Offshore wind has undergone a series of start-stops in India. The discussion on the technology was first taken-up in 2013 when the state of Kerala explored the idea to solve the land-constrained onshore wind in the State. Subsequently, the idea of OW development was pitched numerous times in India by various state and central government stakeholders. The most recent development was the announcement of a 1 GW Expression of Interest in 2018, followed by the creation of a national target of 5 GW by 2022 and 30 GW by 2030.
Even though the idea has been conceived and tossed multiple times, commercial development in the form of a tender is still awaited. Nonetheless, multiple efforts to kick-start the industry by the government indicate that OW is inevitable in India’s energy mix. “Breaking the Catch-22 in India OW” explores offshore wind fitment in India’s long-term energy mix and argues that OW competes with coal-based power in the country. The report highlights that even though the market has its challenges and is no cinch, no fundamental bottlenecks are preventing the industry to grow.
The report has been published with QVARTZ, a leading Nordic consulting organization, to help a prospective participant think about how it can break into the market and stay ahead of the complications.
The report provides a comprehensive understanding of the drivers that makes OW an attractive opportunity in India, and the complexity of the market to pursue this alluring opportunity. In the concluding section, it highlights the options available to the players to create a targeted approach and solve the catch-22. The key insights from the report are:
India’s electricity demand is expected to nearly double in the next decade. The government has planned augmentation of nearly 475 GW of new capacity to meet this demand, hinged on the wind, solar and coal. However, the plans will be severely challenged for the shortfall in evacuation infrastructure for RE and investments for coal. Nearly 45-50 GW of capacity is expected to be needed at EUR 65/MWh in 2030 to meet the demand in India, wherein OW can be an appropriate green alternate to CO2 emitting coal.
In India, OW is currently competing with land-based wind and solar energy on price competitiveness, as per current market design. Today land-based wind and solar technology are available in a range of EUR 30 to 40 per MWh in India, while OW generation costs are expected to run up to 3X of this price, thus putting OW in a catch-22. Offshore wind only becomes competitive if it is deployed on a large scale, but reaching that scale requires it to be cost-competitive.
Indian OW opportunity is attractive due to the expected future demand-supply gap with the national electricity plan getting challenged. It is also attractive because of an ambitious target of 30 GW by 2030 and a conducive tender design, which facilitates transparency and competitiveness. These drivers make it a large and difficult-to-ignore market.
Despite the attractiveness of OW opportunity and no fundamental bottlenecks to the growth, players cannot jump directly into the market as success will not be easy. Uncertainty exists around costs and timelines because of competitive pricing expectations, ambiguous approval process and the gap in certain crucial capabilities with foreign participants. The challenge is increased by the difference in wind resources and site conditions between India and EU.
Interested players must leverage their global expertise and develop local capabilities to build a sustainable industry. The onus lies on both government and supply chain to deliver a roadmap that can unlock the large resource available to India in a cost-competitive manner.
About MEC Intelligence (MEC+):
MEC+ is a market strategy and consulting firm focused on the renewables sector and is based out of India and Denmark. MEC+ has supported the largest global wind OEMs, European utilities, global supply chain players, equity funds to succeed in global OW markets. The company has been extensively working in the offshore wind sector since 2010 and has supported the development of supply chain, contracting models. Work has involved identifying bottlenecks in the supply chain for M&A, clarifying cost reduction levers, and IRR in OW. MEC+ has also been supporting Indian government institutions in defining the framework for OW incentives, tender design, and realistic price benchmarks, to facilitate OW development in the country. The company is uniquely placed to understand the complexity of the Indian market combined with the complexity of OW technology, for helping players set course.
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