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Blown away!

Blown away!
Blowing In The Wind was not simply just a song when the singer sang, “The Answer is Blowing in the Wind.” It was a reiteration of nature’s superpower – the wind – that can bring cooling relief in times of distressing heat or simply cause havoc in its various forms like typhoons, cyclones, hurricanes and so on. Harnessing one of nature’s such superpowers has been long on the mind of humans since ages as they sailed boats, yachts and even mighty galleons. Today, the emphasis is on harnessing the mighty power of the wind to convert it into a powerful source of energy for a power-hungry planet whose population – including India – continues to grow beyond the supply of its needs.

India is the 4th largest energy consumer in the world only after the USA, China and Russia. Despite overall increases in electricity consumption, India’s per capita electricity consumption remains fairly low. As of March 2013, the per capita consumption was estimated to be 917.20 kWh, which is lower than that of the developed countries and the other BRICS (Brazil, Russia, India, China and South Africa) countries.

India’s generation capacity has grown from 85.80 GW as of March 1997 to 243.00 GW as of March 2014, where coal-based projects account for approximately 59.80 per cent of the total installed power generation capacity in India and renewable energy based projects account for approximately 12.10 per cent of installed  capacity. However, renewable energy’s share of energy output is approximately six per cent in India due to low capacity utilisation.

Although there has been an increase in installed capacity, actual installations have been well below targets. Conventional fuel-based capacity additions have faced challenges such as fuel supply shortfall, land acquisition challenges, delays in state and environment clearances, equipment shortages in the market and difficulties with passing on higher costs of fuel to off-takers. At the same time, renewable energy capacity additions have exceeded planned targets. During the 11th Five Year Plan, 14.70 GW of renewal energy capacity was added against a target of 14.00 GW.

Despite an increase in generation capacity, a power supply deficit continues to exist in India. The average energy deficit and peak demand deficit for India over the past six years from the year ended March 31, 2008 to March 31, 2014 was in the range of 8.70 per cent and 10.50 per cent respectively. Over the recent past, conventional energy costs have been increasing even as fuel supply risks have spiked. As a result, renewable energy technologies have become increasingly more viable and have been further supported by a number of fiscal and policy initiatives taken by the central and state governments. During the past five years, approximately 17.23 GW renewable capacity has been added resulting in an increase in the share of renewable capacity on a percentage of total capacity from 9.8 per cent in the year ended March 31, 2009 to 13.01 per cent in the year ended March 31, 2014.

Unlike the National Action Plan on Climate Change (NAPCC), the Government of India has set a
target of having 15 per cent renewable energy in the electricity generation mix by 2020, implying a total installed base of approximately 100 GW of renewable energy generation capacity. Despite the recent growth in expansion of renewable energy capacity, a large part of the country’s renewable energy potential remains untapped. During the 12th Five Year Plan, the Government of India aims to add 29.5 GW of renewable energy capacity. The key drivers for Renewable Energy include: demand/supply gap; rising fossil fuel prices; increase in marginal power purchase cost; policy support including fiscal benefits; fee-in tariffs; and Kyoto Protocol and CDM market.

The challenges facing the Indian Renewable Energy sector include several impediments such as; high rate of interest for debt due to high capital expenditure requirements for the industry, challenges associated with land acquisition and clearance, and the lack of regulatory enforcement of renewable purchase obligations.

Where wind power is concerned, during 2013 global installed capacity for wind power increased by 12.50 per cent to approximately 318.00 GW. India was ranked at 5th position for cumulative installations with a 6.30 per cent share and 4th position for annual installations with a five per cent share at the end of 2013. During the last 21 years, wind power capacity addition in India has taken place at a compounded annual growth rate (CAGR) of 32.87 per cent from a modest installed
capacity base of 54 MW in the year ended March 31, 1993 to 21.10 GW by March 2014.

Annual installation reached 3.2 GW during the year ended March 31, 2012. However, during March 31, 2013 wind installations came down to 1.7 GW mainly due to withdrawal of accelerated depreciation and the discontinuation of GBI for wind power. However, with the reintroduction of GBI for the year ended March 31, 2014, the annual installation reached 2.00 GW for the year ended March 31, 2014. Introduction of Accelerated Depreciation during 2014-2015 is likely to further increase annual installations for the year-ended March 31, 2015.

Among Indian states, Tamil Nadu ranks highest in wind power both in terms of capacity installation and in terms of energy generation, with shares of 35 per cent and 49 per cent respectively. Other states like Gujarat, Maharashtra and Rajasthan have seen significant growth in wind capacity addition during the last four to five years, mainly due to stable policy and regulatory regimes.

Where projected capacity of wind installations are concerned, the average capacity addition targeted or projected for next five years is in the range of 2.50 GW to 3.60 GW per year, according to the estimates and projections of various governments and private entities. Larger size projects – especially 10 MW and above – are playing increasingly greater roles in the annual capacity additions. The average project size is increasing and large capacity projects with project sizes of 50 MW and above are becoming the norm, especially for independent power producers.

The increased domestic demand for wind power in India has led to the growth of the Wind Turbine Generators (WTG) manufacturing business. WTG manufacturers either used self-developed machines or cooperated with global manufacturers to serve this growing market. This cooperation was either in the form of technical collaborations or joint ventures with subsidiaries of global manufacturers or license/sub-license arrangements.

