National Institute of Wind Energy (NIWE), an autonomous technical institution set up by MNRE, has invited Expressions of Interest (EOI) for India’s first offshore wind project. The 1,000 MW project is proposed to be located about 25 km from Pipavav port off the coast of Gujarat. Transmission infrastructure for sub-sea connectivity shall be the responsibility of project developer(s). Due date for submission of EOI is 25 May 2018.
- Little progress has been made in offshore wind since announcement of the offshore wind policy in 2015;
- MNRE would need to offer substantial subsidy support to the project to make price of power financially acceptable to DISCOMs;
- Offshore wind remains a marginal technology because of high costs and execution challenges;
MNRE announced the offshore wind policy in 2015, wherein NIWE was appointed as nodal agency for the sector. But there has been little progress since then. The pilot project has been in development for over 2 years with assistance from the European Union, which is providing technical assistance for completing preliminary wind resource assessment, environmental impact assessment, ground investigations, geophysical and geotechnical studies. As it is the first project of its kind in India, it is fair to assume that project completion would take longer than usual at about 5 years.
MNRE is proposing to allocate the project through an open international competitive bidding process. Offshore wind has potentially higher PLF (up to 45%) but capital and operating costs are proportionately higher still. Factoring these in together with higher execution risks, final tariff is expected to be more than 2x current onshore wind tariffs. It is not clear if any capital subsidy or viability gap funding shall be made available for this project. We believe that DISCOMs would be unwilling to buy the power unless MNRE offers capital subsidies to reduce the final tariff to below INR 3.00/ kWh.The Gujarat DISCOMs recently cancelled two different tenders deeming tariffs of INR 2.98 – 3.06 to be too high.
Although offshore wind technology has been technically proven for about ten years now, high costs and operational challenges mean that it remains a marginal power source. International capacity addition has remained static at about 2-3 GW annually (about 5% of total wind capacity) with cumulative global capacity of only 18,814 MW as of December 2017. More than 90% of this capacity is concentrated in a few countries in north Europe and China.
The launch of India’s first offshore wind project is an exciting development and an inevitable step in onward march of the RE sector. Diversifying energy sources and piloting new technologies is highly desirable. But the government should move with caution. Its plans to hold auctions for 5 GW of offshore wind energy capacity in 2018-19 are highly unrealistic.
