India’s offshore wind power segment has had a bit of a late start compared to other leading global renewable energy markets. Despite the government’s introduction of various policy interventions, including an offshore wind development trajectory, exemption of transmission charges, various draft bid documents and offshore wind leasing rules, deployment is yet to take off. The commercial viability of offshore wind projects, the absence of transmission capabilities and supply chain constraints are the key issues that continue to hamper offtake. However, the sector is undergoing a transformation, marked by growing interest from both domestic and foreign players in setting up offshore wind capacity in India. Against this backdrop, industry experts discuss the potential, key prerequisites and challenges for offshore wind uptake in the country…
What are the key growth drivers for offshore wind development in India?
Ajay Jain
There are two growth drivers for offshore wind segment. First is decarbonisation, where a strategic decision has been made to phase out private thermal power. This shift has been evident over the last six to seven years, with no new private thermal projects and much of the existing capacity facing financial stress. Second is the need to reduce intermittency issues and increase the capacity utilisation factor (CUF) of power plants employing renewable sources. A solar plant in a favourable location may achieve a CUF of around 18-20 per cent, and with improved technology, this may increase to 22-25 per cent. Previously, wind technology provided a CUF of approximately 25 per cent, but with advancements in technology there is a potential to achieve a CUF of promised 35 per cent. It is important to note that this estimate is based on promising technology that has not been proven through installations yet, and is critically dependent on correct wind resource analysis of selected sites.
In terms of growth drivers for the sector in India, the emphasis should be on the replacement of fossil fuels and the provision of another alternative in the form of green electrons. Offshore wind needs to complement onshore renewables, possibly integrated with energy storage solutions such as batteries, to offer a complete alternative that ensures true round-the-clock (RTC) power availability. True RTC means a reliable power supply, not just availability for 40 to 50 per cent of the time. This approach becomes particularly crucial for hard-to-abate industries, such as steel and cement, which currently account for approximately 70 GW of electricity consumption in the country.
Martand Shardul
If all of India’s CO2 emissions were contained in 2022, the world would have shed 2,830 million tonnes of CO2 emissions. However, the Indian government continued to undertake an aggressive approach towards the mitigation of anthropogenic climate change. In this context, one of the most prominent steps is the decarbonisation of the country’s power sector. The central government has planned to harness offshore wind power in Tamil Nadu and Gujarat. The National Institute of Wind Energy (NIWE) has estimated a technical potential of over 70 GW across these states. It is anticipated that the harnessing of offshore wind will enhance the availability of RTC power, one of the advantages of offshore wind power generation.
India has achieved significant strides in offshore wind. The “Facilitating Offshore Wind in India” project, implemented by a GWEC-led consortium with support from the European Union (EU) delegation to India and the Ministry of New and Renewable Energy (MNRE), made some pioneering efforts alongside NIWE’s initiatives. The “First Offshore Wind Power Project in India”, an effort by a COWI-led consortium and supported by the EU, provided assistance in financial assessments. The centre, jointly with the Denmark government, set up the Centre of Excellence for Offshore Wind and Renewable Energy to provide the necessary support. The UK government also continues to provide strategic and technical assistance to India. Assimilating inputs from Indian expertise and industry consultations, the Indian government has published lease rules and a strategy paper outlining business models and prospective tender timelines. These developments have strengthened the interest of the offshore wind industry in the country.
To support the sector, the Indian government has planned 10 GW of interstate transmission system infrastructure. Further, an additional surcharge will not be applicable for offshore wind projects commissioned up to December 2032, provided that power from such projects is supplied to open access consumers. These interventions are beneficial.
Vaibhav Singh
Globally, there is a paradigm shift in costs associated with the development of offshore wind projects, with the average levelised cost of energy (LCoE) dropping by approximately 60 per cent during 2010-21, reaching $75 per MWh. Economies of scale, technological improvements in turbine design (larger sizes and greater hub heights), streamlined logistics and the scaling up of regional manufacturing have led to a steep decline in offshore wind tariffs. These global drivers in cost-cutting are expected to lower costs for offshore wind projects in India as well.
