India Considers Incentives For Utilities To Buy Wind Power

Published on December 8th, 2016 | by

December 8th, 2016 by

Some crucial incentives for the Indian wind energy sector are expected to expire by the end of the current financial year. The Indian government has released a review of the generation-based incentive and has asked stakeholders for their views.

The Indian Renewable Energy Development Agency (IREDA) tasked a private firm to evaluate the generation-based incentive which has driven a bulk of wind energy capacity addition in India over the last few years.

According to the Ministry of New and Renewable Energy, generation-based incentive was launched in 2009 to provide financial support to 4,000 MW of wind energy capacity at Rs 500/MWh ($7.35/MWh) with a ceiling of Rs 6.2 million per megawatt (MW) (more than $91,000 per megawatt). The scheme was extended for the period of 2012-2017 with an increased ceiling of Rs 10 million per megawatt (MW) (around $147,000 per megawatt).

So far, more than 7000 MW wind energy capacity has been covered under the generation-based incentive scheme.

According to the evaluation report contracted by IREDA, while generation-based incentive has been a major driver of growth in India’s wind energy sector, project developers today face some very fundamental challenges which would require a complete revamp of the current scheme.

The largest challenge being faced by wind energy, and all renewable energy, developers in India is the reluctance of utilities to acquire electricity generated due to its intermittent nature and relative greater cost compared to coal-based electricity. Even if the utilities do acquire the electricity the project developers have to wait for long period to receive payments.

The recommendations in the evaluation report suggest that the generation-based incentive be replaced by a procurement-based incentive.

Utilities that procure wind power would be incentivised at a rate of between Rs 250/MWh ($3.67/MWh) to Rs 750/MWh ($11.02/MWh) based on the wind energy capacity installed in the state. The incentive shall be applicable till March 2020 and an additional 15 GW capacity will be covered under this scheme.

Utilities, however, will first have to clear all their dues with wind energy project developers to be eligible for the procurement-based incentive. The evaluator also suggests that generation-based incentive be continued for re-powered wind energy projects at Rs 660/MWh ($9.7/MWh) and wind-solar hybrid solar power projects at Rs 610/MWh ($8.96/MWh).

A final decision of the future of generation-based incentive and prospects of procurement-based incentive will likely be seen in the general budget for next financial year that could be announced in late January 2017.

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