India’s vast coastline of 7,800 km and associated wind resources make offshore wind energy an attractive option for increasing the share of renewables in its energy mix. In view of this, the Government of India notified the National Offshore Wind Policy on October 6, 2015. However, over the past eight years, not much progress has been made.
The policy provided a framework for the development of offshore wind power projects in the Indian economic exclusive zone (EEZ), up to 200 nautical miles from the baseline. The Ministry of New and Renewable Energy (MNRE) was the nodal ministry while the National Institute of Wind Energy (NIWE) was appointed as the nodal agency for offshore wind development in the country. In broad terms, the policy outlined the development model for such projects, beginning with surveys, necessary clearances, leasing of seabed and allocation of blocks (through international competitive bidding processes), power evacuation arrangements requirements, decommissioning requirements, etc.
Following the policy’s implementation, NIWE commenced the wind resource assessment process. In March 2017, it initiated the utilisation of light detection and ranging technology in India to measure wind potential in specific areas. Subsequently, in September 2018, NIWE issued guidelines for offshore wind power assessment studies and surveys. These guidelines allowed private investors to conduct wind resource assessments to collect data for offshore projects in India.
The assessment identified two areas off the coast of Gujarat and Tamil Nadu with good wind potential. Consequently, in November 2018, NIWE invited global expressions of interest (EoI) for the first offshore wind energy project in India, with a capacity of 1 GW, located in the Gulf of Khambhat, approximately 23-40 km seaward from Pipavav port, off the cost of Gujarat. The EoI received positive responses from both foreign and Indian developers; however, the project did not progress further, likely due to the lack of a regulatory regime and issues related to the commercial viability of offshore wind projects in India.
For the next few years, offshore wind projects were on the back burner, with activity picking up only in the last year or so.
Strategy paper
In July 2022, the MNRE issued the first strategy paper for establishing offshore wind energy projects. It provided three models for the holistic development of offshore wind farms in India, which was subsequently amended on August 17, 2023 and again on September 26, 2023. This revised strategy issued by the MNRE provides a roadmap to achieve the 30 GW offshore wind energy target by 2030. As per this current strategy, the following three models have been proposed for the development of offshore wind projects along with a bidding process for site allocation:
- Model A (VGF model): The viability gap funding (VGF) model will be adopted for those identified zones in which NIWE/ MNRE has carried out or proposed to carry out detailed surveys/studies. Currently, under Phase I, 0.5 GW capacity has been identified for allocation in Gujarat and Tamil Nadu each. It is envisaged that SECI will conduct the bidding process in this case and bidding will be either based on power tariffs or VGF amounts with a predetermined power tariff. The power will be sold to SECI with back-to-back power sale agreements to be between SECI and state discoms.
- Model B (non-VGF but with exclusivity over seabed during the study/survey period): This model will be employed for sites identified by NIWE. The identified zones will be allocated for a fixed period on a lease basis through single-stage two envelope bidding. The electricity generated from these projects may be used by the developer for self-consumption, sold through bilateral power purchase agreements, or traded on power exchanges.
- Model C (non-VGF but without exclusivity over seabed during the study/survey period): Offshore wind power developers can identify any offshore wind site within the EEZ (excluding sites covered under the earlier two models) and carry out their own studies and surveys. The Government of India will then issue tenders for such projects based on different models. Developers who have conducted studies or surveys of respective sites may also submit the proposal for project development and allocation of offshore sites under this model. Importantly, such developers will have the right of first refusal in this bidding process.
Lease rules
In 2022, the MNRE released the Draft Offshore Wind Energy Lease Rules, 2022 (lease rules, 2022), amending the previous draft offshore wind energy lease rules from 2019 (Draft Lease Rules, 2019). The draft Lease Rules, 2022 are not in the public domain, and are likely undergoing legal vetting. Notably, the Draft Lease Rules, 2019, cover various aspects such as the grant of lease, term of lease, security deposit amounts along with lease fees, rights of licensees and lessees, suspension and cancellation of lease, and termination of lease. The issuance of the Lease Rules, 2022 is a prerequisite for any offshore project bidding.
Draft tender
In November 2022, the MNRE issued a draft tender document for seabed leasing to conduct surveys and develop offshore wind projects, seeking comments from stakeholder comments on the draft tender. The draft tender was issued for the selection of an offshore wind power developer for the leasing of seabed areas for 4 GW of offshore wind power projects off the coast of Tamil Nadu, based on lease rentals quoted by bidders, through the international competitive bidding process. With the current models proposed under the revised strategy paper, it is not certain if this draft tender will be relevant any longer. It may be used for offshore wind projects to be bid out under Model B (stated above).
The draft tender also includes drafts of model agreements that the selected bidder will enter into with the Government of India. These include the lease agreement, the model survey lease deed, the model construction and operation lease deed and the model concessionaire agreement.
Notably, in September 2023, the MNRE issued a public notice, proposing to auction seabed areas off the coast of Tamil Nadu for the development of offshore wind projects. According to the notice, offshore wind developers will have the flexibility to sell their generated power through open access, third-party sales, sale via power exchange and captive consumption. The lease for seabed areas will be granted for an initial period of five years, with the possibility of extending it for an additional year.
Certain incentives
According to revised strategy paper, the offshore developer is responsible for developing the evacuation infrastructure up to the offshore meeting/interconnection point at the voltage level specified by the central transmission utility (CTU). The offshore substation and transmission infrastructure beyond that point will be developed by the CTU.
In May 2023, the Ministry of Power (MoP) extended the waiver of interstate transmission charges for offshore wind projects scheduled to be commissioned on or before December 31, 2032. The move was aimed at attracting developers to invest in offshore wind projects.
Further, an exemption from additional surcharge was extended to open access consumers purchasing electricity from offshore wind projects, following an amendment made to the Electricity (Promoting Renewable Energy Through Green Energy Open Access) Rules, 2022 on May 23, 2023.
Some of the other incentives being offered to the offshore wind developers are concessional custom duties on the import of critical components for manufacturing of offshore wind turbines (similar to what is available to onshore wind turbines), renewable energy credits with multipliers and carbon credit benefits.
Key challenges
The policy has identified significant challenges associated with offshore wind power deployment. These pertain to resource characterisation, subsea cabling, turbine foundation, installation of turbines including logistics, grid interconnection and operation, development of transmission infrastructure and coastal security during the construction and operation period. The government has taken initiatives to identify appropriate sites for offshore wind development. However, several other challenges still need to be addressed, such as subsea cabling issues, the quantum of VGF and its viability, viability of tariffs that would be proposed, lack of clarity on the various permits and clearances required for the development of these offshore wind projects, marine environment and geological surface area issues, and the necessity to develop ports and related infrastructure to support the installation and maintenance of offshore wind turbines, etc.
The way forward
While still in its early stages, offshore wind energy could play a significant role in helping achieving the net zero targets by 2070. Undoubtedly, the successful development of offshore wind projects in India depends on:
- The actual implementation of the strategy envisaged for offshore wind projects;
- Success in addressing the identified challenges; and
- The provision of government support to incentivise developers to invest in this sector.
