List of Subsidy Schemes for Wind Energy in India – Changing Subsidies creates Investment Uncertainity

Wind Energy is one of the success stories in the Renewable Energy sector in India accounting for almost 70% of the total green energy capacity. India also has the 5the largest wind power capacity in the world with numerous wind equipment factories providing employment to thousands. The advantages of wind power turbines are many & outweigh its disadvantages. However the myriad subsidy schemes which come and go without warning has made the investment climate for wind industry in India highly uncertain.

Accelerated Depreciation
For a long time accelerated depreciation was the biggest incentive scheme to boost wind farms in India. However, this subsidy boosted wind investment more without aiding the optimization of  wind power generation. The reason was that depreciation made investors get all the subsidy during the initial capital expenditure period. After that the investor did not have much incentive in generating power from his wind assets as the returns were not too high. This made the quality of wind turbines suffer along-with the maintenance of the wind farms. This scheme has been discontinued in 2012.

Wind Energy Companies in India that will be affected since its discontinuance are:

1) Suzlon Energy – Suzlon Energy is the biggest Wind Energy Company by far with 4-5 Gigawatts of WTG Capacity per year.Its subsidiaries Hansen Transmission and RePower are also big players in the Wind Energy in Europe.The Company has seen its revenues and profits take a huge hit in recent times but has been recovering slowly.

2) RRB Energy – The company has a long history and manufactures Wind Turbines at its plants in Tamil Nadu.The Company has a capacity of 300 MW which it is expanding to 700 MW.The Company makes only 2 models with power rating of 600 Kw and 1.8 MW.Merill Lynch has made a small investment in this company.

3) NEPC India – This company was one of the wind energy heavyweights and a stock market darling earlier.However It no longer remains an active player in the Indian market .Heavy Debt and Bad Management drove to this company to the ground despite being a pioneer in the Indian Wind Power Market.

4) Auro Mira Energy – The company is more of a Green Utility rather than a full fledged WEG manufacturer.It has made plans to manufacture Wind Turbines in the future.It has attracted funds from Baring and IFC to push forward its Green Plans.Auro Mira Energy is a Tamil Nadu based Green Utility backed by a clutch of PE investors like IFC etc.

5) Regen Powertech – It is a small scale WTG Supplier like RRB Energy which recently set up a small 300 MW manufacturing facility in Tada,Andhra Pradesh recently.The company licenses technology from Vensys to manufacture 1.5 MW gear-less Wind Turbines.The company has managed to supply both big and small wind farms over the last 2 years.The company is supported by the PE arm of Future Group.

6) WinWind – The company is not exactly a domestic company rather one with a Finnish Origin.It is owned by the Abu Dhabi Masdar ,Siva Group and the government of Finland.It has recently established a 1000 MW capacity in Venga,Tamil Nadu and also has a 500 MW plant in Finland as well.The company plans to producer 3 MW Turbines at its Indian plant as well.

7) Pioneer Wincon – The company is a JV between the Pioneer Group and Wincon of Denmark.It makes small 250 KW Turbines and is a bit player with 30 years of operations in India.The Company remains a small static player in the Wind Energy Market of India.

8) Chiranjeevi Wind Energy – A Small bit player like Pioneer Wincon which engages mostly in the sale of small 250 KW Wind Turbines.Like Pioneer Wincon it has sold a number of these Turbines to small companies mainly in the Southern Part of India.

9) Lietnar Shriram Limited – The company is a 50:50 JV betwen the Shriram Group of India and Lietnar of Italy.The company makes gearless turbines of 1.5 MW capacity and has supplied to small farms in Maharashtra.The company has a major inhouse customer in the form of Orient Green Power which is building a 300 MW farm in Tamil Nadu using Lietnar Shriram Wind Turbines.

10) Kenersys – The company is part of the Baba Kalyani Group which is a major forgings manufacturer in India.It was bought over in 2007,when the Kalyani Group and PE firm First Reserve bought over the German company RSB Consult.The Company mainly  makes 2 and 2.5 MW turbines and has production facilities both in India and Germany.It has wind design capabilities between 1-3.6 MW.

Generation Based Incentive (GBI)
Since Wind Power is traditionally more expensive to generate than fossil fuel power such as coal,gas etc.,a Generation Based Incentive (GBI) of 50 paise or 1c/KwH was started in 2009. This was supposed to help wean the wind industry in India off the accelerated depreciation. However even this small amount has been withdrawn in favor of Renewable Energy Certificate (REC) scheme which started a year ago. Though currently the returns from Wind RECs are quite high at Rs 2.70 or 5.5c/KwH , the problem is the uncertainty over the prices in the future. The industry wants the GBI scheme to be restarted .

Renewable Energy Certificate (REC)
To promote the use of renewable energy in India and get to a rate of 10% generation of power in India from green energy, the government started the REC scheme. The details of the scheme are given below.

Note : the BIGGEST PROBLEM with the REC Scheme is that the states are not mandated compulsorily to meet their RPO obligations. If the big states do not meet their RPO targets, then the prices of RECs could collapse leading the renewable energy companies in limbo.

Summary

Wind Energy is currently the cheapest form of renewable energy and has the largest base as well. Newer technologies is allowing wind farms to be constructed on offshore as well as in low wind areas. More than 3 GW of wind energy capacity was put up last year making it the biggest year for wind in India. To keep the pace of wind growth at the same level, long term subsidy schemes should be put in place so that investors can be certain of making a decent returns on their wind farms.