Policy Support, Cost Competitiveness Key For Adoption Of Offshore Wind Power In India
The rating agency Icra has said that policy support and cost competitiveness are key to the adoption of offshore wind power in India. Capital cost for offshore wind power projects remains relatively high currently, leading to a high cost of generation.
"In this context, policy support through VGF/GBI remains the key to making these projects cost-competitive for the distribution utilities in the near term," the rating agency stated in a report.
The government envisages the installed wind power capacity in India to increase to 100 GW by 2030 and further to 122 GW by 2032 from 43 GW as of March 2023, towards meeting the climate change goals to reduce dependence on fossil fuels.
"Given the challenges in securing sites with high wind generation potential in the onshore segment, the government envisages the offshore wind power segment to contribute to the incremental wind power installations in India," it added.
It further stated that offshore wind power projects can achieve a higher plant load factor (PLF) compared to onshore projects, thereby providing a more stable supply. Also, offshore projects mitigate the issues related to land availability and acquisition faced by onshore projects.
However, Icra mentioned that the capital cost of such projects is much higher than the onshore projects with a longer execution timeline.
Notably, the government came out with a revised strategy paper recently for the offshore wind segment, highlighting the various models for development along with a bidding trajectory. However, the tender documents for awarding the projects are yet to be finalised.
The notification of the bidding guidelines, support philosophy and the clarity on development of evacuation infrastructure remains the key to providing an enabling mechanism for the developers to commence work in this segment.
The capital cost for offshore wind power projects is estimated to remain relatively high at over Rs 20 crore/MW against Rs. 7.0 to 8.0 crore for onshore projects. This is partly offset by the relatively higher PLFs achieved by these projects.
"However, the levellised cost of generation for these projects is estimated to remain high at over Rs. 6.5 per unit, based on prevailing capital and O&M costs," Icra mentioned.
Given the relatively high cost of generation prevailing currently for offshore wind power projects, funding support in the form of viability gap funding (VGF) or generation-based incentive (GBI) is necessary to make these projects cost-competitive in the near term, the report stated.
"As capital cost economics improves, the cost of generation is likely to come down," it said, "Further, given the gestation period of at least four years for these projects, it is imperative for the government to notify the policy support mechanism at the earliest so that the first set of offshore wind projects can be commissioned by 2030."
