On 10 June, MEC Intelligence (MEC+) hosted a webinar with Global Wind Energy Council (GWEC) and other leading experts to mark the virtual launch of the report “India Wind Energy Market Outlook 2025”. Experts unlocked the key findings of the report and discussed the key topics of the Indian wind industry.
Mr Ben Backwell, CEO of GWEC opened the session by highlighting that wind is a critical market for India as it can help India move towards net-zero emissions by 2050. Wind has the highest capacity factors and the most decarbonization potential per MW installed to help India achieve its renewable energy goals.
India is already the fourth largest wind power market globally but there is still a need to unlock the economic potential of wind energy. To achieve this, Ben recommended the following measures:
- Having the right policy framework, which is the key
- Streamline complicated auctions by permitting frameworks that can rapidly ramp up the deployment in the country
- Speed up of implementation is required along with the flow of investment into the deployment of wind
He also assured that GWEC is fully committed supporting the government as well as the industry to overcome the challenges by providing research and insight and bringing together all the key stakeholders to achieve RE goals.
Mr Sumant Sinha, Chairman and Managing Director, Renew Power and Chairperson, GWEC India delivered the keynote address after the opening remarks from GWEC. He highlighted that wind’s role will be critical in the evolution of renewable energy in the country to balance out the grid as well as solar and minimise the requirement of storage in the country. Wind’s role is expected to be enhanced in round-the-clock auctions.
Further, Mr Sinha suggested that the Indian wind industry needs to:
- Find ways for increasing the envelope as far as the execution of wind projects is concerned which has become a challenge in the country
- Put collaborative efforts to continue bringing down the cost of wind in the country which has come to a halt with increasing commodity prices
- Bring the reforms in the distribution utility sector as it is necessary to bring growth in the market
- Regarding offshore wind cost issues, the government will have to allow the development of some of the offshore wind farms which can then start developing the ecosystem and bring down the costs
He also talked about the significant role of hydrogen and energy storage in India’s power sector in the coming future.
After the keynote address from the largest IPP in the Indian wind sector, key insights from the report were presented by Mrs Swarnim Srivastava, Senior Consultant, MEC+ which are as follows:
As of March 2021, the Indian wind market stands at 39.2 GW of installations. In our outlook last year, we anticipated 3.3 GW to be installed in 2020 but only 1.1 GW was realised due to a more severe COVID impact than expected. Out of 3.3 GW, nearly 0.8 to 1 GW of capacity scheduled for commissioning slipped into 2021 and around 1.1 GW of capacity was backed out by developers or not granted COD extensions.
Towards 2025, the Indian wind market is expected to install nearly 20.2 GW. However, external shocks will continue to impact the market including the COVID-19 crisis, supply chain related, cost escalation as well as transmission evacuation delay related shocks. If these continue in the market, we are expected to see a conservative scenario of installations around 14.8 GW. On the other hand, if these issues are resolved actively by 2025, then we might even see the market overperforming itself and moving towards an ambitious scenario of 24.4 GW of installations in the next five years (2021-2025).
This forecast is driven by a combination of pipeline and new tender awards where the market is expected to install 10.3 GW from the current pipeline and 10 GW from new tenders towards 2025.
In addition to the core driver of the market, which is DISCOM procurement, a new untapped market remains a potential area for wind installations which is the corporate PPA (Power Purchase Agreements) market. To date, the Indian corporate PPA market is small and has nearly 9 GW of installed capacity. As the initial load requirements of corporates go beyond what can be met through solar, integration of wind in the C&I (Commercial and Industrial) portfolio will be a logical choice to pick up the additional demand, especially hybrid wind-solar projects. Virtual PPA is one of the emerging models in the corporate PPA market which can bypass regulations and charges related barriers of this market.
Towards 2025, the market is not only going to change in terms of volume composition but also in terms of the nature of the market. Indian wind market is shifting its trend to a new hybrid format where the nature of hybrid auctions is also changing from the objective of solely increasing the CUF (Capacity Utilisation Factor) of wind and solar integration towards providing firm and flexible RE to power off-takers in the market.
After unlocking the key insights from the report, the session was concluded by the panel of experts from Enel, Adani, MEC+ and Greentech MW who discussed the market trends and outlook along with the challenges and opportunities to ramp up wind installations to realize India’s decarbonization goals This panel discussion was moderated by Mr Jayasurya Francis, Director-GWEC India.
