By Sarthak Takyar
Tracking the wind power sector in India over the years has been quite interesting, given the reversals in tariff regimes; changes in tariff, capacity and sector profitability trends; and the government’s aim to tap new segments like offshore wind and wind repowering. In the past year, several significant developments took place in both the onshore and offshore wind power segments, which will have a considerable impact over the next few years.
Renewable Watch provides a roundup of the key policy and industry developments in the past year, including tariff and capacity addition trends, sector challenges and the future outlook…
Policy and industry developments
Offshore wind
Efforts to promote offshore wind gained traction in 2023. Key advancements included the announcement of the viability gap funding (VGF), the release of tenders, and the establishment of the Offshore Wind Energy Lease Rules, 2023, which guide the allocation of sea blocks.
One of the major highlights in this space in the past year was the sanctioning of the VGF scheme for offshore wind energy projects with a total budget of Rs 74.53 billion. This includes Rs 68.53 billion allocated for the installation and commissioning of 1,000 MW of offshore wind energy projects. This 1 GW encompasses 500 MW each off the coasts of Gujarat and Tamil Nadu. Additionally, Rs 6 billion has been earmarked for the enhancement of two ports to fulfil logistics needs for offshore wind energy projects.
Given the significant policy push, several tender developments have taken place in the past year, signalling a positive momentum. In January 2024, NHPC Limited invited expressions of interest from companies based in India and globally for empanelling to set up offshore wind projects. In February 2024, the Solar Energy Corporation of India (SECI) issued a request for proposal for the establishment of 4,000 MW offshore wind energy off the coast of Tamil Nadu to be developed under the open access mode. The bids are divided into four blocks, each with a capacity of 1,000 MW. These bids do not include any VGF. Post announcement of the VGF, in September 2024, SECI issued a tender for 500 MW of offshore wind projects (Tranche I) in Gujarat, allowing bidders to apply for VGF. The project will be connected to the interstate transmission system (ISTS) and developed on a build- own-operate basis.
Onshore wind
In the onshore wind energy space, the Ministry of New and Renewable Energy (MNRE) updated its 2016 policy for repowering wind power projects. The updated National Repowering and Life Extension Policy for Wind Power Projects, 2023, permits the replacement of older turbines with more efficient ones, even before thus reach the end of their design life, by making modifications to parts like gearbox, blades, generator and controller. The updated policy provides various incentives, including interest rate discounts from the Indian Renewable Energy Development Agency and the extension of the existing PPA tenure. For wind turbines with a capacity of less than 2 MW, the National Institute of Wind Energy has assessed the nation’s potential for repowering to be 25.4 GW.
During the year, the MNRE also revised the guidelines for micrositing onshore wind power turbines. Under the new guidelines, the criteria for micrositing are now based on achieving an optimised output rather than adhering to a mandated minimum distance between wind turbines.
Between November 2023 and October 2024, there were only five standalone wind auctions, with the tariffs ranging from Rs 3.42 per kWh (the lowest tariff in Gujarat Urja Vikas Nigam Limited’s [GUVNL] 500 MW wind auction, Phase VI) to Rs 3.81 per kWh (SECI’s 500 MW ISTS wind auction, Tranche XVII).
Recently, in October 2024, for GUVNL’s auction for developing 200 MW of grid-connected wind power projects under Phase VIII, Juniper Green Energy, Jakson Green and RIH Renewables (EDF Renewables) were awarded 50 MW, 50 MW and 40 MW at a tariff of Rs 3.56 per kWh, Rs 3.63 per kWh and Rs 3.59 per kWh respectively. Originally floated in July 2024 for 500 MW, GUVNL later reduced the auction capacity to 200 MW.
In the same month, Powerica won 50 MW at a tariff of Rs 3.81 per kWh for SECI’s auction to set up 500 MW of ISTS-connected wind power projects (Tranche XVII). The auction was undersubscribed (120 MW out of 500 MW). According to the tender provisions, this implied that only 80 per cent of the quoted capacity could be awarded. Thus, the total auction award was reduced to 96 MW (80 per cent of 120 MW). Apart from Powerica, Adyant Enersol also bid for this auction (70 MW at a tariff of Rs 3.82 per kWh). As the auction size was reduced to 96 MW, Adyant Enersol was only eligible for 46 MW (96 MW minus 50 MW). However, the company was not awarded any capacity as the tender mandated a minimum project capacity of 50 MW.
