Introduction Project outline

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5 Introduction Over the last 10 years, India has shown to be very pro-active in the development of renewable energy sources, primarily wind (onshore). The country continues to announce ambitious targets (12% renewable energy by 2017) and plans to realize these targets. Past few years have shown impressive annual renewable energy growth rates, nevertheless many project also suffered serious difficulties, such as those related to grid connection of finances. The Government of India has recently expressed its intentions to work towards realizing offshore wind energy in the country. The best example of this being the draft offshore wind policy document that was published by the Ministry of New and Renewable Energy (MNRE) in This led to a chain of events (seminars, international research projects) and increased attention of international stakeholders in the topic of offshore wind for India. Project outline Rijksdienst voor Ondernemend Nederland (RVO) has contracted Ecofys to perform a desk study on the subject Offshore Wind Energy India. The goal of this desk study is to get a better understanding of the status of Indian offshore wind, with respect to market potential, challenges, policy and cooperation opportunities for Dutch industry. At the suggestion of RVO, the desk study is executed in cooperation with the Dutch industry representative organization TKI Wind op Zee (Top consortium for Knowledge and Innovation Offshore Wind). TKI Wind op Zee has created innovation clusters with Dutch industries active in the offshore wind sector, and they have good contacts in the sector. Ecofys has partnered with WinDForce (Indian consultancy company) for execution of the desk study. This partnership allows quick access to local information and inclusion of Indian perspectives related to offshore wind. 5

6 Methodology In order to get a good overview of the political and market landscape, as well as to identify collaboration opportunities, the study was executed along three main lines: - Acquisition of facts related to technological potential and challenges; - Generating market and policy awareness, and - Collecting experiences from Indian and Dutch stakeholders. A fact-driven deskstudy was performed both by Ecofys and WinDForce. Market and policy information was primarily obtained through targeted interviews done by WinDForce (e.g. Ministry of New and Renewable Energy). Experiences were collected on the basis of interviews in the Netherlands and in India. 6

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8 Technological potential A preliminary analysis, for the technological potential of offshore wind, considers the following three factors: offshore wind resource, spatial or bathymetrical constraints and grid capabilities. Offshore wind resource Knowledge on the wind resource of the coast of India is very limited. No offshore wind measurement campaigns are currently performed. Different agencies and experts have provided estimates for offshore wind speeds, however due to the lack of verification material the estimates are considered to be of low quality. Coastal measurements have been performed by C-WET and Oldbaum in Rameswaram and Kanyakumari (Tamil-Nadu) using a 100m met mast and remote sensing device. In Gujarat, the offshore wind resource was modeled using onshore met masts, typically at 70-80m and significantly far away from the offshore region (left picture). Although initial results indicate acceptable offshore wind climate (range: 7-11 m/s is mentioned over various sources) the actual offshore wind climate is not understood well enough to perform proper techno-economic analyses. The available information also indicates strong seasonal effects, which can play a role power evacuation. To summarize: the quality as well as the quantity of measurements should be improved in order to fully assess the offshore potential. Spatial / bathymetry With 7000km coastline, spatial constraints are currently considered of minor importance. Preliminary water depths information for Gujarat, made available by Pandit Deendayal Petroleum University (PDPU) indicates sufficiently shallow water up to 10km from the coast in Gujarat. High-level geophysical (soil, waves, current) information seems sparse and should be collected in a structured manner to better understand the spatial and bathymetric potential. 8

9 Grid Stronger state, regional and national grids are essential for the integration of more renewable energy in India. The Central Electricity Authority (CEA) and Ministry of New and Renewable Energy (MNRE) have recently commissioned Power Grid Corporation of India (PGCIL) to identify what grid expansions are needed to integrate renewable energy as planned in the 12 th year plan (see Appendix). The outcome of this this study is provided as the Green Energy Corridor Plan (see link). The Green Energy Corridor mentions grid expansions needed to realize the onshore additional capacity. It does not mention any offshore capacity to be added (neither does the 12 th year plan). Large investments are needed to realize the work, a coarse estimate, given by WinDForce, is 8 billion USD by the year The Green Energy Corridor Plan is not part of current national policy; the execution of the plan should therefore be monitored closely. The Draft Offshore Policy Document mentions that the State Electricity Boards (SEBs) will be held responsible for the onshore infrastructure required to connect offshore wind farms. This forms a risk for developers, since in general investments in grid infrastructure are lagging and SEB often face financing difficulties. The Draft Offshore Policy Document also mentions that the central government will provide support mechanisms to the respective states in order to realize the on-shore infrastructure. The policy is still to be approved by the Indian national cabinet and it is expected it will trigger political discussions (e.g. on the topic of costs for grid connection). There is thus a considerable uncertainty how this policy will translate into actual regulation. Links Green Energy Corridor Plans: Indo-German Loans: 9

