India poised to become a wind export hub

India’s electricity demand is projected to grow at 9.9% yearly towards 2025 driven by its sheer size and economic growth. The demand dipped temporarily in 2020 due to Covid-19 induced lockdowns, but it not only rebounded to match the pre-COVID level but ended up exceeding 2020 highs in early 2021.

Renewable energy will be the main beneficiary of this growth driven by an ambitious target for 450 GW renewable installed capacity by 2030 and the low tariffs being discovered in auctions. A report by GWEC says that as of March 2021, India has 39.2 GW of installed wind power capacity and is likely to add another 20 GW over the next five years owing to cost and its role to produce round-the-clock power.

India is poised to become a wind export hub. Wind energy is emerging as a crucial link for India’s green energy transition story. The corporate procurement market for renewables has started to pick up driven by the cost competitiveness of wind and solar as compared to DISCOM supply. As of date, 9 GW of wind and 8.1 GW of solar (including rooftop installations) are installed in the C&I procurement category in India. Going forward, solar alone will fall short to meet the multi GW opportunity and wind development will be crucial to meet the larger sustainability goals alongside the power demand of corporates. This market is expected to contribute 0.85 to 1.7 GW of wind installations in the next five years, however, can open to be a multiGW opportunity on the back of long-term reforms easing the approvals and procurement mechanism. Post-2025, the market offers multiple green shoots including those of offshore wind, repowering, and developing India as a wind export hub, as well as the largely untapped potential of the largest C&I consumers in India.

Wind energy in India

India has over three decades of experience in harnessing power through a grid-connected wind energy system. Wind power continues to be a major constituent of India’s renewable energy (RE) based grid-connected power generation mix and constitutes 4%1 of the overall share of electricity generation in the country. Between 2010-2011 and 2019- 2020, wind generation capacity grew at a CAGR of 11.39% while the overall installed electricity capacity witnessed a CAGR of 8.78%.2 The National Institute of Wind Energy (NIWE), autonomous research and development institution of the Indian Ministry of New and Renewable Energy (MNRE), has estimated wind power potential at 100 metre height as 302 GW. This is almost 81% of the country’s current installed electricity generation capacity. With a massive growth in the power sector, particularly in the second half of the last decade, India has made great strides. For example, the country reports over 99% household electrification and is already running the world’s largest RE expansion initiative. From 2017 onwards, new RE capacity addition has continued to exceed coal-based thermal power. These developments indicate the commencement of a new dawn in the Indian power sector.

Yet, India has a long road to walk. With a per capita electricity consumption of 1,208 units in 2019-2020, which is less than half of the world average, and an estimated emerging power demand of 2087 TWh in 2030 from 1207 TWh in 2019, India needs to prepare for the future. Taking note of enormous future surge in power demand and to promote a low carbon growth, India had committed to a 175 GW of installed RE capacity by 2022 and has already installed more than four times its original aggregate 2022 target of 20 GW. As of March 2021, wind power constitutes 42%4 (39.2 GW) of cumulative installed grid-interactive Renewabl Energy power.

Despite the short-term drop in India’s energy demand brought by the COVID-19 crisis, the longterm drivers of energy demand and growth remain intact. Year-on-year electricity demand declined by 8%5between 2019 and 2020 in India, due to the impact of the global pandemic and subsequent economic slowdown. However, long-term projections towards 2025 foresee a recovery of energy demand, expected to increase by 3% in the conservative case and as much as 18% in the ambitious case in the next five years. RE remains the central axis of energy supply planning to meet the increasing demand in India. Although the progress towards targets and renewables installations stalled in 2020, India reinstated its commitment to clean energy in multiple national and international forums, including the UN Climate Action Summit 2020, World Solar Technology Summit (WSTS) of the International Solar Alliance, and 15th G20 Summit.

The landscape for RE support continues to become favourable, in early 2021 the Reserve Bank of India has joined the Network for Greening the Financial System (NGFS) to define and promote best practices in green finance in India. India remains committed to a target of 40% electricity generation from renewable energy by 2030, delivered through 450 GW of installed capacity.

