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Analysis | January 2015

Taking wind energy to the next level

Here´s a look at the key parameters that will influence the growth of wind energy in India over the next few crucial years.
The plans of the new government to accelerate the generation of wind energy by adding an ambitious 10,000 MW every year is a welcome change in the Indian power scenario. Wind energy is one the best forms of renewable energy where we can generate power from wind, which is freely available. India is the 5th largest producer of wind energy. The power deficiency in the country needs to be addressed by increasing the production of renewable energy and reducing energy produced from costly energy imports. Globally, the energy market trend is to reduce fossil fuels in the energy mix and phase out coal and oil, keeping in mind emission and climate change considerations.There has been a shift from traditional markets (Western EU and USA) to new emerging markets (several major Asian markets like China and India as well as Brazil, South Africa and Mexico). From distribution of energy generation, larger investments in cost-efficient energy storage to smart energy systems, the future of renewable energy will see a promising change from what we see today.

The wind energy sector is a promising sector in India. It has the lowest capital cost and generates power at rates lower than the grid rates. The turbine industry presently employs about 60,000 people and with the expansion of the industry it is expected to create 1,20,000 new jobs by 2020. Since the turbines are mainly installed in the rural areas, it leads to development of the rural community. The turbines have a life of 25 years and hence the energy manufacturers invest in the development of the community around it. The wind industry contributes to the manufacturing sector and also creates export potential for the country. As the country fights to reduce the effect on environment, wind energy is the perfect example of how we can produce power and at the same time help our future generations have a better life and cleaner air to breathe in.

With the government, ministries and entrepreneurs talking about the 10,000 MW vision, the country is already looking forward to a sea change. The target is achievable provided issues like grid, storage, high cost of interest and inflexible regulations are addressed and a strong supply chain established. The need of the hour is a change in mindset, understanding core competencies and leveraging them. For India to grow at the projected 8 per cent, with even its best energy initiatives in place, more energy generation is needed. Hence, the goal of 10,000 MW is just the beginning.

The investment fraternity has shown willingness to invest in the industry. It is necessary to win investors´ confidence and make wind energy projects bankable. One of the key drivers of the industry is the gestation period. It takes about 4-6 months to set up a wind energy farm. Investments come from equity and debt investors. Debt investors will only invest when they see equity investments are conducive and equity investors will invest once they see value and attractive returns. More than 80 per cent of investments come from the private sector hence the government needs to assure the investors of a viable market to invest. Some of the key changes to be brought in are: mandatory enforcement of renewable purchase obligation, open access, permission to sell to private players, development of grid infrastructure, generation based incentives and also acceleratory depreciation. One of the significant factors that can accelerate the growth of the industry is government policies. Enforcement of RPO compliance with penalties to achieve NAPCC goals, conducive policy environment, standard methodology for tariff determination across the country, removal of regulatoryand purchasing of power by discoms are some of vital steps the government absolutely needs to take. The focus should be on improvement of the power curve and annual energy production, bringing down cost of energy.Technology should make wind power more predictable, complete with brilliant turbines, smart wind farms and storage.

(This article has been authored by Abhijit Kulkarni, Head of Sales - Renewable Energy Segment, SKF India
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