India needs more than GBI – MAKE

Despite an expected modest upturn in India’s wind market next year – due in part to a revival of the generation-based incentive (GBI) – the country will be hard-pressed to meet its mid-term wind targets, says researcher MAKE. 

The Indian government recently formally signed off a reinstatement of the GBI, which, along with another popular support mechanism known as accelerated depreciation (AD), was shelved in April 2012. 

Critically, in addition to reviving the old GBI support level of 500 rupees ($7.49) per MWh produced by a wind farm, the new GBI will lift the ceiling on the total support a project is eligible for to 10m rupees per installed MW – up from 6.2m rupees/MW under the old version.

The new GBI will cover projects built from 2012-2017, meaning that wind farms built during the hiatus period will qualify retroactively.

In another promising sign for the Indian wind industry, the government recently confirmed its plan to establish a National Offshore Wind Energy Authority, which will carry out resource assessments and ultimately enter into contracts with project developers.

The reinstatement of the GBI is a major victory for the Indian wind industry. An estimated 1.5GW of capacity was not built because of the hiatus.  Still, the recent changes are “insufficient” to enable energy-starved India to meet its target of adding 15GW of wind capacity during the 2012-2017 period, or 3GW per year, according to MAKE

“India still faces significant market challenges,” MAKE says, citing high financing rates, the undeveloped grid, delays in the signing of power-purchase agreements with financially ill state-owned utilities, and the difficulty of moving wind-turbine components around India’s creaky transportation network.

It is unlikely that the AD scheme will be revived “in the short term”, MAKE notes.

Another hurdle is the recent decree – made by the Central Electricity Regulatory Commission – that all wind farms larger than 10MW must forecast their generation for the next day on a quarter-hourly basis, or else face financial penalties.

“This move could prove technically challenging given the state of the local grid and current technology of Indian turbines,” MAKE says.

The rupee’s recent plunge may also hamper growth. The rupee’s 8.1% drop against the US dollar in August represented its largest monthly decline in more than two decades.  India added 2.34GW of wind capacity in 2012, leaving it with an installed base of 18.4GW, according to the Global Wind Energy Council.

Due to the GBI hiatus, India is on track to add just 2.05GW this year, though that may jump to 2.3GW next year, according to Bloomberg New Energy Finance.