10 Market and industry With regard to the installed wind capacity, India s current wind energy market is ranked 5 th position in the world. The country has reached an installed capacity of 20GW, primarily as a result of opened electricity market and favourable incentives, such as the Generation Based Incentive (GBI) and Accelerated Depreciation (AD) scheme. The new 12 th five year plan again mentions the ambitious target to develop 30GW of wind and 9GW of solar. A major threat in realizing this potential is the lack of national coordination in the energy sector. On the one hand, legal frameworks and national action plans steer in the direction of more sustainable energy in India (e.g. through Renewable Purchase Obligations and Renewable Energy targets). On the other hand, the electricity system continues to face serious technical issues (transmission and distribution system), not only threatening evacuation of wind power electricity but also still leaving about 1/3 rd of the population without access to the grid. Gujarat is one of the most important states in India with regard to onshore wind with an installed capacity of 2.6 GW. Gujarat has some advantageous characteristics that could play a role, particularly in future offshore wind developments. These include: good coastal and back-country infrastructure, wind turbine manufacturer bases, large (petrochemical) industry, a number of harbors that are of key importance for India. 10

11 Tariffs Sale of electricity Different off-takers are possible: the main are likely to be state-owned distribution utilities. Alternatively private off-takers can engage in Power Purchase Agreements with the generators. In this case the tariff will be determined by the specific PPA. In addition the generator needs to pay transmission costs to the transmission system operator. Offshore wind Tariffs Offshore wind tariffs have yet to be decided on. The tariffs will be defined on a state level, by the State Electricity Regulatory Commission. Consultants/Advisories are expected to provide insight into the cost breakdown of offshore wind, in order to establish reasonable FiTs. An indication of the target returns are in the range of 20-22%. Note this is high compared to the Dutch situation: 9-10% balance sheet financed project, 14-16% project financed with 70/30 gearing ratio (70% debt). In the Netherlands, the cost of offshore wind is around /kwh. Cost reduction targets for 2020 lie around ~0.10 /kwh. For reference, the onshore wind FiTs in India ranges between /kwh. In comparison the SDE for offshore wind is in the range of /MWh. Although Indian onshore FiTs are lower than the Netherlands, other incentives have sufficiently encouraged Indian wind energy developments. Those include: - Accelerated depreciation schemes - Duty exemption - Income tax exemption - Low interest loans/soft loans through National Clean Energy Fund 11

12 Policy Reforms in the Indian energy market have included drivers for renewable energy and energy efficiency, and have successfully attract investments in the onshore wind sector. A key national policy for renewable energy has been the Electricity Act (2003). It modernized the electricity market and lays the regulatory framework for the current organization of generation, distribution, transmission and trading. Furthermore, the Act mentions a few particular rules related to renewable energy: Assigned regulatory commission for determination of tariffs for renewable energy Mandates states to purchase certain percentage of renewable electricity through RPOs Mandates state governments to develop state-wide plans for grid integration State-wise policies can lead to additional benefits for renewable energy. For Gujarat, a recent development has been the Gujarat Onshore Wind Policy (2013). This policy defines the sales options for Wind Energy in the state. Power producers can either sell at a fixed tariff to the state-owned electricity company (fixed price for 25 years), or to other companies with a grid license. The policy also regulates distribution and transmission charges for Gujarat. Offshore Wind Policy From a national policy perspective, the same set of drivers that hold for onshore wind development, will also drive the offshore wind harnessing, i.e., indigenous energy resource capability, environmental sustainability, need for a low carbon economy, abundant wind resources, energy security and persistent energy and power shortages as well as growing electricity demand. The draft offshore wind policy, published by the Ministry of New and Renewable Energy (MNRE) in 2013, gives a high-level overview of tasks and responsibilities for this new market. Among other things, this document mentions that the State Electricity Boards (SEBs) will be held responsible for the onshore infrastructure required to connect offshore wind farms. This forms a risk for developers, since in general investments in grid 12

13 infrastructure are lagging and SEBs could face financing difficulties. The Draft Offshore Policy Document also mentions that the central government will provide support mechanisms to the respective states in order to realize the on-shore infrastructure. In March 2014 it was confirmed by MNRE that finalization of the policy has been delayed. It is expected that the elections (spring 2014) as well as political debate after the elections further define if, and in what form, offshore wind policy gets established. Interviews with stakeholders have exposed that there is still considerable uncertainty on the establishment of offshore wind policy, as well as its implementation. Links EBTC Document: Technologies-in-India_Web.pdf Gujarat Wind Policy: Draft Offshore Wind Policy: 12