Moreover, from a policy perspective, recent developments in offshore wind have provided a well-defined pathway for the long-term growth and uptake of capacities. This includes the MNRE’s proactive stance in developing a strategy paper, proposing an auction trajectory under different business models in September 2023 (updated). Additionally, there is an interstate transmission charge exemption for offshore wind, and the Ministry of External Affairs recently released the Offshore Wind Energy Lease Rules in December 2023, providing a three-year period for conducting resource assessment and surveys. With a long-term vision (37 GW by 2030), coupled with year-on-year planned targets under innovative business models and clearly demarcated sites/wind zones in Tamil Nadu and Gujarat for project development, the confidence of investors in the Indian offshore wind market further bolstered.
With limited high-potential sites available for onshore wind uptake in India, offshore wind uptake will provide the necessary diversification in India’s renewable energy mix and solve many of the issues associated with land procurement for clean energy projects.
What are the major issues that are hampering its uptake?
Ajay Jain
The execution of offshore wind projects involves meticulous planning. One critical aspect is the sourcing of turbines. Currently, offshore wind turbines, especially those in the class one category with capacities of 18 to 20 MW per turbine, are not readily available in India. This implies a significant learning curve for introducing these turbines to India. The initial turbines will likely need to be transported through the available sea-routes, whether from China or Europe. However, a positive aspect for India is the well-established ecosystem for onshore wind, with several major OEMs already operating. Two key challenges that could hinder growth pertain to turbine technology, especially their size and timely procurement, and the availability and readiness of ports for the logistical requirements of offshore wind projects. However, the key issue, from an LCoE perspective, lies in the high capital expenditure and its potential reduction.
Martand Shardul
Unlike other mature commercial-scale renewable energy technologies such as onshore wind and solar, offshore wind involves a high degree of engineering and is capex intensive. Further, there are evolving supply chain constraints due to the growing global ambitions to tap offshore wind potential – necessitating the addition of over 2,000 GW of offshore capacity by mid-century to meet climate goals. The supply chain for offshore wind is currently concentrated in specific pockets of the world, with major companies having significant volumes of business registered. Hence, fostering competition and expanding the supply chain require resilience building, increasing the volumes of awarded projects and providing attractive incentives and policy support.
Vaibhav Singh
Over the years, the primary impediments to project development in the offshore wind space in India have been the high upfront capex and the resulting LCoE, along with the higher dependence on and costs associated with ports and ancillaries. Investors and project developers, with substantial experience in other cost-competitive and well-established renewable energy technologies such as solar and onshore wind, will require a strong rationale for making investments in the sector, which is difficult to foresee until cost economics become favourable.
Furthermore, there are limited existing domestic supply chains in manufacturing and service hubs, coupled with challenges in product standardisation, resulting in high dependence on the international market for imports and technology partnerships. For example, there are no specialised offshore wind vessels or ports in India that can support the installation and the operations and maintenance of such projects. Hence, lack of port infrastructure and supply chain elements are critical bottlenecks hindering growth.
Further, like developments on the policy front, a similar impetus is needed from a regulatory standpoint. Currently, there is no comprehensive offshore regulatory framework with clear regulations for the uptake of offshore wind. Finally, issues related to the non-availability of resource data sets, tedious approval and clearance processes and lack of technical expertise/trained manpower pose some additional challenges to the segment as a whole.
What are the key prerequisites to drive down costs in this space?
Vaibhav Singh
Innovative policy instruments and global technology innovations are expected to bring down costs for offshore project development in India. Policy drivers such as the provision of the viability gap funding (VGF) to reduce upfront capex for the initial set of projects and the availability of low-cost financing options are critical for establishing critical mass. It is anticipated that with increased project uptake, economies of scale will further assist in bringing down costs over the long term.
