India's wind power boom is failing to deliver

Posted: 12 August 2008

To all appearances, wind energy in India is booming - but it could very well be nothing but an optical illusion. For despite rising installed capacity and huge investments, India only uses a small proportion of the potential wind energy that has been installed.

In more technical terms, India does not manage to generate enough power from wind because of lower than average plant load factors (PLF).

This is reported in its latest exposé by Down To Earth magazine, a New Delhi-based science and environment fortnightly, published with assistance from the Centre for Science and Environment (CSE).

Wind farm, Maharashtra
Wind farm, Maharashtra
Wind farm, Maharashtra. Photo © Down to Earth
"We know that wind energy can and must play a critical role in securing our future needs," says CSE director Sunita Narain. In fact, over the past few years, the Indian government has given incentives to promote wind energy. Today, the country has over 8,700 megawatt (MW) of installed capacity. The country has also set a target to add another 10,000 MW in the 11th plan.

"But our review of wind energy in the country finds that there is an urgent need to reassess the current policies and incentives, so that the business of wind gets serious about generating power, and not just installing wind farms and reaping benefits from fiscal incentives," says Narain.

The study found that wind energy - while accounting for 6 per cent of the total installed power capacity in the country - only contributes 1.6 of the country's power. On average, across the country, the PLF of wind energy has increased marginally from 13.5 per cent in 2003-04 to 15 per cent, but there are states such as Gujarat and Andhra Pradesh, where wind energy is functioning at a PLF of less than 10 per cent.

Maharashtra has more than tripled its wind capacity in the past few years, but has actually decreased it in terms of its PLF. Today, in this energy-starved state, wind energy functions at a PLF of 11.7 per cent - a pathetically low figure compared to other states like Tamil Nadu and Karnataka, and certainly compared to global averages of 25-30 per cent.

Shadowy business

This analysis of new and renewable energy, , based on the government's own figures, shows that this investment in capital will be largely wasted unless policies change. "In the current scheme, which gives an accelerated depreciation benefit of 80 per cent and other tax incentives for installation of the plants, wind energy has become the business of cash-rich investors, who take advantage of tax benefits, and are not serious about generation of power," says Narain. It is no wonder, says CSE, that hotel companies, spinning mills and even film stars have invested in wind energy.

Down To Earth says the problem has been made even more pernicious because of the 'closed nature' of the business. The few companies that make wind turbines, monopolise the business of setting up the wind farms and then charge for a farm's operation and maintenance as well. As a result, there is no information on the cost of the capital infrastructure. Whereas in other parts of the world the cost of capital (which is the key determinant of the cost of power) has gone down because of economies of scale, in India it has climbed upwards - from Rs 4 crore per MW a few years ago to Rs 6 crore per MW today - roughly equivalent to a jump from US $10m to US$15 million per MW.

There is also little information about the cost of operation and maintenance or the expected efficiencies of a plant and how this can be increased. "The current business is not geared to generation of power and increasing efficiencies and reducing costs. This is clearly not good if we want wind energy to play an important role in our future energy security," says Chandra Bhushan, associate director, CSE and head of the Centre's industry unit.

"The Indian wind energy sector needs to be re-energised, and for that to happen, policy needs to change and get real," says Chandra Bhushan.

The key need, says the report, is to move towards a generation-based system of incentives (instead of an investment-based one). This can be done by by increasing the tariff paid to generate wind. Recent moves to do this are dismissed as "too little, too inadequate and too hesitant to change the business as it operates currently," ny Chandra Bhushan.

In India, utilities have to purchase a certain proportion of their energy from green sources like wind. This can be a powerful tool to promote green energy, says the report, but there is a lack of information about the scheme, a lack of penalty provisions if utilities do not meet the compulsory green quota, and low or non-existent green energy quotas set by some states.

Finally, the report also wants benefits of wind power to go to local people. While its generation needs land, it rarely gives back something in return to the communities who live in the vicinity of the wind farm. Local people, it suggests, could be helped by rent or sharing from the lease of the land.

"If not done democratically, the push for wind energy can well become just another alienating 'infrastructure' programme... It will be so understood, and so resisted, as just another brown - not green - energy programme," says Down To Earth.

To read the full report see www.downtoearth.org.in.