In July 2024, SECI announced the winners of its 1.35 GW ISTS-connected wind power projects (Tranche XVI) to be set up in Gujarat and Karnataka. The tender also offered a greenshoe option of 700 MW. For the project in Gujarat, JSW Neo Energy won 350 MW at a tariff of Rs 3.61 per kWh. The company was also allotted an additional 350 MW at the same tariff under the greenshoe option. Meanwhile, Powerica won 50 MW at a quoted tariff of Rs 3.70 per kWh. For the projects to be set up in Karnataka, Torrent Power won 100 MW at a tariff of Rs 3.60 per kWh, and JSW won 150 MW at Rs 3.68 per kWh and was awarded an additional 175 MW at Rs 3.60 per kWh under the greenshoe option.
In January 2024, for GUVNL’s 500 MW wind auction (Phase VI), which had an additional greenshoe option of 500 MW, Alfanar Projects, Juniper Green Energy and EDF Renewables won 50 MW, 90 MW and 24 MW at a tariff of Rs 3.42 per kWh, Rs 3.44 per kWh and Rs 3.45 per kWh respectively. Of the total tendered capacity, only 164 MW was auctioned.
In November 2023, for REC Power Development and Consultancy Limited’s 100 MW wind auction, Juniper Green Energy and Avaada Energy won 50 MW each at a tariff of Rs 3.58 per kWh and Rs 3.59 kWh respectively.
Onshore wind tariff trends and sector challenges
Recent trends show an upward trajectory in wind power tariffs following the steep decline in tariffs witnessed after the transition to competitive bidding. In 2017, India transitioned from feed-in tariffs to reverse auctions for wind energy procurement. The transition led to a fall in tariffs from around Rs 4-Rs 5 per unit to Rs 2.50-Rs 3 per unit. Post the transition and until December 2022, tariffs ranged between Rs 2.69 and Rs 3.11 per kWh. From January 2023 onwards, tariffs have steadily increased, with a notable rise to Rs 3.58 per kWh in November 2023. From November 2023 to October 2024, the tariffs ranged from Rs 3.42 per kWh to Rs 3.81 per kWh, averaging around Rs 3.60 per kWh. The rise in tariffs can be attributed to the transition to closed bidding from reverse auctions. It can also be attributed to several legacy issues that the wind industry still faces. These include inconsistent state-level policies on land acquisition, right-of-way constraints, delays in signing PPAs, the need for timely development of transmission infrastructure to avoid curtailment, exhaustion of high wind sites and not keeping pace with global technological advancements.
These issues, coupled with the knee-jerk transitions in tariff regimes, have not only impacted tariffs but also capacity additions. The capacity additions for wind have gradually fallen compared to solar, with the latter even becoming the leader in installed renewable capacity at 92,119.18 MW as against 47,716.72 MW for wind as of October 2024.
From 2014-15 to 2016-17 (before the transition to competitive bidding), wind power led renewable energy capacity additions, achieving 2.31 GW in 2014-15 compared to 1.17 GW for solar. However, a shift occurred in 2017-18 with the transition to competitive bidding. While tariffs dropped significantly, so did the capacity additions, with wind capacity addition standing only at 1.87 GW compared to solar’s 9.56 GW. This trend persisted, with solar consistently outperforming wind in capacity additions. By 2023-24, solar added 15.83 GW annually compared to wind’s 3.25 GW. Between April 1, 2024, and October 31, 2024, only 1,830.21 MW of wind capacity has been added compared to 10,305.55 MW for solar.
The low wind capacity additions ultimately pose the risk of the country not meeting its renewable purchase obligations (RPOs). According to the Prayas Energy Group’s RPO portal, in 2022 and 2023, only 13 and four states, respectively, met the RPO targets of 21.18 per cent and 24.6 per cent, as outlined by the Ministry of Power.
The low capacity additions and project pipeline have also impacted the financial prospects of wind original equipment manufacturers (OEMs), with their number in India reducing over the years. In addition, wind OEMs are increasingly turning to export markets to sustain their order books given dwindling domestic demand.
The offshore wind segment, despite its potential and policy focus, also faces critical challenges. Offshore wind projects are highly capital-intensive, with costs ranging from Rs 210 million to Rs 250 million per MW–roughly three times the costs of onshore projects. According to sector experts, the current tariff expectations of Rs 7-Rs 9 per unit make offshore wind less competitive compared to conventional energy. Additionally, it remains uncertain how much VGF will contribute to the reduction of these tariffs. Lengthy approval processes, often exceeding two to three years due to complex environmental clearances, create significant delays. Additionally, seabed leases are financially unviable, and acquiring seabed data is a slow process. A lack of skilled professionals, particularly in geotechnical and geophysical surveys, exacerbates these challenges by affecting accurate seabed evaluation and foundation design.
