Evolution of Wind Power in India and Role of CDM

Transcription

1 Evolution of Wind Power in India and Role of CDM Gaurav Gandhi Renewable Energy Technology and Application (RETA) Energy Environment Division, The Energy and Resource Institute (TERI) India Habitat Center, CGO Complex, New Delhi Telephone: Fax: Abstract India is facing an acute shortage of electricity, particularly of peak electricity. Millions of villages are still un-electrified. In order to bridge demand and supply gap of electricity, renewable energy can be proved as a sustainable mean of power supply. Another reason behind focusing on Renewable Energy Technologies (RETs) is climate concerns; RETs provide a clean source of power generation. Wind energy particularly, has proven a significant rise in installed capacity globally, also the technology is maturing and it is again reflecting a remarkable growth in this RE sector. All the non-oecd (Organization for Economic Cooperation & Development) countries have a huge potential of renewable energy, which if tapped, can result in sustainable development in power sector and to reduce GHG emissions. Being non- OECD and developing country, India is taken as a case in order to study developments in wind power sector. Total wind power installed by the end of December 2007, is MW and India is on 4th rank, as far as wind power generation is concerned. The paper will discuss the policy developments to support wind power activities in India, which also involves wind resource activities carried out by Ministry of New and Renewable Energy (MNRE). The impacts of policy interventions on wind power generation, further developments in the sizes of WTGs, manufacturers share and CDM for wind power projects are also addressed in this communication. Keywords Wind power India, wind power and CDM, wind power policy, installed wind power capacity, techno-commercial feasibility 1. Introduction In second section the paper discusses general development in wind power sector of India. The third section gives brief idea about total installed capacity of wind power in India by

2 September This section also describes state wise wind power installed capacity, giving an idea about un-explored potential and percentage wise potential that can be further tapped without any technological interventions. Fourth section details out existing tariff structure in various states and various policies in those states to promote and/or deploy wind power. Fifth section elaborates methodology adopted by TERI to calculate techno-commercial feasibility of wind regime. Section six is about wind power projects, so far approved by IPCC, as eligible to get CDM advantage. Section seven projects the future of Indian wind power development, while section eight concludes the discussion. 2. Development of wind power Wind power development in India started in late eighties as a demonstration purpose. Largest installed capacity for demonstration project of around 19.4 MW is in Tamil Nadu, followed by Gujarat of 17.3 MW capacity. Table 1 describes demonstration type installed capacity in various states of India. Table 1 Total installed capacity for demonstration projects State Demonstration Projects (in MW) Andhra pradesh 5.4 Gujarat 17.3 Karnataka 7.1 Kerala 2.0 Madhya pradesh 0.6 Maharashtra 8.4 Rajasthan 6.4 Tamil nadu 19.4 West bengal 1.1 Others 3.3 Total 71.0 Size of wind turbine also increased from 50kW in 1990 to 2100 kw in The development took a major boost from Electricity Act 2003, after which it increased annually with Compound Annual Growth Rate (CAGR) of around 30%. Government of India established Ministry of Non-conventional Energy Sources (MNES) presently renamed as Ministry of New and Renewable Energy (MNRE). MNRE along with Indian Institute of Tropical Meteorology (IITM) has carried out wind resource mapping of India and developed wind map of India as shown in figure 1.

3 As per the figure, most of the Indian region falls in class 2, i.e. wind speed at 50 m height is in the range of 5.6 to 6.4 m/s or wind power density at 50 m is in the range of 200 to 300 w/m2. The class of wind can be further manipulated by means of hub height, by increasing height of tower, class of wind is lowered, that ultimately reflects in higher energy yield as due to increase in height of tower provides flexibility to increase the rotor diameter as well. Figure 1: Wind energy potential map of India 3. Installed wind power capacity and manufacturer s share India ranks 4th after Germany, Denmark, and United states in wind power installed capacity. The installed capacity as on 31st September 2007 (as on 31st December the installed capacity is MW), in various states of India is given in table 2.

