What will it take for Wind Power to Fly in India

A growing middle class, increasing energy consumption and the quest for energy security. These are the reasons why being the fifth largest producer of wind energy  is simply not enough for India. The country currently boasts a capacity of 19 GW, However, according to the 12th Five Year Plan (2012-2017), India is targeting another 18.5 GW of renewable energy, 11 GW of which is to come from wind power. Given recent technological innovations, it is possible to accelerate the large scale deployment of wind technologies and add around 30 GW to the total capacity by 2020. However, in order to achieve this target and move towards capitalizing on the 103 GW of total potential, India must overcome a number of technical, institutional and market barriers.

Increasing the share of wind power is also central to India’s climate change plans. According to the McKinsey Climate desk tool, high penetration wind power (penetration is the fraction of energy produced by wind compared with the total available generation capacity) has the potential to reduce annual GHG emissions by 112 Mt CO2eq. More importantly, low penetration wind power (which assumes a lower percentage share of wind contribution to the energy grid) has a potential of decreasing emissions by 171 Mt CO2eq annually. This is because low penetration technology requires less storage capacity, is less expensive and can accommodate more diffused grid structures. However, before such technologies are adopted, India must address a number of technical barriers inherent to wind production and decide how wind power will fit into the country’s long term plans.

Perhaps the most important barrier relates to the fact that wind power has significant seasonal and intra-day variations. This means that setting wind power targets without taking into account the capacity of the grid to balance this intermittency with alternative sources can be disastrous. This challenge becomes acute when considering the targeted 1,03,000 MC long term capacity. At such a scale, balancing possible intermittencies which are natural to wind power generation will be critical.

Similarly, India’s wind potential is unevenly distributed and concentrated in five major states; Karnataka, Tamil Nadu, Andhra Pradesh, Maharashtra and Gujarat. This means that it will be unrealistic to assume wind to be in the preferred power mix for all regions.  In regions where the potential for wind power generation is significant, the availability of appropriate land can also act as a barrier.

Lastly, the growth of wind up till now has largely been a result of the 80% accelerated tax depreciation on wind power. This tax is provided by the government of India to incentivize greater private investment into the sector. While this tax break has resulted in the addition of wind power capacity on the balance sheets of existing companies, it has been largely counterproductive. The policy has allowed large companies to reduce their payable taxes without requiring them to have actual wind power being produced as a prerequisite. A number of cases have been reported where wind projects were built in low wind speed areas and failed to deliver the promised production. This policy also reduced the involvement of foreign investors by pricing them out of the market as they do not enjoy the tax related benefits afforded to local companies. Given the negative policy consequences, this tax was lowered to 15% in 2013. However, energy producers have since pressured the government to reverse the decision. Suzlon energy, a leading turbine maker, has argued that the removal of tax incentives has cut wind power production in 2013 by half (from 3300MW in 2011 to 1500MW in 2013). This tension between incentives which drive innovation and capacity versus those that create dependence needs to be resolved if wind power is to reach its potential.

To overcome these barriers India can explore the following strategies :

  • Improve regional level planning and coordination. In order to leverage the potential of wind power, the government must specifically target developing capacity in the five states where potential is concentrated.
  • Increase competitiveness and drive down prices. This can be done by reducing anti-competitive behavior by major equipment suppliers. Equipment suppliers usually undertake all developmental activities, as well as commissioning of projects and self-contracting of O&M activities. Since suppliers control the bulk of the process, buyers are forced to pay a premium for the wind power projects. This results in wind power projects being more expensive and restricts competition for equipment supplies.
  • Improve the regulatory framework for Renewable Purchase Agreements. Currently, some states such as Maharashtra, Gujarat, Madhya Pradesh and Karnataka do not allow the procurement of RE power from outside the state. This is detrimental for the overall development of RE in the country.
  • Revisit land tenure policies. Encouraging mixed use land use for wind power generation with agriculture will improve adoption rates as it will increase land availability in crucial states as well as decrease the costs (compared to commercial rent).
  • Invest in R&D. R&D in energy storage technology which can provide backup for longer durations, like compressed air and high power density batteries among others, is critical if large scale deployment is to be achieved, Similarly, it is important to invest in complimentary options like pumped hydro-storage to accommodate intermittent shortages.
  • Explore the technical potential and economic viability of off-shore wind energy. This can boost production in states such as Andrha Pradesh and Tamil Naidu and circumvent land use conversion challenges in some regions.

India has made great strides in adopting renewable power. Wind will remain critical to reducing emissions, increasing production capacity and improving energy security. How successful the country is in achieving its ambitious targets for wind will greatly depend on its ability to priorities certain regions and adapt land policies, invest in better storage technologies and create more competitive markets.

Bilal Bawany is a second year Master of Global Policy Studies student at the LBJ School specializing in International Development and Governance. His experience in the public health, agribusiness and education sectors has fuelled his interest in how public private enterprise, aid and development policies affect the political economy of service delivery in developing countries.

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