As Solar Spreads, Shrinking Space for Wind

It was one of the lesser noticed misses caused by the 2020 pandemic. In fact, we had predicted it in our own January 2020 issue. When Solar capacity would overtake wind in India. But come 2021, and wind energy has finally been overtaken. The news, when it was finally confirmed, couldn’t have been announced with lesser fanfare.

Tucked into the MNRE’s (Ministry of New and Renewable Energy) monthly summary for the month of January 2021 was this line- “ A total of 1396.97 MW of Renewable energy (RE) capacity was added, taking the cumulative installed RE capacity to 92.54 GW as of Jan 31, 2021.

This includes 38.68 GW of wind capacity, 38.79 GW of solar capacity, 10.31 GW of bio power and 4.76 GW of small hydro capacity.” And just like that, solar has officially become the no. 1 source of renewable capacity in the country. That it has happened with almost no sign of any celebration is more to do with the fact that it has happened behind schedule, solar has run into growth problems of its own and yes, none really wanted this to happen to wind. Add to that the fact that some of India’s largest RE players, from Renew Power, to Sembcorp to SB Energy, Adani Green energy or Greenko have all either been in wind earlier, or still are. Though not surprisingly, most seem to be pivoting away from wind energy comprehensively. For good reasons, as we will see.

Back in 2015-16, when the industry was still trying to understand the best way to achieving the announced target of 175 GW for renewable energy by 2022 by Prime Minister Modi in early 2015, Wind was the definite leader in RE by a distance.

Installed solar capacity was a piffling 2632 MW, as compared to 23, 354MW for Wind Energy. That was then. Since then, Solar has grown over 13 times , while Wind Energy has grown a sedate 65 percent. Even with a ‘modest’ target of 60 GW by 2022, required Wind capacity to be added was just over 5 GW per year, a number domestic manufacturers could easily supply. But actual additions have slipped below 2 GW for two successive years now after hitting 5.5 GW in 2016-17 (the last year before auctions), with future pipelines looking at increasing risk without sorting out key issues.

Wind, The Early Starter That Almost Won

Not only had wind seen a longer run than solar as a serious renewable energy candidate, it has still got the better domestic manufacturing base to push it. And nothing typifies the fortunes of the wind industry in India than Suzlon, a domestic firm that went from domestic champion to global frontrunner to a basket case, and now, a firm still struggling for survival, all in a matter of 2 decades. Since its start in 1995, Suzlon has been supplying wind turbines to customers globally with an installed capacity of over 18,800 MW on date. In India, the firm rode special incentives in the form of accelerated depreciation (AD) on wind energy assets and generation-based incentives (GBI), that supported growth in the early years of this century. In fact, it was not uncommon to see celebs investing in Wind for the tax incentives.

In 2006, Suzlon signalled its ambitions by acquiring Belgian wind turbine gearbox manufacturing firm, Hansen Transmissions International NV, for around €431 million at the time. In 2007, it made an even more audacious move, picking up German wind turbine maker REPower (renamed Senvion in 2014). For a final cost of €1.4 billion. But from 2008 onwards, the firm has struggled, as event after event hit its fortunes. From the global crisis in 2008 , to the withdrawal of special incentives in India in 2012, which took away all ‘easy’ earnings. The shift to the auction based mechanism in 2017 has been the final blow for Suzlon, and many other onshore wind energy suppliers domestically broadly, with a cost obsessed policy environment increasingly putting brakes on further growth.

Other key manufacturers based in India, be it Siemens Gamesa, GE Wind Energy, or Inox Wind and others, have all demonstrated that in the right conditions, they can thrive, but face headwinds now because of the unfair comparison with Solar costs now. Linked to the sector is also a 2000 strong MSME supply chain, that ensures almost 90 percent of components are available domestically.

All this, when even today, on sheer efficiency, and subject to good location, Wind turbines comfortably beat their solar counterparts on energy conversion efficiency.

But in a sector where the weakest link is the discoms and their financial woes, perhaps it was inevitable that wind energy would trip up on price, despite an outstanding record till 2017. In fact, even today, India’s total wind energy capacity is at no. 4 worldwide, though with the giant gains being made in offshore wind, that rank too will slip in the coming years.

Wind has not really been helped by the fact that almost all action in the space is concentrated around two states today, Tamil Nadu and Gujarat. In fact, they were the only states which reported any fresh wind capacity during Q3 (October December 2020), with about 221 MW and 73 MW, respectively. Two erstwhile champions, Karnataka and Andhra have switched off from wind due to very high renewables share already, and a major shift in focus to solar now, respectively.

Maharashtra, a state with a legacy wind presense and strong repowering potential has simply chosen to ignore renewable energy in the past couple of years, with a systemic capture by its state discom that has simply got no intent to move faster.

How Solar Won

So how did Solar roar ahead? Keep in mind that the future of solar was obvious to many, including a perspicacious Prime Minister Narendra Modi, as early as 2014- 15, when experts first started predicting a sharp drop in prices. Since then, Solar has defied even the most optimistic predictions over the past decade. Both when it comes to the drop in prices, as well as its share in the energy mix. Consider the International Energy Agency, (IEA). In 2000, it predicted the world’s solar capacity would quadruple over the course of the next 15 years. It took just five. In 2005, the IEA upgraded their 2015 forecast from 5 GW to 14 GW. It took 3 years, this time.

But even then, experts in the solar sector do not write off wind, considering how tough they have had it themselves in an intensely competitive market in the past few years.