14 Offshore wind permitting As per the Draft National Offshore Wind Policy released by MNRE, NOWA (National Offshore Wind Agency) will be setup as a nodal agency which coordinates with the different ministries for the clearances. Clearances required before installation of the offshore wind farms are to be obtained from a number of authorities. The table on the next slide gives an overview of the type of clearances required for an offshore wind farm. It is expected that the Minister for New and Renewable Energy will set up the NOWA once national government agrees on offshore wind policy. Besides the permitting process, NOWA is also mentioned by stakeholders to be active in: Preliminary resource assessments Oceanographic surveys Definition of concession areas offshore wind Bidding process and allocations of areas It is the expectation NOWA will play important role in the upcoming years once a regulatory framework for offshore wind is established. Risk for developers may be that NOWA does not have a track record for execution of the regulatory processes. One could expect that NOWA will quickly enter a phase where experience and knowledge from abroad is highly appreciated (e.g. experience with spatial planning, surveys, bidding, allocation). Dutch institutes and government could play an active role in this process. In order to support international cooperation, there would be a task for RVO to closely follow the establishment of NOWA and to maintain in contact with key persons within MNRE and NOWA. 13

15 Recent developments During the interview phase, a number of interesting developments were identified. A high-level overview of 4 projects in given in this and the following slide. GWEC Project Goal of this project is to provide policy guidance, resource mapping, techno-economic study of selected areas, training, supporting partnerships and developming long-term vision. The project will run for 4 years and the consortium members can bring in additional sources of funds to complete and expand the work. All the international coordination will be handled by GWEC based out of Brussels while the project management unit (PMU) rests in WISE at Pune. The Project involves amongst other things resource and site feasibility, identification of the location for first pilot project and development of a matrix of parameters to be evaluated. For further information about this initiative, please contact RVO. British High Commission Project The goals of this project have some overlap with the abovementioned GWEC initiative, although has some more focus on policy, capacity building and grids. Project duration is 34 months. IT Power India is involved in project implementation. The intend to work in close collaboration with NOWA, once established. Possibly coordination of works will be done with GWEC to avoid overlaps. 14

16 Suzlon Suzlon has expressed its plans to install one or two met masts for collecting wind regime data as well as oceanic data required for structure design of the Offshore WTGs. They hold a permit to install a wind mast 20 km offshore in Gulf of Kutch (Gujarat). Suzlon representatives expressed that the company looking for an integrated proposal with funding and supplies of equipment with requisite technical knowledge for carrying out the operations. The company is also involved in port development for wind energy under the vibrant Gujarat initiative. ONGC The Oil and Natural Gas Company (ONGC) is India's largest oil and gas company, active in exploration and production. They have large involvement in offshore activities around the coast in India. The company is mentioned frequently to be the first party being able to undertake offshore wind project development, possibly a demonstration project of ~50 MW. In case more information about the ONGC initiative is requested, it is advised to coordinate this through RVO. 15

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18 Interviews Dutch industry Ecofys has performed an round of interviews with selection of Dutch companies and organizations to collect lessons-learned of working in an Indian industry, as well to collect attitudes related to entering a future Indian offshore wind market. A first selection of organizations was made with RVO and TKI. In this selected, there was a focus on organizations active in the front-end and pre-development phases. This phase will be the most important phase India in the coming years. Final parties eligible for interviews were selected in coordination with Larive international, the company performing comparable desk studies for Brazil and China. 17

19 Interviews with Dutch industry While most stakeholders recognise potential for exporting Dutch know-how, the industry requires more certainty from the market before any significant efforts towards market entry will be made. Most stakeholders indicated that while the market is interesting, capacity is a constraint: Other international markets are already further in development and are more obvious focus areas. In some cases, other more established business lines of companies (already active in India) take precedence to offshore wind. Linkage to concrete projects can facilitate organisations to assign resources to explore the Indian market. There a various key areas in which the Dutch industry is able to provide expert knowledge. However, the added value of such knowledge needs to be acknowledged; if not European tariffs might form a hurdle. In addition significant competition exists in India, with well-established national and international firms. Nonetheless, the specific nature of offshore wind still presents knowledge gaps and thus business opportunities. Key is to partner in an early stage of market entry, to enable linkage to Indian sector/governmental stakeholders as well as facilitating working with the multitude of regulatory agencies. 18