Although more than 15 WTG manufacturers have set up manufacturing facilities with aggregate manufacturing capacity of approximately 12 GW per annum, for the year ended March 31, 2014, approximately 88 per cent of total annual capacity installations were attributable to six manufacturers – including Inox Wind limited – according to the WISE Report. Among the newer entrants, Gamesa India, Inox and Regen have gradually established themselves as leading WTG manufacturers in the country.

Inox Wind limited, a leading Indian windpower solutions provider and wind turbine generator manufacturer, is issuing equity shares priced at Rs 315 to Rs 325 per share to raise Rs 1,000 crore. Gujarat Fluorochemicals Ltd (GFL), which is a part of $2 billion INOX Group of Companies stated that the issue, which will open on March 18 and close March 20, comprises equity shares aggregating up to Rs 700 crore and an offer for sale of up to one crore equity shares, or five per cent of stake held by Inox Wind promoter Gujarat Fluorochemicals to the extent of Rs 300 crore. The issue will be listed on both exchanges, NSE and BSE.

“We will use the funds to primarily expand our existing capacities, besides Rs 150 crore will be utilised for enhancing capacity in Madhya Pradesh,” Devansh Jain, Director, Inox Wind, said while noting that the company, with an order book of 1,258 MW as of December 31, 2014, has customers that include Green Infra, Continuum Wind Energy, Tata Power Renewable Energy, Welspun Energy, Bhilwara Energy, ReNew Power Ventures and Hero Future Energies.

“Our 2 MW WTGs were designed and developed – after assessment of wind site qualities and conditions across low wind resources locations such as those in India – with licence from AMSC Austria. Through our wholly-owned subsidiaries, we provide turnkey solutions for wind farm
projects and have acquired – or expected to acquire – access to certain project sites in Rajasthan, Gujarat, Andhra Pradesh and Madhya Pradesh which, we estimate are suitable for installation of an aggregate of 4,052 MW capacity that we intend to develop for customers as part of our turnkey model for wind farm development. The company is looking at constructing a new integrated manufacturing facility at Barwani (Madhya Pradesh) at cost of approximately Rs 2,000 million to manufacture, nacelles and hubs, rotor blade sets and tower.”

Meanwhile, when asked about the issue of land acquisition for wind power projects, Jain said, “90 per cent of the wind projects come up on waste land, therefore problem of land acquisition does not arise in the wind energy sector.” The company is looking at improving the cost-efficiency of generating power from wind energy while maintaining  high quality standards and project execution capabilities, through offering customers more advanced WTGs with improved power curves. It is also looking at establishment of offices and production facilities outside India in its expansion plan.

With the emergence of wind IPPs, the focus has shifted towards utilising higher efficiency technologies to maximise project returns. The historical trends show that megawatt scale turbines are becoming more popular as compared to smaller capacity turbines. The average WTG size for annual installations has increased gradually touching 805 kW during the year ended March 31, 2014.

At the same time, with focus on developing low wind speed sites, WTGs suited to such conditions are being preferred. The technology in India is moving towards bigger diametres with better aerodynamic design, lighter blades and higher hub heights. These developments have taken place in context of extracting wind energy with lowest cost of energy from the low wind pockets prevalent in India.

In India, for wind power development, the ‘turnkey’ solution approach is preferred by wind farm developers and small investors since they don’t have in-house capabilities to undertake project development on a larger scale. Although recently a few large customers/independent power
producers have initiated in-house project development activities, a majority of capacity addition is expected to continue to be driven by ‘turnkey’ solution providers, at least over the short to medium term.

WTG manufacturing typically entails large requirements of working capital. In the coming years, WTG manufacturers with well-capitalised balance sheets are likely to be in a position to manage their working capital requirements and effectively manage growth of the wind turbine business.

India to see a big rise in power demand

Electricity demand in India increased from 739.3 BU in 2008 to 1,002.2 BU in 2014 – an increase of over 35 per cent. Despite an increase in generation capacity, a supply deficit continues to exist in India as of March 31, 2014, coal-based projects accounted for approximately 59.2 per cent of the total installed power generation capacity in India and renewable energy-based projects accounted for approximately 12.9 per cent installed capacity.

However, renewable energy’s share of energy output is approximately six per cent in India due to low capacity utilisation. Conventional fuel-based capacity additions have faced challenges such as fuel supply shortfalls, land acquisition challenges, delays in state and environmental clearances, equipment shortages in the market and difficulties in passing on higher costs of fuel to off-takers. At the same time, renewable energy capacity additions have exceeded planned targets during the 11th Five Year Plan, 14.7 GW of renewal energy capacity was added against a target of 14.0 GW. Total installed power capacity in India is expected to reach 400 GW by 2022, according to the India Department of Heavy Industry, Indian Electrical Equipment Industry Mission Plan 2012-2022.

In India, electricity generation primarily comes from fossil fuel sources (coal, gas and diesel), nuclear, large hydro and renewable sources of energy. The demand-supply gap for coal has been increasing in India and increasingly, larger parts of India’s coal requirements are being met through imports.

With electricity demand growing at CAGR of 6.9 per cent from 2008 to 2013 on one hand and lack of access to electricity for less than half of its population on the other, India faces the challenge of maintaining a balance between energy security and energy access for all, while also ensuring sustainable development. Under the National Action Plan on Climate Change (NAPCC), the Indian government has set a target of having 15 per cent renewable energy in the electricity generation mix by 2020, implying a total installed base of approximately 100 GW of renewable energy generation capacity. The Indian wind power market is expected to witness annual installations of approximately 3.0 to 5.0 GW over the coming years.
Dominick Rodrigues

Dominick Rodrigues

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