4 Sr. No. State Table 2 Total installed capacity in India Gross Potential (MW) Technical Potential (MW) Installed capacity (MW) 1 Andhra Pradesh Gujarat Karnataka Kerala Capacity installed in Madhya Pradesh Maharashtra Orissa NA N.A. 8 Rajasthan Tamil Nadu West Bengal Others NA NA Total * # * Data till 30/09/2007 # Data received in discussion with manufacturers 3.1 Manufacturers/ suppliers There are 9 manufacturers of wind turbines in India. The four major manufacturers: Enercon India Pvt. Ltd., Suzlon Ltd., Vestas Wind Technologies India Pvt. Ltd. and Vestas R R B India Ltd; together have about 80% market share in terms of total installed capacity. Figure 2 below shows total installed capacity of the four major manufacturers in India as on 31st March All India market share details (FY Total) Vestas RRB 7% Other 7% Vestas 12% Suzlon 46% Enercon 28% Suzlon Enercon Vestas Vestas RRB Other Figure 2: Manufacture wise share of installed capacity in India

5 Indian wind energy equipment manufacturers have created a niche for themselves by expanding their businesses in Europe, US and Asia including China. 4. Tariff and wind energy policies The Government of India started supporting renewable and in-particular wind energy sector by adopting a multi- pronged strategy, which includes 1. Establishing wind monitoring stations to develop wind energy resource data base 2. R & D and testing infrastructure supports to industry. 3. Support to industry to develop and/or adopt technology through installation of demonstration projects and involvement of public sector companies to adopt technologies for example, BHEL Ltd (previously known as Bharat Heavy Electricals Ltd) was engaged in adopting wind energy technology 4. Providing fiscal and financial incentives through various tax rebates, duty exemptions 5. Adopting policies to offer preferential tariffs to wind energy based electricity generation, banking, and wheeling 6. Setting targets for contribution of electricity from renewable in total electricity generation in the country 5. Development of policy and regulatory structure In 1993 the Ministry prepared Guidelines for procurement of power from Renewable energy sources which guided various state utilities regarding purchase price for power from renewable energy sources. In addition to the price, the guidelines were provided for other issues like interconnection, wheeling of power etc. These guidelines were adopted at different scales by different state utilities in India. Energy sector reforms started in the 1990 s with formation of Central and State Regulatory Commissions and unbundling and privatisation of government- controlled utilities. In June 2003 the Electricity Act 2003 was notified. This act has specific provision for power generation through renewable energy. It mandated the state level regulatory commissions to specify quota for procurement of power from renewable sources of energy. 5.1 Electricity Act 2003 The Electricity Act 2003, mandates the state regulatory commissions to specify a percentage, of total power consumed, to be purchased from renewable energy sources

6 through the section 86(1)(e) which defines functions of State Regulatory Commissions as to promote co generation and generation of electricity through renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any persons, and also specify, for purchase of electricity from such sources, a percentage of the total of electricity in the area of a distribution licensee. As per the provisions (section 3(1)) of the Electricity Act 2003, the Ministry of Power, Government of India also notified the National Tariff Policy on January 6, Some of the important provisions with regard renewable energy generation are: 5.2 National Tariff Policy Section 6.4 of the National Tariff Policy reads as follows Pursuant to provisions of section 86(1) (e) of the Act, the Appropriate Commission shall fix a minimum percentage for purchase of energy from such sources taking into account availability of such resources in the region and its impact on retail tariffs. Such percentage for purchase of energy should be made applicable for the tariffs to be determined by the SERCs latest by April 1, Such procurement by Distribution Licensees for future requirements shall be done, as far as possible, through competitive bidding process under Section 63 of the Act within suppliers offering energy from same type of non-conventional sources. In the long-term, these technologies would need to compete with other sources in terms of full costs. The Central Commission should lay down guidelines within three months for pricing non-firm power, especially from non conventional sources, to be followed in cases where such procurement is not through competitive bidding. Implementation of Section 86 (1) (e) of the Electricity Act 2003 and Section 6.4 (1) of the National tariff Policy are underway. Different states are in the process of issuing tariff orders for renewable energy based electricity generation and specifying quota/share for power from renewable energy in accordance with the provisions of the Electricity Act The present status of specifying quotas for renewable energy procurement and issuing tariff orders in some of the major Indian states is summarized in Table 3.

7 Table 3 Status specifying quotas for renewable energy procurement in different Indian states S. No. State Quota/Renewable Purchase Obligation Time Period 1 Andhra Pradesh Minimum 5% of total energy (of this 1/2% is to be reserved for wind) , & Gujarat Minimum 1% of total energy Minimum 1% of total energy Minimum 2% of total energy Himachal Minimum 20% of total energy Pradesh 4 Haryana Up to 2% of total energy Up to 2% of total energy Up to 3% of total energy Up to 10% of total energy Karnataka Minimum 5% and maximum of 10% of total energy 6 Kerala Minimum 5% of total energy (of this 2% from SHP, 2% from wind and 1% from all other NCE Madhya Pradesh sources) Minimum 0.5% of total energy including third party sales from wind energy 8 Maharashtra Minimum 3% of total energy Minimum 4% of total energy Minimum 5% of total energy Minimum 6% of total energy 9 Orissa 3% (for wind and SHP) 10 Rajasthan Minimum 4.88% of total energy Minimum 6.25% of total energy Minimum 7.45% of total energy Minimum 8.50% of total energy Minimum 9.50% of total energy 11 Tamil Nadu Minimum 10% of total energy

