A couple of years ago, the wind power sector looked very robust, with 3,200 MW of capacity added in 2011-12 alone.
Last year, the US-based Lawrence-Berkeley National Laboratory said that India’s wind power potential is about 2 million MW— ten times its total installed power capacity.
Over the years, as many as 26 wind turbine manufacturers had come up in the country. So, it looked as though a rural industry would develop, relying on local manufacturing and employment.
Today, however, the wind industry is down in the dumps. In 2012-13, installations fell to 1,700 MW, and the shrinking market has left little room for smaller turbine manufacturers.
No incentive
First, the Union Government withdrew two key sops, ‘accelerated depreciation’ and generation-based incentive (GBI), from April 2012.
Accelerated depreciation enabled profit-making companies to save on taxes by putting up windmills and writing down 80 per cent of the machine costs as depreciation. This led companies textiles and auto component companies, among others, to put up windmills.
Another set of investors, who wanted to be in wind energy, found the generation-based incentive, which paid a fixed amount per kWhr generated, alluring. This saw a few wind-based independent power producers come up, with many receiving equity funding.
The subsidy withdrawal, though well flagged, brought the industry to a halt.
Securing land and the right of way to bring the bulky towers and blades to the site are also proving to be major issues.
Ironically, in Tamil Nadu, India’s windiest State, the public sector distribution utility is not buying wind power. It is instead purchasing costlier power from the market, ostensibly because wind power is fickle. The wind power produced in Tamil Nadu cannot also be sold to consumers outside the State.
With power supply improving in the State, wind power producers will find it difficult to sell their electricity directly to consumers. ‘Third-party sales’ prices will therefore come under pressure, making the sector less attractive.
In other States, such as Gujarat, utilities are not signing power purchase agreements. On top of this, the Central Electricity Regulatory Commission requires wind power producers to forecast their generation for the following day, with penalties if actual generation misses the forecast by over 30 per cent. The penalties deter investors.
In an effort to promote the development of renewable energy, the Government had introduced Renewable Energy Certificates (REC). Distribution companies and other “obligated entities” are required by law to buy some energy from renewable energy suppliers. Those who fail to meet this “Renewable Purchase Obligation” can make up the shortfall by purchasing RECs.
RECs are given to renewable energy producers who opt to sell them to obligated entities at a non-preferential tariff. However, wind power producers who chose the REC route now find they are unable to sell the certificates. This is because the obligated entities are not buying them, and getting away with it.
The Government has said it will bring back GBI. Apart from that prospect, there is not much these power producers can look forward to. The wind has been knocked out of the industry.