Miles to sail to harness offshore wind

In the recent months, the central government has introduced two policy measures to support the offshore wind sector, which generates electricity through wind farms in waterbodies, such as the sea. In April this year, the government implemented subsidies for vessels involved in offshore wind energy project setup and undersea cable laying. Then in May, the government extended the waiver of additional surcharges for offshore wind projects. These recent policy efforts are geared towards accomplishing a target of 37 gigawatts (GW) equivalent of offshore wind projects by 2029-30, as stated in a strategy paper published by the Ministry of New and Renewable Energy (MNRE) in 2022.

But will these policy interventions be enough to give a necessary push to offshore wind energy? The question looms as analysts observing the industry have not seen much progress since the policy was first notified eight years ago.

Offshore wind is an important part of India’s efforts to transition to renewable sources of energy. The government of India first notified the National Offshore Wind Energy Policy on October 6, 2015, to harness the offshore wind power across the 7600-kilometre coastline in the country. The MNRE further framed the draft Offshore Wind Energy Lease Rule, 2019, to regulate the leasing mechanism of offshore wind energy blocks, although the final policy is yet to be notified.

In 2022, the MNRE published a strategy paper, outlining three different models to promote offshore wind energy. In the first model there would be demarcated offshore zones for which the MNRE or the National Institute of Wind Energy (NIWE) will have carried out studies and the government will offer viability gap funding or any other financial incentive. In the second model, the NIWE will identify offshore zones for which detailed studies have been carried out. In this case, developers would need to carry out studies and can then bid for necessary central financial assistance. In the third model, the government will allocate offshore wind sites, under a lease, with site exclusivity rights for a fixed period. Under all the models, the paper suggests, the government shall be responsible for the immediate transmission of power from the offshore pooling delivery point to the onshore meeting or interconnection point.

On November 14, 2022, MNRE released a draft tender for seabed leasing of offshore wind projects under Model 3. India also has plans to open bids for two tenders, off the coast of Tamil Nadu and Gujarat, with a total capacity of five GW.

The first tender for sea-bed leasing for offshore wind projects for four blocks of sea-bed in Tamil Nadu was supposed to come by the end of March but has been since delayed due to the lack of clarity on who will develop offshore power evacuation and transmission infrastructure and the time given to the project developers to implement the project.

The tender was supposed to be under Model 3 and need not sell the electricity to power distribution companies (discoms). However, the Tamil Nadu government had suggested to MNRE that both Model 2 and Model 3 projects be put out concurrently, and the State government would pay the developer Rs. 4 per kWh.

Citing the discussions with MNRE, Martand Shardul, Policy Director-India of the Global Wind Energy Council (GWEC), stated that in the ministry’s strategy paper, published in 2022, the onus of developing offshore power evacuation and transmission infrastructure was on Central Transmission Utility of India Limited (CTU). The revised draft Request for Selection (RfS) document, for which the ministry held consultations with the industry, has put that in the scope of the offshore wind developer.

As representatives of the industry, he says, they have recommended to the government that if the responsibility of developing offshore wind power evacuation and transmission infrastructure is passed on to the developer, the cost of building the evacuation and transmission infrastructure should be separate from the levelized cost of electricity (LCOE) of offshore wind. LCOE is a metric used to assess the average cost of generating electricity over the lifetime of a power plant or energy project.

Meanwhile, MNRE is also working on a tender for one GW of capacity for a Gujarat coast, under Model 1, where the government will provide viability gap funding which is monetary support to make one project that is economically viable but financially unviable, become economically and financially viable.

Can offshore come to the rescue of the wind sector?

India has set a target of harnessing 140 GW (out of which 30 GW is offshore wind) installed wind energy capacity by 2030. The plan envisages adding 7.5 GW of wind energy annually, reaching around 110 GW by 2030.

It is to be noted that annual wind capacity additions have started declining since 2017 after the government introduced a reverse auction regime for wind power procurement. Other factors include the low availability of wind-rich sites and payment issues from distribution companies for low wind energy capacity addition. India has added just eight GW of capacity during the last five years, missing the target of 60 GW of wind capacity by 2022. The government decided to move away from the reverse bidding mechanism in January 2023.

The government recognises that offshore wind power provides a viable alternative with better quality wind etc.

Commenting on the advantages of offshore wind, Vibhuti Garg, Director of South Asia with the Institute of Energy Economics and Financial Analysis (IEEFA), says that good Tier 1 and Tier 2 sites in India are already exhausted. Offshore wind can provide much better sites for higher wind power generation. Capacity without good generation will occupy a lot more land, and India is also constrained for land to develop these big projects.