Future outlook
As per the National Electricity Plan (NEP) 2023 (Volume 1, Generation), the likely installed capacity for wind is 72,895 MW by 2026-27 and 121,895 MW by 2031-32. This means that an annual growth rate of approximately 52.76 per cent and 155.45 per cent till 2026-27 and 2031-32, respectively, from the current level of 47,716.72 MW, will be required. Thus, approximately 25 GW needs to be added in about two years (12.5 GW addition per annum) to achieve the 2026-27 plan; and 74 GW over seven years (over 10 GW addition per annum) to achieve the 2031-32 target. These are ambitious goals, considering that capacity additions have hovered around 2 GW over the past few years. While the government has announced a 50 GW annual bidding trajectory for renewables till 2028 with 10 GW reserved for wind, on-ground implementation of this plan remains key.
Going forward, achieving the NEP’s wind energy goals will require more than policy directives; it demands proactive central and state government collaboration to eliminate administrative bottlenecks and the deployment of advanced technologies by industry stakeholders.
Meanwhile, the government has set a target for deploying 30 GW of offshore wind capacity by 2030. As per the central government’s bidding trajectory for offshore wind energy projects, 37 GW of wind energy projects are planned to be bid out by 2029-30. A project capacity of 4 GW per year for a period of three years will be bid out, starting from 2022-23, for development off the coast of Tamil Nadu and Gujarat. Subsequently, a project capacity of 5 GW will be bid out every year for a period of five years, that is, up to 2029-30. It remains to be seen how much of these plans actually materialise
going forward.
According to CRISIL Ratings, India’s wind capacity addition is expected to increase by approximately 2.5 times to nearly 25 GW between fiscals 2025 and 2028, compared to approximately 9 GW between fiscals 2021 and 2024, entailing a capital expenditure of Rs 1.8 trillion-Rs 2 trillion. India added wind capacity at approximately 3 GW per year between fiscals 2014 and 2018. However, the pace slowed down to 1.7 GW between fiscals 2018 and 2023. Going forward, the outlook may be more positive than the current trend, as over 6 GW of standalone wind projects have been auctioned since the start of fiscal 2023 till October 2024, compared to around 3 GW auctioned in fiscals 2021 and 2022. In addition, auctions for hybrid and storage-linked projects are also on the rise, increasing from 4 GW in fiscals 2021 and 2022 to nearly 18 GW in fiscals 2023 and 2024.
To further support wind capacity additions, supply-side constraints have begun to ease through an improvement in transmission connectivity and the better financial health of wind OEMs. The government is developing transmission infrastructure to improve connectivity to sites with high wind potential and plans to increase connected capacity for wind sites from approximately 50 GW as of December 2022 to approximately 75 GW and 100 GW by March 2025 and December 2027 respectively.
Another key trend will be the expansion of the wind component manufacturing base in India. The country is currently the second-largest hub for onshore wind turbine assembly and key component production in the Asia-Pacific region, as per the Global Wind Energy Council. Going ahead, the country stands to gain from the “China + 1” strategy adopted by major supply chain players. Domestic manufacturing capacity is sufficient to meet India’s onshore wind demand through 2030, with potential for additional export and trade opportunities if manufacturing scales up further. Efforts are under way to reduce reliance on imports for critical components such as castings, generators and pultrusion carbon fibre. For instance, at the Vibrant Gujarat Summit in January 2024, Reliance Industries announced that it would establish India’s first carbon fibre facility in Hazira, Gujarat, for wind blade manufacturing. In October 2024, Chennai-based Refex Industries partnered with WinVision Enterprises to launch a joint venture (JV) focused on wind energy solutions, including the manufacturing and assembly of wind turbine generators and related components. The JV will manufacture critical components, including nacelle assemblies, hub assemblies and rotor blades, fabricate tubular towers, and produce control equipment. The partners have committed a total investment of Rs 1.39 billion into the JV, with an initial Rs 300 million already earmarked. Going forward, successful offshore wind auctions are also expected to draw investment into domestic offshore wind manufacturing.
Net, net, in the past year, the wind power sector has witnessed significant policy and industry developments. The talking point remained the push given in the offshore wind segment. Wind tariffs are showing an upward trend, which is favourable for developers, while yearly capacity additions and project pipelines are also gradually increasing compared to past years – a development welcomed by OEMs. However, much more needs to be done to meet India’s wind capacity targets, and thus, the sector still has a long way to go to recover its lost sheen.