8 S. No. State Quota/Renewable Purchase Obligation Time Period 12 Uttar 5% of total energy - Pradesh 13 West Minimum: 1.9% Bengal Minimum 3.8% National Electricity Policy The Government of India (GOI) in its National Electricity Policy announced in Feb 2005[4], aims to Make electricity accessible to all by 2010 Fully meet demand by 2012 Increase in per capita energy to 1000 kwh/year by Minimum lifeline of 1 kwh/ household/day by year Financial and fiscal incentives The wind power projects are being supported and promoted by the Government of India through various financial and fiscal incentives. These include: 5.5 Accelerated depreciation This has been one of the most effective financial incentives for wind energy projects under which investors can claim 80% depreciation in the first year of installation. 5.6 Power purchase tariff for wind energy projects The other important policy measure is the purchase tariff for power generated from wind projects. Way back in , MNRE issued the guidelines for the purchase of power from renewable energy based projects. According to these guidelines the baseline tariff of Rs 2.25 per kwh was set up for the year 1994 and annual increase of 5% was allowed. These guidelines were in effect till Subsequently, with the power sector restructuring and passing of The Electricity Regulatory Commission (ERC) Act 1998, the State Electricity Regulatory Commissions started playing crucial role in tariff determination of power including power generation from renewable energy sources like wind. Currently, tariffs of wind power purchase vary as per states, various state government tariffs and its validity is described briefly in table 4.

9 Table 4 State government wind power purchase policies State Wheeling* Buy-back Rate by SEB Validity Andhra Pradesh At par with conventional Rs.3.37 per kwh w.e.f (frozen for 5 years) Till 2009 Gujarat 4% of energy Rs.3.37 per kwh (without any escalation for 20 yrs.) Till 2009 Karnataka 5% of energy + Rs.1.15/kWh as cross subsidy for 3rd party sale. Rs per kwh without any escalation for 10 yrs of commercial operation Till 2009 Kerala To be decided by SERC To be decided by SERC _ Madhya Pradesh Maharashtr a Rajasthan 2% of energy + transmission charges as per ERC 2% of Energy as wheeling + 5% as T&D loss. Below 132 kv, 50% of normal charges applicable to 33 kv declared by commission + Surcharge + Losses * Year wise rates (Rs./kWh) from 1st to 20th year 3.97, 3.80, 3.63, 3.40, 3.30, 3.30, 3.30, 3.30, 3.30, 3.30, 3.30, 3.30, 3.30, 3.30, 3.30, 3.30, 3.30, 3.30, 3.30, 3.30 Rs.3.50/kWh (First year of commissioning). (Escalation of 15 paise per year for 13yrs) For Jaisalmer, Jodhpur and Barmer district Rs.3.60 per unit for injection in 33kV or 11kV system & Rs.3.71 per unit for injection in EHV system. For other district Rs.3.78 per unit for injection in 33kV or 11 kv system & Rs.3.89 per unit for injection in EHV system. _ Till 2010 Tamil Nadu 5% of energy Rs.2.90 per kwh Till 2009 Punjab 2% of Energy Rs per kwh for base year and 5% escalation for next five years up to West 7% of energy + open Rs.4 per kwh _ Bengal access charges * Wheeling charges are paid towards transmission charges to the utilities for captive use of electricity 5.7 Special low interest loans and tax concessions IREDA started funding wind energy projects by providing long-term loans typically for 10 years period with 1 year moratorium and at special low interest rates, which were about 4-8% lower than the commercial interest loans. The debt/equity ration for such projects is typically 75:25 for projects up to 1MW and 70:30 for projects above 1MW capacity. Apart from the loans for installing wind farms, IREDA also offered loans to the wind turbine suppliers/ manufacturers for establishing the manufacturing facilities too. Currently the interest rates for financing wind energy projects are around 10.25% with maximum repayment period of 10 years.

