortium, with the National Institute of Wind Energy (NIWE) serving as the nodal agency and knowledge partner. Based on a multi-criteria approach that involved the assessment of various parameters such as wind resource and bathymetry, the consortium identified eight zones each off the coasts of Gujarat and Tamil Nadu as potential offshore wind energy zones. To facilitate the development of offshore wind farms in the country, three models have been proposed.
Model A: VGF-based
Under the first model, development will be undertaken in demarcated offshore wind zones where the MNRE and the NIWE have conducted detailed studies and surveys, supported by viability gap funding (VGF) from the central government. The NIWE plans to develop 1 GW capacity zones each off the coasts of Gujarat and Tamil Nadu under this model. Under Phase I, bids will be invited for identified zones in Gujarat and Tamil Nadu, for 0.5 GW of capacity each. The MNRE has completed investigations for a 365 square km seabed area in the Gulf of Khambhat, off the coast of Gujarat, and is expected to soon invite bids after getting the necessary approvals. Meanwhile, the NIWE will carry out an extensive LiDAR survey in Tamil Nadu. For the development of this project, a single-bid, two-stage process will be adopted, followed by an e-reverse auction.
The MNRE will enter into a concession agreement and a lease agreement with the successful offshore wind project developer for a period of 35 years at an annual floor lease fee of Rs 100,000 per square km per year. The selected developer is expected to commission the offshore wind power project within three years from the date of the concession agreement. The Centre will provide the required VGF support to selected developers to achieve a pre-determined power tariff. For the sale of power procured, the Solar Energy Corporation of India will sign a power sale agreement with the respective state/other states distribution companies.
Model B: Without VGF with seabed exclusivity for study/survey
Under the second model, offshore wind power projects will be developed for open access/captive/third-party sale without any VGF assistance from the central government. The MNRE and the NIWE will initiate a competitive bidding process for the provisional allocation of identified offshore wind energy sites to interested developers for a period of two years on a lease basis. The allocation will follow a single-stage, two-envelope bidding process. Each offshore site will have a minimum installed wind power capacity requirement.
The selected developer will submit a detailed project report, and enter into 35-year concession and lease agreements for the development of offshore wind energy projects after the study/survey period without any VGF assistance from the government. The developer will have to pay the quoted lease rentals/site allocation fee for the period starting from the study/survey lease agreement till the commissioning of the project. The commissioning must be completed within three years of the date of the concession agreement.
After the initial two-year period, the government may invite procurement bids from discoms based on tariffs. The power generated from such projects will be used for captive consumption under the open access mechanism, or sold to an entity through a bilateral power purchase agreement, or sold through power exchanges. The selected developer will be responsible for facilitating these power sales.
Model C: Seabed study/survey without any exclusivity and VGF support
Under the third model, developers can identify any offshore wind site within the exclusive economic zone in Gujarat and Tamil Nadu excluding sites considered under Model A and Model B, and submit a proposal to the NIWE for carrying out studies and surveys. Subsequently, the government will initiate a bidding process to allocate the seabed.
The following three bidding methods have been proposed for site allocation:
- Bidding on lease/allocation fee or revenue sharing in case of projects for captive consumption/third-party sale/sale through exchange under the open access mechanism.
- Tariff-based competitive bidding for power procurement by discoms, central or state governments.
- Any other transparent bidding mechanism identified by the government in the future.
The central government can conduct the bidding itself or through a central/state government agency, which will ensure power offtake from the proposed offshore wind project. The sites for study/survey will be allocated to developers on a first come, first served basis. In case multiple developers propose to conduct studies/ surveys at the same site, there will be a minimum gap of 1 km between the sites allocated to developers.
Post the study/survey, site-specific bidding will be conducted, with the developer conducting the study/survey having the first right of refusal. However, the project will be developed without any central financial assistance.
The MNRE will enter into concession and lease agreements with the successful bidders for a period of 35 years. The selected developer is expected to commission the offshore wind power project within four years of the date of the concession agreement. To facilitate and accelerate the process and achieve the offshore wind energy targets, an indicative auction trajectory has been released.
The selected developers under Model B and Model C will be eligible for benefits such as provision of power evacuation infrastructure from the offshore connecting point, renewable energy credits with multipliers, and carbon credit benefits, as determined by the central and state governments. Further, projects commissioned till December 31, 2032 will receive a waiver on interstate transmission system charges.
The way forward
Based on the three proposed models, the government has already started work on the tendering process for identified sites in Gujarat and Tamil Nadu. Recently, the MNRE came out with proposals for the development of offshore wind energy under Model B and Model C.
Currently, the government is working on a 4 GW tender of four sites off the coast of Tamil Nadu under Phase I of Model B. The tender is expected to be floated on December 1, 2023. Bids for a further 3 GW under Phase II are expected to be invited in 2024-25. Overall, the government plans to develop 14 GW of equivalent offshore wind capacity on 13 sites across four zones in Tamil Nadu by 2027-28 under the open access model.
For onshore wind power generation, the good sites in India are already exhausted. Therefore, the expansion of the offshore wind segment can help increase wind generation with plants that have a higher capacity utilisation factor. In addition, offshore wind plants do not require land and improve the availability of round-the-clock green power, essential for the decarbonisation of the industrial and commercial sectors.
India’s vast coastline of 7,600 km presents significant potential for the development of offshore wind power projects. With proactive measures in place, India is poised to achieve its target of 30 GW of offshore wind power capacity by 2030.
While the release of the strategy is a positive step by the government, it is essential to ensure that the plans are effectively implemented.
