India, with its long coastline, has significant potential to harness offshore wind resources, particularly off the coasts of Gujarat and Tamil Nadu. The government has set an ambitious goal to achieve a total non-fossil-fuel-based installed capacity of 500 GW by 2030, with 37 GW from offshore wind sources as envisioned by the Ministry of New and Renewable Energy (MNRE). Despite this vision, the country currently lacks operational offshore wind capacity, even as the global market approaches 75 GW as of 2023, according to the Global Wind Energy Council. Preliminary assessments by the National Institute of Wind Energy (NIWE), based on satellite data and ground-based wind resource assessments, such as light detection and ranging (LiDAR) systems, suggest that India’s offshore wind energy potential is immense, with estimates indicating 36 GW off Gujarat’s coast and 35 GW off Tamil Nadu’s coast, collectively representing 70 GW of potential capacity.
After years of stagnation, India’s offshore wind energy sector is finally gaining momentum, marked by significant developments over the past year, including the announcement of viability gap funding (VGF) for the sector.
Renewable Watch gives an overview of India’s offshore wind energy landscape, major ongoing developments, challenges and the path forward…
Government initiatives and policies
Over the past few years, the Indian government has proactively taken steps to develop its offshore wind sector, especially to streamline project execution and reduce costs. One of the first initiatives included the notification of the National Offshore Wind Energy Policy in October 2015, which designated the MNRE as the nodal ministry responsible for developing offshore wind energy. The NIWE was tasked with conducting resource assessments surveys, as well as facilitating the establishment of offshore wind farms. In December 2023, the Ministry of External Affairs introduced the Offshore Wind Energy Lease Rules, 2023, to regulate the allocation of offshore wind sea blocks to developers, exempting them from interstate transmission charges and providing a three-year period for conducting resource assessment and surveys. Recently, in September 2024, the MNRE proposed amendments to revise the Offshore Wind Energy Lease Rules, 2023. Key changes include the introduction of a two-stage bidding process, beginning with area clearances and followed by auctions for site leases, aimed at ensuring transparency and reducing uncertainties for developers. Additionally, they include provisions for developers to conduct preliminary studies and surveys, as well as flexibility in developing offshore wind farms in combination with hybrid systems.
Recognising the high upfront costs of offshore wind projects, the government introduced a VGF scheme in September 2024 to mitigate financial risks and attract developers for offshore energy projects. With a total budget of Rs 74.53 billion, it includes Rs 68.53 billion allocated until 2031-32 for the installation and commissioning of 1 GW of offshore wind projects, encompassing 500 MW each off the coasts of Gujarat and Tamil Nadu. The additional Rs 6 billion has been earmarked for the enhancement of infrastructure of two ports, addressing the logistical needs for offshore wind projects.
Further, according to the scheme guidelines for the implementation of the VGF scheme, the Solar Energy Corporation of India (SECI) will serve as the implementing agency, conducting international competitive bidding for two identified sites – a 500 MW project off the Gujarat coast and the other 500 MW off the Tamil Nadu coast. The competitive bidding will be based on the VGF amount and not on tariffs, the latter being fixed by the government. The initial power offtake agreements will be secured at a tariff rate of Rs 4.50 per kWh for Gujarat and Rs 4 per kWh for Tamil Nadu, providing early-stage market stability.
Further, the scheme guidelines state that after the issuance of the letter of award to bid winners, the developer must obtain Stage II clearance as per the National Offshore Wind Energy Policy, 2015, with support from the NIWE. Once all necessary clearances and permits are secured, the developer will sign a seabed lease deed agreement with the central government, as outlined in the Offshore Wind Energy Lease Rules, 2023. Following this agreement, the developer can begin construction and development activities for offshore wind energy projects. Further, under the VGF disbursal schedule, developers will receive VGF in phases linked to project milestones: 25 per cent will be released after foundation work, 35 per cent after half the capacity is commissioned, another 35 per cent upon full commissioning, and the remaining 5 per cent after one year of operation. This phased approach will ensure accountability and incentivise timely completion.
Given the significant policy steps taken by the government to attract developers, several tender developments have already taken place in the past year, demonstrating the government’s success. In January 2024, NHPC Limited invited expressions of interest from companies based in India and globally to set up offshore wind projects. In February 2024, SECI issued a request for proposal for setting up 4,000 MW of offshore wind capacity off the coast of Tamil Nadu in the open access mode. The bids are divided into four blocks, with a capacity of 1,000 MW each. These bids do not include any VGF. After the announcement of 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 and developed on a build-own-operate basis.
Challenges and the path ahead
While offshore wind energy remains capital-intensive, with levellised costs of energy currently high, global trends indicate a 60 per cent cost decline between 2010 and 2021, driven by larger turbine sizes, economies of scale and streamlined logistics. It will be interesting to see whether the Indian offshore wind market can mirror this trend. Achieving cost reductions in the offshore wind market is a challenging task as such projects involve high capital expenditure, complex logistical needs and reliance on imported components due to a nascent domestic supply chain. Additionally, detailed resource assessments, including oceanographic, geophysical and geotechnical studies, are essential to validate project feasibility – with the lack of skilled professionals adding to the problem. High project cost expectations translate into high tariff expectations. 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. Going forward, policy interventions such as reduced GST, waiver of import duties and extended project timelines are critical for mitigating these challenges. Furthermore, the absence of specialised ports and vessels for offshore wind installation underscores the need for infrastructure development.
The government has been proactive in addressing most of these challenges. Apart from VGF for project and associated infrastructure development, initial projects will be supported by data from LiDAR measurements and geotechnical surveys, reducing risks for developers. The establishment of clear guidelines and regulatory frameworks further signals the government’s commitment to nurturing this sector. Additionally, international collaborations have played a significant role in shaping India’s offshore wind road map. Partnerships with the European Union, Denmark and the UK have provided technical and financial assistance, including the establishment of the Centre of Excellence for Offshore Wind and Renewable Energy, a joint initiative by the Indian and Danish governments. These collaborations are expected to bolster investor confidence and pave the way for long-term sectoral growth.
Going forward, the development of offshore wind projects in India is critical for meeting the country’s climate targets and making the power sector more robust. Offshore wind offers a sustainable energy solution with high capacity utilisation factors, potentially reaching 35 per cent with advanced technologies. It also complements India’s renewable energy mix by reducing land-use conflicts and providing reliable round-the-clock power, particularly for energy-intensive industries.
All in all, India’s offshore wind segment, though in its infancy, holds immense potential and opportunities. The sector is undergoing a transformation, marked by growing interest from both domestic and foreign players in setting up offshore wind capacity in India. With the right mix of policy instruments, infrastructure development and international cooperation, the country is poised to emerge as a significant player in the global offshore wind market.
