Offshore wind: The sleeping giant has been stirred

The sector is hoping for a new lease of life with the draft offshore wind energy lease rules 

By Shweta Miriam Koshy
Published: Thursday 21 February 2019
Photo: Getty Images

Latest global tariffs for offshore wind-generated power highlights the technology is no more the new kid in the power-generation block.

Worldwide, there was about 19 gigawatt (GW) installed wind power capacity at the end of 2017, with 4.3 GW added that year itself.

European countries, including the United Kingdom, have been pioneers in the sector and today account for 84 per cent of such offshore installations. Increased scale has turned tariffs competitive compared with power generated from gas, nuclear, solar and wind onshore. Recent auctions in Germany and the Netherlands have even drawn subsidy-free bids.

What about India

Yet offshore wind energy comes with expensive challenges like resource characterisation, sub-sea installation, turbine foundation and development of long transmission infrastructure.

India is ill-prepared to meet these challenges due to the lack of technological knowhow and studies to assess resources.

The country, nevertheless, jumped on to the bandwagon with its ‘National Offshore Wind Policy’ in 2015. And, as is the trend in India, the government set ambitious targets — a capacity of 5 GW by 2022 and 30 GW by 2030.

This followed preliminary assessments by FOWIND, which estimated tremendous potential along the coasts in Gujarat and Tamil Nadu. FOWIND, or the Facilitating Offshore Wind in India, was a Global Wind Energy Council (GWEC)-led consortium that hoped to bring to India its learnings from the European experience. It was to serve as a knowledge hub and a skill development centre. It was also handed the responsibility of the first demonstration project or the First Offshore Wind Project in India (FOWPI).

The first round of geotechnical, geophysical, ground investigation and metocean assessments was conducted by national Institute of Wind Energy (NIWE) and, in part, by FOWPI.

The latter led the first Light Detection and Ranging (LiDAR)-based wind profiling in the Gulf of Khambhat, which began in November 2017. It was to be the site of the first demonstration project; however, the idea of a demonstration project was dismissed, claiming there was enough proof for the technology’s success worldwide.

What the government did

Instead in April 2018, the Union Ministry of New and Renewable Energy (MNRE) released an expression of interest (EOI) to get the lay of the land. Despite considerable interest (35 global and domestic wind energy companies responded) that the conservative EOI drew, no tender was issued.

In parallel, with the slowdown in the onshore wind industry, the excitement around offshore wind energy fizzled out too.

To awaken the sleeping giant, the MNRE in 2019 released Draft Lease Rules for Offshore Wind. The regulations apply to leasing of offshore blocks anywhere between 100 and 500 square metres within the exclusive economic zone off the Indian coast.

The document details the responsibilities of the lessee; imposes restrictions on the activities that can be undertaken within the leased offshore blocks and explains repercussions in cases of default.

The lease for prospecting can be for up to five years, for developers to undertake necessary assessments and feasibility studies. Project development activities will be allocated a 30 year lease, with a facility to extend for five more years. Both leases are associated with security deposits and a yearly lease fee based on the size of the block to be leased.

It talks about compensation to the developer in case the central government pre-emptively procures the energy generated and also permits curtailment if issues with grid stability or security arise.

The lease rules have also included social and environmental caveats — rigidly stating that the development of the farm wind should not in any way affect the livelihood of the coastal population; and should not lead to the deterioration of local flora and fauna. The lessee is also given the responsibility of disposal — a deficiency in the onshore wind sector.

The loopholes

Unfortunately, some necessary details continue to be absent. For one, the National Offshore Wind Policy lays the onus of development of transmission infrastructure (till the sub-station on land) on the developer. Large investments in offshore structures and transmission facilities will result in uncompetitive high tariffs – something Indian power procurers do not have the stomach for. This can perhaps be best addressed by delinking the responsibilities for transmission and generation — similar to the UK’s offshore transmission owner model.

Second, there has been no mention on port augmentation and utilisation for the purposes of offshore wind project development. Functional ports close to offshore farms are essential to reduce costs. They could also help in operation and maintenance, repowering and decommissioning.

Neither the policy nor the regulations discuss upgrading or redesigning existing ports. If India is serious about offshore wind, it must set up dedicated ports. Europe, for example, has 10 such ports.

Third, developers are sceptical claiming high costs, lack of incentives and the high risks. Further, there is no visibility on whether the energy procurers will even buy the electricity generated at the high tariffs that offshore wind projects will inevitably yield.

These worries might need to be addressed with government-backed guarantees in long-term power-purchase agreements.

There are several reasons for India to diversify to offshore wind, the primary one being the contentious nature of land in India. A close second is that the best wind potential sites in the country are filling up.

Further offshore wind development in India is egged on by the tremendous potential, an underutilised manufacturing capacity and a thirst for more energy.

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