Offshore Wind’s 2024 in India- Building Blocks Falling Into Place

India’s offshore wind ambitions made slow but steady progress in 2024, egged on by multiple European partners pushing the country to try this ‘last frontier’ of renewable energy. For a country heading towards 100 GW of solar, and 50 GW of onshore wind, Offshore wind energy has been a distant dream, primarily because of cost issues.  Despite an Offshore Wind Policy released as far back as 2015, progress has been slow until this year. For, even as Offshore wind prices have held more or less steady at the Indian equivalent of at least Rs 9-12 per unit, solar and onshore wind prices have come down significantly since 2015 to an average of Rs 3 per unit. If one takes the post 2020 period, offshore wind prices have actually risen by over 25%. BESS prices now, which have fallen over 60% during the same time, further complicate the picture.

The combination of BESS with Solar and Wind at existing rates is a real threat to not just Offshore wind but even Pumped Storage and Green hydrogen, considering the many subsidies and unrecognised costs the latter has.  As of now, the modest target of 5 GW of Offshore wind by 2025 is all but forgotten, and the 30 GW target for 2030 seems too ambitious.

A quick timeline of the progress India made. In May MNRE proposed Viability Gap Funding to support the initial push for Offshore Wind.

By September, things finally moved into a higher gear.  with the  President’s approval of the VGF Scheme. Within weeks SECI issued a tender for 500 MW Gujarat Project. Feedback on the tender came in, and again, within two weeks, in early October, MNRE Amends Offshore Wind Lease Rules, To Ease Process.  But even as Offshore Wind costs remained stubbornly high, by November ONGC, NTPC formed a green JV for Offshore Wind Project In India. Does that mean progress is assured? Shareholders of these two listed PSUs will certainly be hoping they are not forced into a losing proposition just to set up a ‘demonstration’ project for the rest of the Industry in India.

This existential threat to Offshore wind has meant looking up yet again to China for succour, and like it or note, the country has delivered. Today, not only is China adding Offshore Wind at the fastest rate among all countries, it has over 60% of the manufacturing capacity in this segment too.  Hopefully, with the Chinese involved deeply now, cost reductions will get the kind of attention the European and American firms failed to provide when they dominated.

From processes like seabed scoping, to environmental impact Offshore wind faces higher costs pre-development, during development and post set up as well.  Some of these are a significant extra vis a vis solar or onshore wind, and probably need external support a well. The next big innovations like Floating offshore wind turbines need to solve for cost on an urgent basis. In recent months, insurance costs have been a huge issue driven by reports of failures, leading to what an industry expert described as “insuring for high cost, high frequency events that insurance is not designed for”.

While offering larger turbines of 8-12 MW as virtually standard sizes today, the Offshore wind sector needs some deep work on its own processes to ensure it remains a key part of the mix for a wider mix of countries with a coastline. The rejection of all bids in a tender for Offshore wind in South Africa on cost grounds is just one indicator that cost will be the final decider on the next big step for this option in India as well.