Twister

In India, wind provides 70 per cent of renewable energy. In mid-2007, the country, had roughly 10,000 mw of installed renewable capacity--roughly 7.5 per cent of total installed capacity.

Indian policy says by 2012 at least 10 per cent of new electricity capacity installed must be from renewables. But currently for renewables, we only know how much we have installed, not how much we use.

Tax planning

Take wind energy. India's installed capacity of 7,230 mw, which is the world's fourth highest, is founded on an installation-based promotion regime. The first set of incentives in the 1980s included 100 per cent accelerated depreciation (investors were able to save the entire corporate tax on investment in wind farms in the first year), capital subsidy, tax-free income, sales tax and other tax benefits. These were given for installing wind turbines."In this period investment in wind energy was more for tax planning than for electricity generation," write Chintan Shah and Vivek Sharma in an article, 'Techno-economics of wind energy', published in the book Wind Power Development in India. This, however, was the situation when corporate tax was high. But as corporate taxes fell across the board and governments withdrew sales tax exemptions, investment in wind energy dried up.

The second burst of investment is more recent. This time tax incentives are lower, and technological innovation has increased efficiency. The first generation of 500-kw wind turbines were unsuitable for India's wind regimes. But now, capacity utilization is up to over 20 per cent and large turbines of 1,000-2,000 kw capacity are being installed; the dimension of the rotor has increased from 16-20 m to 60-80 m, which makes for greater generation of energy. In the early 1990s, suppliers assembled imported parts. But now manufacturing is done locally.

The 2003 electricity act provided for state-level electricity regulators creating conditions for promoting renewables. It mandated that a portion of power generated should be from renewable sources, but left modalities to the regulator. Ten states--Andhra Pradesh, Madhya Pradesh, Gujarat, Karnataka, Kerala, Rajasthan, Orissa, Tamil Nadu, Uttar Pradesh and West Bengal--have set minimum percentages, ranging from 0.5-10 per cent. Some states such as Andhra Pradesh have also specified the quantum to be sourced from different renewable energy sources. These states also mandate preferential tariffs for renewable energy. Maharashtra pays the highest--Rs 3.50 per kw -hr--to the wind power generator.

Successful model

It's this system of feed-in-tariffs that has led to a large increase in wind installations in Germany and a consequent fall in their prices. In this system, subsidy is not given for installation but the incentive is in the form of an assured higher tariff for electricity generated from renewables. Energy utilities are also required to source a certain proportion from renewables. The higher costs of investment are recovered from the power utility and consumers.

Why support?
Analysts say wind energy needs such support. Though competitive with conventional energy sources, wind energy's capital costs are high. Besides, this energy is highly dependent on wind speed and density. This energy source not only supplies energy but also consumes it--power is needed to maintain the voltage profile of the system. State electricity boards charge for this power at different rates.

There is another limitation. Wind energy plants are situated not according to existing transmission lines. Their location is based on wind geography.
According to Indian law, transmission and distribution networks are states' responsibility. So in Tamil Nadu and Karnataka, in certain cases, wind generators were asked to back down during windy periods, because transmission capacity was constrained. Now states are working around this obstacle. Maharashtra and, more recently, Madhya Pradesh have ruled that the cost of transmission lines beyond the point of metering will be borne by the promoter, for which 50 per cent of the total cost will be given as an interest-free loan to be refunded in five years. Market analysts say this additional cost will affect competitiveness. It is not clear how much installed wind energy is actually being generated and consumed.

Clearly, wind is integral to India's energy future. It just has to be made to blow in the right direction.