India – Electric Power & Renewables 2019

Wind Power in India is Gaining Traction

Published: 01 March 2019

Ambitious goals can only be achieved by grid expansion

India’s wind energy market has flattened out but is likely to pick up again. After rising to a record level of 5.5 GW of new wind power capacity in 2016-17 (financial year from 1 April to 31 March), it fell to 1.8 GW in the following fiscal year, to only 1.0 GW of additional capacity from January to December 2018. The slump in 2017-18 was due to the abrupt change from government-fixed feed-in tariffs to a bidding procedure at the beginning of 2017. As a result, electricity tariffs fell from around 5.0 Indian rupees (iR; around 7 US cents) per kilowatt hour (kWh) to a record low of 2.4 iR, which had a negative impact on investments.

After the bidding rounds in September/October 2018, the kWh price recovered slightly to 2.8 iR. The switch to tenders is also gradually progressing, so that the projects currently in the pipeline are advancing. Amit Kansal, Managing Director of Senvion India, told Global Markets International (GMI) that there are large order backlogs to be processed in the next two years. In the calendar year 2019, around 2.2 GW of new capacity could be added and in 2020 even 6-7 GW, forecasts Vinay Rustagi, Managing Director of the consulting company Bridge to India, in talks with GMI. A similar picture is expected for 2021.

 

India: Installed capacity of wind energy (in GW)

2015/16 2016/17 2017/18 2018
Total capacity at the end of the year 26.8 32.3 34.1 35.1
Net capacity increase 3.3 5.5 1.8 1.0

Note: Financial years (1.4. to 31.3), for 2018 balance at 31.12.2018

Source: Ministry of New and Renewable Energy

 

Other industry experts are forecasting new capacity of less than 2 GW in 2019 but predict a strong upturn thereafter. The driving forces are the government’s desire to expand renewable energies, underpinned by fiscal incentives, along with the competitive price of wind power. The fundamental orientation of energy policy is unlikely to change even after the parliamentary elections in the spring of 2019.

Total installed capacity reached 35 GW at the end of 2018. According to the government’s targets, wind power capacity is expected to increase by around 6 GW each year, up to a total of 60 GW by 2022. Wind turbine manufacturers in India see the target as achievable. Rustagi forecasts a capacity of 50 GW by March 2022. In any case, there is an estimated potential of 302 GW.

To achieve the government’s goal, bottlenecks in the transmission grid must be eliminated. Wind power is generated almost exclusively in the seven windy states of India, above all in Tamil Nadu and Gujarat, on which the bidders in the most recent tenders have focused. However, electricity is consumed throughout the country, so the government is striving to ensure balance in future projects.

 

India: Grid-bound wind power capacities by state (in GW)

State Status 31.12.2018 Expansion targets until 2022 Potential*
Tamil Nadu 8.6 11.9 33.8
Gujarat 6.0 8.8 84.4
Maharashtra 4.8 7.6 45.4
Karnataka 4.7 6.2 55.9
Rajasthan 4.3 8.6 18.8
Andhra Pradesh 4.1 8.1 44.2
Madhya Pradesh 2.5 6.2 10.5
Others 0.2 2.6 9.3
Total 35.2 60.0 302.3

Note: *with a hub height of 100 meters

Sources: Ministry of New and Renewable Energy, National Institute of Wind Energy

 

Network expansion is the key to success

In order to absorb the strong influx of renewable energy, and to meet the government’s ambitious electrification program, massive investments in the expansion and modernization of the transmission grid are needed. The Institute for Energy Economics and Financial Analysis (IEEFA) estimates the investment requirement at US$ 60 billion to US$ 80 billion between 2019 and 2023. Lack of grid connection is one of the main problems, according to industry insiders. Some project tenders have already failed for this reason.

In addition to grid expansion, electricity generation must also become more flexible. For example, wind power needs to be integrated with solar power and conventional power plants. It is crucial to build up storage capacities, which is becoming increasingly necessary due to new micro-grids in small villages and the emergence of electric vehicles. Since technological developments will reduce the costs of energy storage, experts estimate that the storage business can grow by 20-25% annually over the next ten years.

Wind and solar hybrid projects represent another way of achieving a more stable and efficient power supply. In mid-May 2018, the government launched its “National Wind-Solar Hybrid Policy” with the goal of launching 10 GW, either in new projects or by hybridizing existing ones. Such hybrid projects are 10-15% more efficient than pure solar or wind power projects. Siemens Gamesa established India’s first large-scale hybrid wind-solar project in 2017-18, in which 28.8 MW of solar capacity were docked to an existing 50 MW wind farm.

Competition for the windiest locations

With the expansion of renewable energies, competition for the most profitable areas is intensifying. The Ministry of New and Renewable Energy (MNRE) intends to create a database of available areas for solar and wind projects in order to reconcile the existing potential with the available transmission capacity and expand the latter accordingly.

In fact, the best locations for wind power projects have already been allocated, and some are underutilized by weak or older plants. Almost 18% of installed wind power capacity is suitable for connecting more powerful turbines. Due to a high population density, land in India is in short supply. Therefore, and also acknowledging the low tariffs, wind power masts regularly reach 150-160 meters. Investors want to achieve better capacity utilization by means of taller masts and larger rotor blades. Bigger turbines with 2.3 and 3.0 MW are increasingly being used as well. The number of wind farms with several hundred MW is increasing.

Offshore projects are beginning

In the competition for new wind power sites, the government is now also targeting coastal waters. In April 2018, MNRE invited companies to express their interest in India’s first 1 GW offshore project. There were 35 applicants, including renowned companies such as Suzlon, Inox Wind, EON, Siemens and Senvion. The tender is scheduled for 2019. Driven by strong wind potential on the west and south coasts, the government is aiming for offshore installations totaling 5 GW by 2022 and 30 GW by 2030. However, these technically demanding projects are not yet fully developed and can only be implemented slowly, according to industry representatives.