Last year saw the commissioning of a crucial substation at Bhuj in Gujarat, where 60% of the wind pipeline is concentrated. Under the newly proposed wind park/wind-solar hybrid park development scheme, the central government has raised the prospect of earmarking land for wind park development to address delays in allocations of land and grid. Additionally, the MNRE extended the inter-state charges waive-off from December 2022 to June 2023 and removed price caps for future auctions. India also launched an extending green electricity trading market, in form of GTAM in June 2020. India is the world’s fourth-largest onshore wind market, and new tenders and market mechanisms introduced in 2020 offer growth opportunities ahead.

During 2020, both wind and solar benefitted from the favourable financing made available by the government for economic recovery, as well as loan tenures increasing from 15 to 18 years and a 75% debt ratio instead of 70%.

Positives for future of wind export in India

Wind’s role in India is set to evolve into a value focussed role of providing power during the day in combination with solar and other technologies:

1. Wind and solar are complementary in generation profiles in terms of the time of the day and seasonality. Wind supplies power during peak consumption hours in a day. Seasonally, wind production is strong during the monsoon season when solar resource is lower, while the reverse is the case during the months of November and December.

2. Wind is driven by higher annual CUFs in the range of 35% to 40% as compared to solar operating at 16% to 20%. A wind plant combined with solar allows annual CUF to move even higher.

3. Wind offers a more consistent daily generation profile as compared to solar, which is available for 6-7 hours a day.

4. Wind has relatively lower societal costs, including no costs of carbon, lower marginal costs for dispatch, minimal water requirement, matching load profile from the grid, and lower than solar balancing costs. Additionally, the wind industry has a higher job creation potential and requires skilled and semi-skilled labour throughout the project lifetime.

State-wise distribution

Nearly 26 substations have been allocated to evacuate wind generation in India. However, the projects bid in central auctions has gravitated towards two substations – Bhuj in Gujarat and Tirunelvelli in Tamil Nadu. The former was preferred by developers due to the availability of cheap revenue land. Sites in the Bhuj region allowed developers to engineer the lowest-cost bids utilising high resource sites and cheap revenue land, resulting in a concentration of nearly 60% of awarded capacity at the substation.

Due to lower project commissioning activity in 2020, grid-related constraints were eased with the commissioning of 500 MW of grid capacity in 2020 and an additional expected capacity of 6 GW by mid-2021. Simultaneously, developers have started exploring projects outside Gujarat and Tamil Nadu; since the SECI V tender, projects have diversified into Madhya Pradesh, Karnataka for wind projects, and Rajasthan for hybrid projects. More than 1 GW of wind project pipeline has been in these states.

The overall contribution of state markets to wind energy forecasts in the next five years is expected to be limited to 700 MW in the base case and no new state tender is expected. Only Gujarat is expected to continue with state auctions in the ambitious case, while three states: Tamil Nadu, Maharashtra, and Madhya Pradesh are expected to procure wind from central auctions to meet non-solar RPOs. Karnataka, Rajasthan, and Andhra Pradesh are expected to be in a state of flux and will likely focus on solar procurement.

Future of wind in India

Towards 2030, India is expected to continue pushing towards its climate goals for the Paris Agreement and work towards achieving its vision of 450 GW installed renewable energy capacity by that year. The carbon neutrality agenda is expected to receive a further push from the government towards 2030, as the country explores new pathways including floating solar, offshore wind, decentralised renewables, and bolder initiatives green energy storage, electric vehicles, and its National Hydrogen mission. The government has set multiple long-term climate agendas; however, a lack of short-term milestones and market roadmap for emerging sectors like offshore wind makes it difficult to assess feasibility.

The long-term drivers for wind continue to be strong in the Indian market as the country will move towards technology neutrality and low carbon growth. Reforms underway in the market, including the Draft Electricity (Amendment) Bill, Market Based Economic Dispatch (MBED), and emerging wholesale markets, indicate a shift towards a more efficient power market structure girded by cost-competitiveness and inclination towards the promotion of RE in the electricity mix. Although growth has stalled in recent years, the position of wind is expected to strengthen as green, cost-competitive, and hybrid resources are called upon to meet the growing needs of India as an industrial powerhouse and engine of global development.