10 Apart form IREDA, other financial institutions, banks etc have also started financing wind energy projects. Wind projects are classified as infrastructure project and attract special tax concessions such as 10 years tax holiday, concessional duty rates for import of wind turbine components etc. Additionally, some of the state governments offer additional benefits to for industries in backward areas; these include concessional tax rates and tax holidays for state taxes, exemption from payment of electricity duty, exemption from demand cut. Green Energy Fund The state of Maharashtra has established a green energy fund by imposing a cess on the industrial and commercial consumers of electricity in the states. This fund is used to promote non-conventional energy in the state. Through this fund it offers up to 11% equity in wind farm projects in co-operatives, reimbursement of up to 100% of the expenditure on approach roads, evacuation arrangement and infrastructure development etc. 6. Techno-commercial analysis of wind regime Before initiation of any wind power project, it is essential to carry out wind resource assessment in order to determine wind power potential of the site. Wind resource assessment plays an important role in determining viability of the project as energy generation is site specific and depending upon topography of the land as well as wind speed or wind power density in that region. Wind data is collected for at least a year in preferably 10 minutes interval, this data is further processed with relevant software and processed data is made available for analysis of wind regime in that area. This data is called raw wind data that is further analyzed for pressure variation, air density variation, and seasonal variation in wind flow pattern. The raw wind data also contains direction variation in the wind flow. Due to availability of this wind direction data, it is easy to analyze wind flow pattern. This raw wind data is processed further to create observed wind climate file with help of application tool such as WAsP observed wind climate (OWC) wizard. With help of software like WAsP, Windpro etc., after providing relevant input to these softwares in appropriate file format, energy generation of that site is calculated. This generation also takes into consideration the array losses occurred due to micrositing. Other losses such as internal transmission loss, density correction (in case if density corrected wind turbine file is not used

11 while simulation), grid availability, machine availability, uncertainty of wind, reactive power etc. losses are also taken into consideration in addition to array losses. Out of these, density correction and internal transmission loss can be calculated, based upon 1 year performance of machine, machine availability, and reactive power can be determined. Uncertainty of wind, modeling error, and grid availability are sort of errors those vary from location to location and person to person. Other software such as RETScreen can also be used to estimate energy generation of the site, but accuracy of WAsP, Windpro etc. is far more than that of RETSceen as more detailing of input is done in case of WAsP, Windpro etc. Once energy estimation is done, this is further analyzed with the financial parameters such as rate of interest, discount rate, salvage value of project, investment cost, various debt-equity ratios, O & M costs etc. Inflation and wind electricity generation tariff in that state is also considered. By varying these financial parameters against estimated energy generation, best optimized combination can be selected. Net present value (NPV) and internal rate of return (IRR) are two crucial indicators giving financial viability of project. 7. CDM projects As required by UNFCC, to be eligible for CDM project, it is essential to prove additionality of the project. Based upon tariff offered in various states, for wind power projects, it is difficult to prove additionality. So, only 11% of total projects (316) are eligible for getting CDM benefit. Majority of the projects approved for CDM are from Tamil Nadu state. Out of total 28,995,416 CERs generated per annum, in India, only 4.8% of total CERs, i.e. 1,408,322 CERs are generated from wind power projects. Figure 3: Percentage share of wind power projects in CDM of India.

12 8. Way forward The steady growth of the wind energy market, success of early plants and favourable policies has now attracted other commercial financial institutions and investors including leading corporates to invest in wind energy projects in India. The untapped technical potential of about 6930 MW is likely to increase further as a result of grid extension, improvements in roads and other infrastructures in the country. Thus the market is likely to expand to anywhere between 10000MW to 40000MW in coming future. The impact of policies is evident from the data on installed capacities of the wind power projects over the year as shown in Figure 4. The CAGR (compound annual growth rate) for last five years is 30%. Currently, annual capacity addition is about 1500 MW to 2000 MW indicating market size of US$1500 million per annum. 9. Conclusion The Government of India has been actively developing renewable energy and wind energy sector since 1980 s. With long-term vision, timely changes in the policies, programs and thrust on institutional development including financial institutions and industries the Government of India achieved stupendous success in wind power development to become currently world s forth largest producer of wind energy based electricity. Indian wind energy equipment manufacturing industry has today developed into a formidable force with significant presence in the world markets. Electricity Act 2003, and national and rural electrification policies have announced huge targets for the electricity sector and wind energy is likely to play an important role in achieving the same. The Government of India has announced its plan to have 10% of new electricity generation capacity addition of estimated MW by 2012 from renewable and wind energy installed capacity target is MW by In addition to the projections till 2012, the Report of The Working Group on New and Renewable Energy for the 11th Five year Plan also made some long term projections, till 2020 for some of the major technologies like wind, hydro, and biomass for power generation. According to these projections, the total installed capacity of wind projects would be about 39000MW by 2022

13 Bibliography 1. Garud Shirish and Gaurav Gandhi (2007). Wind Power developments in India- market and policy overviews, Proceedings of Wind power, Schanghai, China