Foreign technology offers solutions

Foreign wind turbine manufacturers like Siemens Gamesa and Vestas are optimistic about the coming fiscal years in India. With the transition from a state-fixed feed-in tariff to a competitive bidding process, there was a lull, which may still be visible in 2019. After that, a strong upward trend is expected. Thus, India should return to the world’s largest wind power markets with more than 4 GW of new capacity being added annually.

The influx of new wind power projects poses challenges for plant manufacturers, component suppliers and service providers. These include insufficient transmission and distribution capacities as well as intensifying competition for the windiest locations, including offshore locations. Also, it is necessary to reduce costs, increase efficiency, integrate energy sources more closely and build up storage capacities.

Innovations in turbine blades and tower superstructures, as well as digitization of services, will be required. The aim is to increase turbine service life and energy yield, according to Tulsi Tanti, Managing Director of India’s leading turbine manufacturer Suzlon. In addition, the lower electricity tariffs are putting several small component and service suppliers under pressure. Some will not survive, but large turbine manufacturers such as Siemens, Suzlon, Vestas and GE will remain in the market.

Wind power industry stands on broad footing

All in all, there is a good mix of foreign and local manufacturers of wind power technology in the country, says Vinay Rustagi, Managing Director of the consulting company Bridge to India, according to press reports. With the exception of electronic components, all parts of a wind turbine are produced locally. Foreign manufacturers such as Siemens Gamesa, Vestas and GE are also helping. Siemens Gamesa operates two rotor blade production facilities and one cabin production facility. The production capacity of domestic and foreign manufacturers in the country is sufficient to meet local demand, says Rustagi.

Imports of wind turbines are negligible. Not only is transport difficult, but the government also protects the domestic industry with customs tariffs. For example, castings for wind turbines from China have been subject to protective tariffs since the locally produced castings were more expensive and experienced problems with timely delivery.

Critical areas require international know-how

Even though India is almost self-sufficient in wind power technology, some technologies and expertise must be procured from abroad, for example battery storage capacities. Technology and know-how involving grid integration must also be imported. Foreign expertise is needed to improve the efficiency of wind turbines as well. And offshore projects can only be completed with outside help.

The market leader in wind turbines is Indian manufacturer Sulzon Energy Ltd., which, with 12 GW of capacity at the end of March 2018, accounts for over a third of the grid-connected nationwide wind power capacity of 34 GW installed to date. Second is Siemens Gamesa with 5.3 GW, followed by Wind World India with 4.9 GW. With 2.3 GW each, Vestas Wind, INOX Wind and ReGen Powertech are also represented. With similar rankings and only slightly different proportions, these suppliers were involved in setting up operational capacities during the 2017-18 fiscal year.

 

India: New installed capacities of wind turbine manufacturers during 2017/18*

Company Capacity (MW) Market share (in %)
Suzlon Energy Ltd 626.3 35.3
Gamesa Wind Turbines Pvt Ltd 552.2 31.1
Vestas Wind Technology India Pvt Ltd 181.6 10.2
INOX 174.0 9.8
GE India Industrial Ltd 96.9 5.5
Wind World India (formerly Enercon India) 44.0 2.5
ReGen Powertech Pvt Ltd 43.5 2.5
Pioneer Wincon 19.5 1.1
Acciona Windpower Nordex 18.0 1.0
RRB Energy 12.6 0.7
Leitner Shriram Manufacturing Ltd 6.0 0.3
Global Wind Power Limited (GWP) 0.9 0.1
Shriram EPC Ltd 0.3 0.0
Total 1,775.8 100.0

* Fiscal year from 1.4.2017 to 31.3.2018

Source: Indian Wind Turbine Manufacturers Association (IWTMA)

 

The main investors in the wind power sector are private companies specializing in electricity generation, the so-called Independent Power Producers (IPP). In 2017/18, they accounted for 56% of the installed capacity of 1.8 GW. This was followed by 27% from other private companies, including small investors, and 17% from the public sector and state utilities.

Wind turbine manufacturers such as Siemens Gamesa are also involved as project developers. Between October 2017 and September 2018, the top project developers were Indian companies Adani, ACME, Renew Power, Hero Future, Essel Infra, Tata Power and APGENCO, as well as the Japanese conglomerate Softbank and also Siemens Gamesa. As suppliers of inverter modules, Chinese firms Huawei and Sungrow have displaced the previous market leaders ABB and Japanese company TMEIC from the top positions during this period.

 

India: Investors in the wind power sector 2017/18 (fiscal year)

Investor Capacity (MW) Status*
Renew Power 387 IPP
Torrent Power 165 Public utility company
Skeiron Renewable Energy Pvt Ltd 145 IPP
Axis Windfarms 109 IPP
Atria Power 57 IPP
Continuum Energy 54 IPP
Hero Future Energies 50 IPP
NTPC 48 Public company
Greenko Group 44 IPP
Oil India 38 Public company
ILFS 36 IPP
Ecoren 35 IPP
SITAC RE 22 IPP
Bhoruka Power Corporation Ltd 18 IPP
Sun Photo Voltaic Energy India Pvt Ltd (Acciona Nordex) 18 IPP
Tata Power Renewable Energy 17 Public company
Semb Corp 12 IPP
Surya Vidyut Ltd 10 Public utility company
Total 1.265

* IPP = Independent Power Producer

Source: Indian Wind Turbine Manufacturers Association (IWTMA)