Shri Prakash Rai, Head C&I Business at Amp Energy India, a major player in the solar space with a focus on the C&I segment, has this to say about Solar overtaking wind. “This was expected obviously and would have happened sooner if the disruptions due to the pandemic had not slowed down project development activities. Despite wind’s decade long headstart. Wind installations saw a downtrend when the reverse auctions were introduced in wind and tariffs slid to ₹2.44/ kWh. Other factors such as inconsistent regulatory environment, lack of suitable land, and the fact that most states in the country do not have conditions ideal for wind power project development have hindered the growth of wind as compared to solar, which has favorable conditions across the country.

On the future of wind, Rai is more hopeful.

“Wind and now solar are the leading segments in the Indian renewable energy space with more than 80% contribution. Since, the world is now transitioning towards clean energy and dispatchable clean energy is the need of the hour. A better way of harnessing wind and solar energy can be wind-solar hybrids. It is fast emerging as a viable new renewable energy option in India and when coupled with battery storage can further improve the capacity utilization factor (CUF) and create many feasible options of peak power and round the clock power output.

Since solar is already making great strides in India, this arrangement of wind-solar hybrids can emerge as a saviour for India’s wind sector and at the same time create power in peak hours and better energy mix into the grid.”

How Can Wind Recover Its Mojo?

The challenges for wind are well known by now. But industry experts have never shied away from plain talking, especially considering the well established eco-system for it in the country. Be it Suzlon’s Tulsi Tanti, who has regularly pushed for a mechanism to allow a small subsidy or win energy to bridge the gap with Solar, to developers at last year’s virtual REINVEST, the suggestions came thick and fast, and for many made sense.

Hybrid Projects make it to the top of the list for almost everyone, from reasons ranging from faster and more efficient land acquisition, developers with a better ability to raise and close projects, to the logic of Hybrid projects, where Solar would dominate during the day, while wind works in the night, reducing intermittency from renewables.

Sunil Jain, Chief Executive Officer and Executive Director, Hero Future Energies, while speaking at REINVEST, had stressed on three main areas. “One,due to the unique requirements of wind energy for the right location, large scale wind farms are going to be challenged, until you have large solar park type parks.” Thus, he made a case for smaller scale auctions of 50-100 MW size rather than the giant projects.

Peaking tariffs for wind is a key suggestion from many experts, including Jain, seeing as how wind delivers in the evening when demand spikes. “The government needs to value peaking tariffs a little higher. Currently, in trading platforms too, energy peak tariff is around 30-40% higher and here wind can be considered and can be used in decreasing the price” he said. Finally, Jain pitched stability and predictability in demand, to support both manufacturers and developers. “We have a model where we have a 450 GW target for 2030. 50 GW to wind means a decade of 5 GW every year. Once those volumes are assured, you will do optimisation in supply chain to bring down the cost”. Smaller sized projects in wind also have the advantage of lower transmission losses, a point that has been made by other experts for both solar and wind projects.

Repowering, or upgrading old wind turbines with newer, higher capacity ones is a huge opportunity in itself, according to many experts. It takes care of the issue of land, location, and is should be a natural outcome for turbines that have lived out their recommended life. In fact, Neerav Nanavaty, Chief Executive Officer & Country Manager-India, ENGIE spoke on the same issue at REINVEST, when he said “Lots of grandfathered wind resources constrained by sub 1 MW turbines today. 4 GW in Tamil Nadu sitting at 10-15% or similar PLF. Through a coherent policy, we can unconstrain that and double the PLF”. Doing so would be a huge opportunity, and also change perceptions about relative efficiency of wind energy, as overall PLF’s are barely 20 percent in India, when they could be easily pushing 30 percent or more with newer technology upgrades for these old assets.” Unfortunately, a formal policy refresh on repowering wind installations is still to see the light of day in India, with the existing policy simply not making an impact.

Of course, Nanavaty also supported the smaller project suggestion as he highlighted how onshore wind is also a logistics or land problem in India. “It is easier for us to develop wind farms in many countries compared to India. There is a need for smaller footprints for accelerating deployment, and for making it a smoother journey for all the stakeholders. Adoption of wind by C&I customers would also help as they they stick to solar primarily because its an easier technology to deploy. Packaging smaller chunks key.”

Manufacturers like Suzlon have also urged the government to consider Wind manufacturing too under its PLI (Production linked Incentive) scheme, that has worked well in many sectors, especially electronics.

Conclusion:

Any Immediate turnaround in the deep slump that the wind energy finds itself in, seems difficult, barring specific policy action that helps bridge the price gap with solar, which is a yawning 25 percent today. The case for that will have to be made on the basis of India’s manufacturing prowess in Wind (unlike in solar), and the possibility that the transmission upgrades being made to handle higher amounts of solar power will be better utilized from evening to next morning if there is a level of wind capacity too. A policy push is long overdue many would say, considering how solar has virtually monopolized the conversation and support from various government arms over the past 12 months.

In the long term, of three years and beyond, hope is coming from offshore wind, which has made giant strides literally, in both the size and output of turbines. With single turbines of 10 MW and above, and offshore projects of 1 GW and more, offshore wind has taken over the challenge of growth and expansion worldwide. As always, as China warms up to it in the coming decade, expect prices to fall further, and offshore wind energy’s inherent advantages to work well for at least states like Tamil Nadu and Gujarat, which do have conditions that could support offshore deployment too.