The four year long FOWIND (Facilitating Offshore Wind in India) project has now been running for just over a year. During this time the project partners (DNV GL, GPCL, CSTEP and WISE) have worked to deliver necessary preliminary work to determine the potential for offshore wind development in the States of Gujarat and Tamil Nadu, in cooperation with the Indian Ministry of New and Renewable Energy and the National Institute for Wind Energy (formerly CWET).
A key research output - the Offshore Wind Policy and Market Assessment Outlook - was launched on 17 February in New Delhi. A joint report from DNV GL and GWEC on behalf of the FOWIND Consortium, this report is a crucial link to facilitating the development of a roadmap for offshore wind power in India.
The report seeks to review the experiences to date in six major offshore wind markets including Belgium, China, Denmark, Netherlands, Germany and the UK; as well as to put the sector in the larger context of the industry as a whole. We try to tease out the lessons that may be useful for Indian policymakers as they piece together the policy, regulatory and financing frameworks which will allow for the development of a sustainable, commercially successful industry; which of course must be adapted to both the unique opportunities and challenges of the Indian financial and energy environments.
India already has a strong track record in onshore wind, but the rate of capacity addition has fallen in the past couple of years due to policy instability as well as state-specific issues linked to land acquisition for projects. As a result offshore wind may now have a role to play. Offshore wind holds the potential for alleviating the land acquisition challenge. Although the costs are greater, offshore wind has some inherent advantages such as a large wind resource, higher wind speeds than onshore wind and more clarity over land tenure. Offshore wind can also play a role in meeting the demand from load centres closer to the coastline – for example, Greater Mumbai, Chennai and Surat, as well as other big cities such as Vishakhapatnam and Vadodara, subject to technical and economic feasibility.
This report has reviewed progress in the sector to date and focused on the regulatory and policy frameworks in seven leading markets. It has drawn out the following key recommendations for India:
- Set a clear offshore wind target and roadmap to convey the vision to industry
Experience shows that a clear, time-bound, quantitative target for offshore wind development, and a roadmap of how to achieve it, is an effective tool to focus minds on the offshore wind opportunity
- Clearly articulate and affirm energy policy objectives to maintain industry confidence
A clear understanding of wider policy objectives helps to provide industry with confidence that the drivers for offshore wind will persist even if the exact milestones do not always go to plan
- Ensure managed progression from demonstration to commercial projects
Demonstration sites are crucial for identifying regulatory issues, testing the local supply chain, understanding specific environmental concerns, helping transfer knowledge and testing new technology. However, for the industry to make the necessary investment in infrastructure, a clear plan for a well-managed progression to commercial scale projects is also required.
- Provide strong initial public investment and utilise Public-Private partnerships where possible
Public investment is needed not just to reduce project risk and to provide soft loans but also to ensure that the preliminary assessments and necessary supporting infrastructure is developed. The high cost of offshore wind means that a mix of public and private finance is likely to be required
- Ensure sufficient volume, delivered in a smooth pipeline, and design risk-informed support mechanisms to drive cost reduction
Confidence in sufficient market volume helps industry to maximise local ‘learning by doing’ and benefit from economies of scale – thus pushing down costs. Yet it is important to ensure a smooth pipeline, as rapid increases or decreases in deployment are challenging for the supply chain to manage. A further aid to cost reduction can be designing ‘risk-informed’ financial support mechanisms, which are structured such as to minimise upfront developer risk, and therefore minimise the cost of financing.
- Careful consideration of the costs and benefits of promoting a local supply chain
Job creation is a key driver for offshore wind, yet needs careful consideration. It could be beneficial for India to promote investment in this sector with a view towards creating a robust supply chain as part of the country’s industrial development strategy. However the decision to develop a supply chain must be based on whether the potential market is big enough to warrant a local supply chain that is commercially viable, and whether local companies would be able to win export opportunities in the wider global market.