20 Topics for Dutch collaboration Based on interviews with Dutch and Indian stakeholders, 10 topics are considered most fruitful for international cooperation in the coming years. The left column denotes the most relevant stakeholder to contact in order to develop a cooperation. In general, C-WET is an important stakeholder as it has involvements in various initiatives related to offshore wind. In addition, MNRE is an important stakeholder when it comes to policy development. In order to boost cooperation initiatives on the topic of renewable energy, the Dutch Ministry of Economic Affairs has signed an Memorandum of Understanding with MNRE. Under this MoU, cooperation can take place in various modalities (e.g. exchange of personnel and knowledge, training, joint research). For more information about this MoU, please contact RVO. 19

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22 Conclusion The current data indicate India has sufficient potential to harvest offshore wind power. Whether or not the market will develop is a matter of overcoming hurdles, most of them identified during this study. Some early prerequisites for an Indian offshore wind market to develop include the following: Clear policy for offshore wind that assigns responsibilities as well as financial resources to right stakeholders; Political understanding of cost-components for offshore wind in India and a strategy to bear those costs; Good overview of techno-economic potential of various zones in the offshore region and assignment of areas where offshore wind is to be deployed; First small-scale pilot-project, developed with international parties, which solves country-specific problems and demonstrates offshore wind can be realized; Well-managed central agency with the task to implement policy and manage permitting. Some of the Dutch offshore wind industrial players can play an important role in realizing these prerequisites. In the coming years, most chances are expected for those active in the early phase of offshore wind planning and development. Given the pre-mature status, few opportunities are expected in the short term for companies active in the construction and O&M phase. The Indian stakeholders who will play a role in the early phases have been identified, and some explicitly expressed their interests in working with Dutch partners. The perspective of most Dutch organizations to this is that concrete projects are essential for the international collaboration to be successful. To identify those projects, it is important to continue to follow the market and key stakeholders (e.g. those implementing the first research projects). RVO and TKI Wind op Zee support the engagement of interested Dutch organizations in the developing Indian market and can support to lay first contact where needed. 21

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30 Gujarat Ports Harbor requirements offshore wind A suitable harbor is essential for both for the installation as the operation phase of an offshore wind farm. Five high-level requirements for a suitable harbor are: Sufficient space for pre-assembly and loading of foundations, blades and tower elements Efficient loading capacities (cargo cranes with sufficient capacity) Heavy duty quays Sufficient draught Heavy duty hinterland connections Gujarat harbor industry The extensive coastline makes Gujarat suitable for harbor industries. Gujarat ports play an important role in import and export of goods between India and the world. It is claimed that Gujarat ports handle about 25-35% of national cargo. A number of Gujarat ports have included shipbuilding activities in their portfolio. The establishment of Special Economic Zones (SEZs), as well as the availability of land, attracts additional investments to harbors. Gujarat harbors offshore wind Table above list some key characteristics of four harbors in Gujarat that were selected by WinDForce and Ecofys. Key figures are based on public data. From the key figures these four ports appear reasonably developed. As this is only an initial inventory, further study should be done to check: Loading capacity of quays, cranes, etcetera Room for storage and pre-assembly Logistic infrastructure with back country (spare-parts) 29

31 Sailing distance to possible wind farms Ecofys could not verify if Indian ports have expressed their interests in becoming logistic centers for offshore wind. Possibly Mundra and Kandla could play an important role in developments in the Gulf of Kutch. We would advise to closely follow plan announcements related to major ports in the region. Links: Gujarat ports: 29

32 Overview of the 12 th Plan Period ( ) 30

33 Stakeholders Power producers Central is the power producer which owns and operates the offshore wind farm. This could either be an independent power producer, or a public state undertaking. State Electricity Regulatory Commission The State Electricity Regulatory Commission is tasked with setting the FiT. Subsequently, the State Distribution Utility engages in a PPA with the power producer (private or public). Policy makers The policy makers are likely to include several stakeholders both on a state and national level, such as: Ministry of New and Renewable Energy State Government State Electricity Board National Offshore Wind Authority Central Electricity Regulatory Commission State Electricity Board The State Electricity Board is tasked with making reinforcements to the onshore grid, necessary for transport of the produced electricity of the offshore wind farms. Authorities The power producer requires permits and consent from various authorities: Ministry of Environment and Forestry 31

34 Ministry of Defense Ministry of Shipping Ministry of Petroleum and Natural Gas Ministry of Civil Aviation State marine boards 31

35 For abbreviations: see Appendix A 32

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