On the necessity to do offshore wind, Shardul of GWEC said that it not only provides a higher capacity utilisation factor (CUF) but Round-the-clock (RTC) power, which would be a blessing in disguise for industrialised states like Tamil Nadu and Gujarat. Harnessing this resource not only eradicates the need for land but also improves the availability of RTC green power, which is essential for decarbonisation in the industrial and commercial sectors. Offshore wind can also create green job creation opportunities. In fact, among all renewable energy technologies, offshore is going to be an outlier in terms of the number of jobs that can be created across the value chain during the execution as well operations.

As per the trajectory identified by the MNRE strategy paper, India plans to bid out 37 GW equivalent of offshore wind projects by 2029-30, with four GW each year from 2022 to 2025 and five GW each year from 2025 to 2030. Though it’s 2023, the government has yet to bid out the first offshore wind project.

Since the development of offshore wind projects will take a minimum of 7-8 years and the first bidding is yet to take place, offshore will have minimal contribution in meeting Nationally Determined Contributions (NDCs) by 2030. Shardul explains this by stating that if everything goes well and the government is able to tender this year, the first offshore wind project will be commissioned by 2030 or after 2030. He is also of the opinion that offshore wind bidding through the Model 3 route involves a big risk not only for the industry but also for the government. In Model 3, all the major work– such as site survey, obtaining clearances, and ensuring offtake among others are in the scope of the developer, including adherence to timelines but there is no clarity on what happens if requisite clearances are not obtained within stipulated timelines. Supporting the initial few GW of Model 3 projects with adequate financial support mechanisms to mitigate investor risk may prove beneficial.

Offshore wind projects are more costly than other renewable energy technologies, such as solar PV and onshore wind. The capital cost of establishing one MW of offshore wind plant is Rs. 207.5 million, whereas onshore wind will cost Rs. 64.9 million, and solar will cost Rs. 47.1 million. However, the turbines are getting bigger, the hardware cost is reducing, and the transmission is getting bigger and better, leading to cost reduction, claims a study done to estimate the cost for the first offshore wind farms in India.

Offshore wind also has a high Capacity Utilisation Factor (CUF) compared to onshore wind, which has 30-40 percent CUF, CUFs of offshore wind can go as high as 50-55 percent. So, per unit cost will go down, giving better viability, while per MW cost remains still higher, adds Garg of IEEFA.

Future course

Experts believe that establishing domestic supply chains and developing manufacturing and procurement facilities at ports is important to drive down the cost of offshore wind in India.

A report released by GWEC India in March 2023 recommended waiver of taxes, import duties, and GST until the local supply chain is set up. It also asked for a ten-year tax holiday.

The government believes India has an advantage as industry players are already doing business on onshore projects producing up to 3.6 MW turbines. They only have to expand their base and change their investment to the requirements of offshore wind to produce up to 15 MW turbines.

It has been reported earlier that government plans to introduce a production-linked incentive (PLI) scheme to promote the manufacturing of offshore wind turbines.

Collaboration between the government and private sector, financing mechanisms, and robust supply chains are key to bringing down the cost of offshore wind energy projects.

“Offshore wind projects need to be seen from the perspective of a much higher grade of engineering and complexity involved in operating in waters that have not been tested. For example, Tamil Nadu offshore sites still don’t have Light Detection and Ranging (LiDAR) data and may also require a robust site survey to determine the engineering required to successfully install, commission and operate while also adequately mitigating any impacts arising from climate extremes. We are discussing deploying a 6-10 MW turbine size in Tamil Nadu and Gujarat. It needs handholding and some support, whether from the central government, or the multilateral development banks (MDBs). Countries of GOWA can come together to set up a mechanism that is able to cut the risk of offshore wind projects in markets that are under-development and new markets. Facilitating access to innovative financial instruments for early-stage projects may set such markets as more attractive destinations for the offshore wind industry” elaborates Shardul.

He says, the ministry has been very receptive to productive feedback from the offshore wind industry and this dialogue between government and industry must be strengthened further to support India’s strides for harnessing offshore wind.

India’s G20 Presidency has also allowed forging a collaboration with international players working on offshore wind energy.

Experts believe that environmental regulation is another essential aspect of the growth of offshore wind. Several regulations apply to offshore wind projects, including CRZ Notification, 2019; EIA Notification, 2006 (as amended), and “safety” and “no fishing zones” as per maritime conventions. As per National Offshore Wind Energy Policy 2015, an Environment Impact Assessment (EIA) study of proposed offshore wind farms is one of the key components for developing wind farms.

“We also need to look at siting of the project and transmission systems in a way that does not harm the environment and biodiversity and need comprehensive environmental assessments carried out to make the projects economically as well as ecologically sound,” said Garg.

Banner image: Nordsee One is an offshore wind farm in the German part of the North Sea. India is also planning to bid out 37 gigawatts (GW) equivalent of offshore wind projects by 2029-30. Photo by Capmat007/Wikimedia commons