India is preparing to commit almost €800m ($909m) of ‘viability gap funding’ for a first offshore wind project in its waters as it moves to launch a 1GW tender as soon as October, said one of the leaders of an EU-backed programme helping to kick-start the sector there.

The funding, which would be disbursed to a project during its construction phase, will be crucial in helping a pioneer developer bridge the gap between its own power price and the 3.5 rupees/kWh ($0.05/kWh) that the off-taker in the state of Gujarat has agreed to pay, said Gabriel Zeitouni, deputy head of the First Offshore Wind Project of India (FOWPI) initiative.

The viability gap funding has been agreed in principle, and now needs to be discussed by Indian ministries before hopefully being approved by the cabinet of Prime Minister Narendra Modi, said Zeitouni, in an interview with Recharge after a FOWPI-organised conference in New Delhi that was attended by top government officials and senior executives from international finance institutions and major wind groups, including the European Investment Bank (EIB), Orsted and India’s own ReNew Power.

An expressions of interest (EOI) issued by India last year saw a ‘who’s who’ of the global offshore wind sector put down a marker ahead of the tender for a first 1GW project off Gujarat, which is supposed to set India on course to meet offshore wind targets of 5GW in 2022 and 30GW by 2030.

Indian officials indicated they are currently hoping to launch the tender in October, once the viability gap funding is agreed, said Zeitouni, although he stressed that timetable could slip.

As FOWPI, led by Danish consultancy COWI, prepares to wind down after more than three years of helping lay the ground for the sector, Zeitouni said the response to the EOI was one of the reasons he is upbeat about the prospects for Indian offshore wind, despite the absence of a comprehensive official policy for the industry.

“The potential scale of projects and pipeline is enormous, and I can see industry top players very interested in the Indian market,” he said.

Zeitouni said FOWPI's work shows the price of offshore wind power – one of the key potential objections cited to the sector given the cheapness of Indian onshore wind and solar – could be dramatically reduced if the government supports plans for various tax breaks, adopts a UK-style approach to transmission assets, and approves the viability gap funding.

“With those [policies in place] we can decrease the expected tariff level by more than 60%,” said Zeitouni.

Other causes for optimism include the agreement by Gujarat network operator GETCO to build an onshore substation, NIWE preparations to launch five more Lidars in Indian waters, a geophysical survey covering the 1GW project area and signals from MNRE that it plans to announce a second tender while the first is underway. “The Central Government is being proactive and investing in collecting data in Indian waters to support both the first and future offshore wind farms of India,” said Zeitouni.

Henriette Faergemann, first counsellor, head of section environment, energy & climate action in the EU delegation to India, told Recharge huge progress had been made in key areas thanks to the work of FOWPI and others – although some significant issues still remain to be resolved.

There’s a tradition of announcing big targets, and that’s how they get everyone in line.

For example, the more relaxed approach to environmental impact assessments adopted by the Indian authorities compared to EU governments would exclude projects from funding by the EIB, she explained.

Faergemann said skepticism by some in the global industry over India’ s ability to reach its offshore wind targets – especially the 5GW by 2022 goal – may be missing the point.

“There’s a tradition of announcing big targets, and that’s how they get everyone in line,” she said.

“And I don’t underestimate their ability to turn a big ship around.”

Faergemann added: “I don’t see the 5GW as crucial. What’s crucial is they keep working. There will be delays, but that’s OK – as long as it keeps going in the right direction. I think they are on a fantastic trajectory.”