Mr Ramesh Kymal put forward his view that the wind market will be in the range of about 2 to 3 GW per year for the next five years and the government’s focus is gradually shifting from tariff driven approach towards energy security as there is no other energy alternative for the coming years.
He highlighted three challenges and the possible solutions for these are:
- The first challenge is the unavailability of components and downstream supplies in India for greater MW production which leads to developers importing raw materials from outside the country and in turn increases the cost for them. He suggested that in order to truly bring down the cost, aggressive indigenisation is required which can only be done if a large enough market is created for global component suppliers to grow their business in India.
- The second challenge mentioned by him was the poor financial health of DISCOMs which has not been addressed by the government yet. This issue can be resolved if states are asked to do regional auctions rather than just going to one area in Gujarat and Tamil Nadu. It will help DISCOMs get better price realization.
- The third challenge is biomass getting completely ignored by the industry. It can be a good balancing source of power for wind if we follow the model of Spain, or Europe in general, where the entire forest is dedicated to biomass.
Mr Sandy Khera agreed with MEC+ forecasts and highlighted that the Indian wind market could look at 15 to 18 GW getting installed by 2025. However, there are a few assumptions behind this forecast:
- ISTS charges and loss waiver extension must be extended beyond 2023
- Project delays, financial stress, and the decreased costs issue need to be resolved
- DISCOMs have to honuor PSAs (Power Sales Agreement) and PPAs and make payments on time
- All the stakeholders across the supply chain should work together to bring down the LCOE (Levelized Cost of Energy)
Wind is a very strong case as it helps in balancing the grid and optimally utilises the transmission infrastructure. Mr Khera highlighted three constraints in the market that have contributed to the current pace of execution such as COVID impact, supply chain disruption, and increase in commodity prices. He suggested the following actions which can be taken by the government and the industry:
- A stable, consistent, and long-term policy and conducive regulatory environment is required to have certainty of cash flows
- More visibility on the tenders upfront is required to enable developers and OEMs to plan better together and present a more competitive bid
- Simple procedures for land acquisitions, permit approvals, and right-of-way issues
- Convergence and coherence between central and state government is required
- Upfront procurement planning between centre and state in terms of demand can decrease the risks and delay in signing the PPAs
- Incidences of PPA renegotiations need to be addressed as they send a negative signal to the investors
Mr Sidharth Jain highlighted that wind will be a central axis of the renewable energy portfolio in the next five years with an expected 20.2 GW installed capacity towards 2025.
He mentioned that although the demand for renewable is huge, year-on-year demand will continue to change due to the external shocks present in the market. These external shocks include changes in the cost, COVID-19 impact, RPOs not being notified beyond 2022 and transmission infrastructure not being well defined beyond a certain period.
The wind market is expected to bounce back with ~50% growth over the next five years with high volumes, tariff stabilisation and hybrid tenders picking up.
He suggested the following measures to the industry:
- Supply chain companies should become more risk-sharing-oriented since the number of risks is going to increase for these companies with the maturity of the Indian wind industry
- Specific tender for peak power and base power needs to be developed as an offering and we need to understand how virtual PPAs and corporate PPAs can be put together to help companies meet their sustainable development goals
- In terms of innovation, the number of turbines in India is not in sync with the global industry so trade and non-trade barriers can be removed to integrate the supply chain.
Capt. Sundaresan Kishore believes that the wind industry will find its way back out of COVID just the way the oil and gas industry got back after facing two world wars in its time.
He also mentioned that the government is making changes for the wind sector which may not be as agile and fast as we require to attract global players, nonetheless, the market is moving in the right direction.
MEC+ is a specialist consulting firm focused on the wind and renewables sector for 10 years and is based out of India and Denmark. Our clients include largest global wind OEMs, European utilities, Global Supply chain players, Equity funds, and Independent Service Providers. MEC+ has expertise in guiding senior management on new technology and market opportunities. The company has delivered insights on some of the largest M&A deals in India, hi-tech innovation and technology roadmaps for global supply chain players, and strategic planning for profitable growth across multiple businesses.
Global Wind Energy Council (GWEC) is a member-based organisation that represents the entire wind energy sector. The members of GWEC represent over 1,500 companies, organisations and institutions in more than 80 countries, including manufacturers, developers, component suppliers, research institutes, national wind and renewables associations, electricity providers, finance and insurance companies.
See more: www.gwec.net