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Offshore wind auction could kick-start new industry in energy-hungry India

Tue 12 Jun 2018 by David Foxwell

Offshore wind auction could kick-start new industry in energy-hungry India
India has a large population, GDP is growing rapidly, and it has an acute need for large-scale, clean energy generation

The Modi administration in India wants to build the country’s first offshore windfarms, but it needs to be re-elected next year for projects to proceed. There are also questions about the size of the first project, tariffs and affordability

Compared with some evolving markets, India’s plan for 5 GW of offshore wind energy by 2022 might not seem that ambitious, but the timetable it has set to achieve its ambition certainly is.

India has good reasons to be investing in new sources of energy. It has a population 1,324.2M, the second largest in the world. GDP is growing rapidly, but it has an acute need for large-scale, clean energy generation to fuel its rapidly growing economy. In the period from 2011 to 2015 it invested US$46.9 Bn in clean energy and currently has 313.86 GW of clean energy sources in one form or another. Renewable energy has a 16% share of the country’s overall energy market.

Under the leadership of Prime Minister Narendra Modi, the country’s commitment to green energy has been renewed. It already has the world’s fourth-largest onshore wind market, with an installed capacity of close to 33 GW, but Mr Modi sees offshore wind power playing an important role in India in future due to the large wind resources available near centres of high-energy demand.

India has also made strong commitments under the UN Paris Climate Agreement and announced ambitious renewable energy goals, targeting 175 GW of renewable energy capacity by 2022. This target includes 60 GW from wind energy, some of which could be met by opening up the offshore wind segment, initially in two states, Gujarat and Tamil Nadu.

As Charles Yates of CmY Consultants told OWJ, in March 2018 the Ministry of New & Renewable Energy’s (MNRE’s) most senior civil servant told an EU workshop that the first offshore wind project in the country “will be awarded this year.” This project will be offshore Gujarat. The MNRE’s long-term vision is for 35 GW of offshore wind in Gujarat and 30 GW in Tamil Nadu.

Mr Yates confirmed that a target of 5 GW by 2022 was expected to be in a white paper published this year, and a LIDAR system to measure the wind resource offshore Tamil Nadu is expected to be installed in August 2018. It is here that the second project will be installed, with expressions of interest for the Tamil Nadu project due in September 2019 with a tender process to start by December 2019.

Mr Yates said the Indian authorities want to start a dialogue with experienced developers to learn lessons from other countries, but for investors in Indian offshore wind projects the most important question is political support, at national and state level.

“It is not completely clear that this support exists at state level,” said Mr Yates. “It also needs to be borne in mind that there will be a general election April or May 2019 and any dates expressed and the timetable for rolling out offshore wind energy in India are subject to change.”

Another issue he highlighted is tariffs. “There are affordability issues to consider,” said Mr Yates. “It isn’t clear yet who will pay for these projects, what level of support they might secure in terms of a tariff and who will pay for the tariffs, whether the cost will be met by the national government or at least in part by the states in question.”

As Mr Yates also explained, preliminary discussions between the authorities in India and developers indicated that views about the level of support needed to realise projects diverge somewhat. The government is interested in what it described as “affordable tariffs.” Developers highlight the need to establish a supply chain in the country and are looking for higher tariffs. 

Another issue he highlighted is that, whereas Mr Modi obviously wants to be seen to be doing something in offshore wind, the other main national party, the Congress Party, hasn’t said too much about it and other options exist. Solar power and onshore wind can also help India meet its targets for clean energy. “Onshore wind is very affordable too,” said Mr Yates.

At the moment the timeline for the projects is expected to see the results of expressions of interest in the Gujarat project announced at the end of June 2018. A reverse auction will take place in late August to select a developer. If the Modi administration is returned to power next year, an auction for the project offshore Tamil Nadu is due to take place in December 2019.

The documents for expressions of interest in the project in Gujarat described a 1 GW project. It was issued to global entities who have installed more than 500 MW of offshore wind, and Indian wind turbine manufacturers/developers who have installed more than 500 MW and have a tie up with a global manufacturer/developer who has developed more than 500 MW.

The windfarm site is 23-40 km from the port of Pipavav in the Gulf of Khambhat in a zone of around 400 km2. The plan is that a government agency will sign a 25-year power purchase agreement backed by a payment security mechanism. A government agency will provide the onshore transmission and offshore transmission will be the responsibility of the developer.

The Gujarat site has average speeds of 8.2 m/s according to the MNRE (<7.5 m/s likely) with silty, low-strength seabed on top of firmer clays and sand. Water depths at the site are 15-30 m and the sea conditions are calm for all months except June/July/August. A grid connection is available at Pipavav, one of India’s main hubs for shipping.

Mr Yates told OWJ that after the expression of interest was issued there was a certain amount of ‘push back’ from developers and some stakeholders about the size of the project, which, in comparison with the first commercial-scale projects carried out in other countries, is quite large. As a result, an amended tender was issued that described a windfarm offshore Gujarat of 500 MW to 1 GW. The timetable for expressions of interest was also modified.

Although the tender specifies a project offshore Gujarat, Mr Yates also said it was possible that bids would also be submitted for projects in other areas in India’s territorial waters.

“Indian wind turbine manufacturer Suzlon has been feeling a certain amount of pain as a result of margin compression in onshore wind auctions in India,” Mr Yates explained. “It has become increasingly common for OEMs such as Suzlon to develop projects onshore and then sell them on, so it is not out of the question that something like this might happen.” Mr Yates said data is available about the potential wind resource in areas other than Gujarat and could, potentially, be used for bids to build offshore windfarms.

If the Modi government is re-elected, and if the projects go ahead in their current form, there are also ambitious plans for the local supply chain. Initially, the biggest opportunities for Indian companies would be in foundation manufacturing – Indian companies already have a track record of manufacturing foundations for the offshore oil and gas industry. The country also has considerable engineering expertise and a long-established shipbuilding industry. Local players might be expected to assume key roles in operations and maintenance once windfarms are operational.

 

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