India possesses an impressive offshore wind energy potential of over 70 GW in Gujarat and Tamil Nadu alone, presenting a significant opportunity to accelerate the nation’s clean energy transition. With an ambitious target of installing 30 GW of offshore wind capacity by 2030, the country has committed to harnessing this vast and untapped resource. Against this backdrop, at Renewable Watch’s 13th annual conference on Wind Power in India, senior sector stakeholders shared their views on the offshore wind sector in India, the evolving cost economics, and learnings from global offshore wind markets. They also discussed the key challenges, regulatory hurdles and the way forward to accelerate project deployment. Edited excerpts…
Jesper Badea Jensen
India has a vast potential for offshore wind. A study was conducted by the European Union in collaboration with the Ministry of New and Renewable Energy (MNRE) and the National Institute of Wind Energy, where the entire coastline of India was examined. This study was further expanded at the Centre of Excellence with marine spatial planning projects, and a capacity of approximately 70 GW was found to be feasible. The capacity is higher than what has been installed in Europe, a region that already possesses a large wind industry. Given India’s substantial capacity for onshore wind, some of the transferable skills from that sector can be leveraged to support the development of the offshore wind sector in the country.
Globally, the offshore wind sector is facing challenges because of its capital-intensive nature and high level of specialisation. In India, there are relatively few original equipment manufacturers (OEMs) that are capable of producing the necessary equipment for offshore wind projects. This challenge is further compounded by a shortage of installation vessels, high tariffs and inflation. Further, with alternative renewable energy sources such as solar being more cost-competitive, it is important to identify the benefits of offshore wind and clearly communicate those benefits with all stakeholders to make the sector investor-friendly.
The uptake of offshore wind depends on early grants and subsidies. For instance, in the context of Europe, the first large offshore wind project was auctioned around 10 years back at the strike price of approximately Rs 11- Rs 12 per unit. Moreover, in Europe, because of the financing being favourable, the capital expenditure required is not very high. Specifically, in Denmark, only about 5-10 per cent of power production is based on power purchase agreements, with the remaining going straight to the market. Furthermore, to minimise risk for developers, schemes such as contracts for difference (CfDs) are being explored.
Additionally, while near-shore wind also offers huge potential in India, it should not be seen as a stepping stone for the development of offshore wind. The primary reason behind this is that the technologies used for near-shore and offshore differ vastly in terms of equipment and vessels used. Viewing them as similar technologies risks misallocating incentives and could hinder effective development. Instead, each should be approached as a distinct technology with appropriate strategies and infrastructure.
Harsh Nupur Joshi
ONGC Green Limited has the capability and willingness to execute offshore wind projects in India. We have created a joint venture with NTPC Limited to take up offshore wind projects. However, government support is essential to establish a pilot project in order to demonstrate the feasibility of offshore wind in India.
The offshore wind strategy announced by the government has three different modes. For Mode A, the viability gap funding (VGF) granted is not sufficient and needs to be enhanced. Mode B needs to have an offtake guarantee for the wind power generated. For Mode C, exclusivity provisions are necessary to incentivise investors.
A consistent and long-term offshore wind policy is crucial to propel this sector forward, especially since offshore wind is expected to play a vital role in the development of the green hydrogen sector. Globally, it has been observed that government action initiated the first offshore wind capacities. India will similarly need strong financial, policy and regulatory support to compete with cheap solar and onshore wind. The high cost of offshore wind currently limits its uptake, underscoring the need for incentives such as accelerated depreciation or feed-in tariffs similar to those that catalysed the early growth of the solar sector. Hence, government push is essential to bridge the cost gap between offshore wind and cheaper renewable alternatives.
While the import of large offshore wind machines is currently necessary, their production should be gradually indigenised. The installation of offshore wind projects requires offshore vessels. India needs a reliable supply of these vessels, but they are fully booked globally for the next few years. As the first few GWs of offshore wind capacity in India are expected to be installed by 2032, long-term arrangements for vessel availability are critical. Additionally, well-developed port facilities are required to support the transportation, installation and maintenance of turbines and vessels.
Going forward, the central and state governments need to collaborate on the initial projects. If central financial assistance or VGF has been rolled out by the central government, it needs to be complemented by some incentives from the states to ensure maximum effectiveness.
While the government is indeed taking a lot of steps, they are not reaping the desired benefits because the cost is too high, and that can only be tackled when a diverse range of incentives is offered. In addition, it is key to ensure economies of scale for the offshore wind sector, much like what has been experienced in the solar space.
In addition, the number of clearances required for setting up offshore wind projects is huge, for which developers have to approach different ministries. To ease this, all clearances should be arranged in one place. Furthermore, early offshore projects need feed-in tariffs, feed-in premiums or CfDs to give developers tariff certainty. Hard-to-abate industries such as steel and fertilisers, which need consistent power supply, should be targeted with incentives to procure offshore wind.
Kuldeep Sharma
Although offshore wind is a new domain for us, we recently started a bilateral programme with the Ministry of New and Renewable Energy (MNRE) to connect German and European expertise with India’s offshore wind ambitions.
The cost of offshore wind in India currently ranges between Rs 180 million and Rs 200 million per MW, which is significantly higher than the Rs 60 million- Rs 80 million per MW for onshore wind.
Furthermore, when looking at tariffs, the levellised cost of energy (LCE) is estimated to be around Rs 12- Rs 14 per unit for offshore. For onshore wind projects (part of hybrid, FDRE and round-the-clock projects), the LCE is around Rs 4.50 per MW or lower, thereby making it more feasible at present. Thus, offshore wind requires a lot of institutional and government support to remove regulatory hurdles, ease the approval process, etc.
VGF mechanisms will serve as the key drivers to create complete offshore supply chains in India. Experience from European markets, such as Denmark, shows that when VGF levels are low, as seen in a recent Danish tender, the interest in projects diminishes. European offshore markets typically rely on higher VGF or CfD levels to bridge the financial gap. Similarly, India will need these kinds of support mechanisms to kick-start the initial GWs of offshore wind capacity and help build the entire supply chain ecosystem.
Currently, India does not manufacture wind turbines suitable for offshore projects and depends on imports, presenting a significant supply chain challenge. The OEMs in India manufacture turbines that have a capacity of 2-3 MW, but turbines for offshore wind require a capacity of over 6 MW. Hence, such high-capacity turbines will have to be imported at least till 2032. Moreover, offshore wind installation demands over seven specialised vessels, while India currently has only three to four such vessel types available. Given that global vessel orders are booked up for the next few years, India must undertake early booking and establish clear project timelines to avoid missing out on the global supply queue.
To tackle such issues, the first step should include ramping up research and development. Going forward, production-linked incentives, which already exist in sectors such as solar and batteries, could be adopted for offshore wind components. These initiatives can foster domestic manufacturing of offshore wind components. Furthermore, the level of complexity in terms of grants and approvals required needs to be reduced. India could learn from Germany, where getting approvals used to take around five to six years but has now been reduced to under two years. This is a significant time reduction, and setting up a one-stop shop will be beneficial in the long run for the larger uptake of offshore wind in the Indian market.