Further, engaging corporates through the open access mechanism has been an effective strategy globally, where price visibility from a strong credit counterparty lowers the overall cost of debt for developers while also providing corporates with a feasible model to control costs over the long term and meet internal clean energy ambitions. Increasing the participation of the commercial and industrial segment in offshore wind development, especially from a procurement standpoint, can further contribute to cost competitiveness.
In addition, technology partnerships/collaborations will remain central in developing cost-cutting measures for the Indian market. This includes technology design and research and development for optimal project performance, the establishment of regional supply chains and manufacturing hubs in close proximity to reduce transportation and logistics costs, capacity building of local stakeholders and joint collaboration efforts in other aspects of project development.
What are your policy suggestions to the Indian government that can accelerate the development of offshore wind projects in India?
Ajay Jain
The focus of the policy makers should be on solving the issues emerging in the planning of offshore wind tenders in Tamil Nadu. Initially, the timelines aligned with industry expectations. However, a public notice was issued and the commissioning timelines were reduced to five plus one years. This timeframe is typically insufficient for the developmental activities required for an offshore wind project. Previously, the situation allowed for five plus five years – five years for development and five years for construction. It is crucial to correct this timeline, aiming for at least eight to nine years to effectively execute a 1 GW-sized project. This is the minimum required timeline because various surveys, including geotechnical and geophysical assessments, environmental impact studies, and other technical investigations, need to be conducted to determine whether the site is suitable for the intended purpose. Resource assessment in the water involves deploying LIDAR, and it takes about a year to generate the necessary data. All these processes collectively require a minimum of three to four years, subject to assurance of requisite permissions and approvals from various central and state ministries. Simultaneously, securing a power purchase agreement (PPA) is essential, considering that offshore wind falls under Model B, where entities are required to find their own PPA.
Going forward, GSTs and import duties should be zero or minimum for the offshore wind segment. The ministry has agreed in principle, but there may be a situation where they only come through halfway. Therefore, no duties and minimum GST, like the precedent set for oil and gas, are key to the uptake of offshore wind projects in India. One can perhaps live with 5 per cent GST because that is the minimum rate allowed. So, even if we do that, we will be saving a lot of money. Maintaining 18 per cent GST and 20 per cent import duty will be detrimental to the project economics.
Martand Shardul
The industry believes that the government should implement instruments such as the VGF for initial offshore wind projects, offtake assurance, and offshore wind purchase obligations to support the sector. In addition, the availability of necessary port infrastructure, import duty waivers for machines and materials, and skill development schemes are anticipated to be crucial factors contributing to the success of offshore wind in the country.
Mitigating climate change and meeting the evolving aspirations of citizens will require harnessing every bit of green electron potential. Offshore wind not only offers opportunities for transitioning to greener power generation and usage but also brings economic opportunities through industrialisation. In addition, it enhances prospects for communities vulnerable to sea-level rise and livelihood uncertainties caused by climate change. Policies for offshore wind in India should be integrated to leverage social, economic, environmental, and climate-related benefits.
Vaibhav Singh
The key policy suggestions include:
- Implementing the envisaged ambitious offshore trajectory formulated by the MNRE, without further delays in auctioning and project tendering and commissioning.
- Low-cost debt financing and VGF-based projects to bring in economies of scale.
- Optimising port infrastructure and preparing for offshore uptake by strategising necessary alterations in the existing set-up.
- Developing regional clusters for offshore wind to create a robust supply chain by engaging relevant stakeholders. The uptake of such manufacturing hubs will require central financial assistance/state-level subsidy support.
- Exploring public-private partnership models that have been successful in the development of other renewable energy technologies, wherein the private sector collaborates with the government in formulating strategies for project development and operations.
- Conducting thorough environment impact assessment studies to meet international standards and enhance project bankability.
- Taking learnings from developed offshore markets (such as Germany and the Netherlands) to develop a concrete regulatory framework for offshore wind. The government can also consider establishing a dedicated offshore wind renewable energy trajectory to accelerate development.
(Views of Mr Jain are personal)
