After China & Europe, India Set To Embark On Offshore Wind Journey

After China & Europe, India Set To Embark On Offshore Wind Journey

After a thrust to offshore wind energy projects in China and Europe, swings of changes in this sector are now expected in India too. Last year, globally 10.8 GW of new offshore wind energy capacities were added, as per a report from the Global Wind Energy Council (GWEC). The lion’s share was taken by China which added 6.3 GW of new capacities. It was followed by EDurope which added 3.8 GW.

Besides China and Europe, Taiwan, Japan, South Korea and other countries are now also spearheading the challenging wind energy solutions. In India, with the Solar Energy Corporation of India (SECI) issuing its maiden offshore wind tender, the vaults have opened for the new emerging clean energy solution for the country. Offshore wind energy in India took nearly a decade to take off after the initial policy was launch in 2015.

In June this year, after nearly a decade, the Ministry of New and Renewable Energy (MNRE) released a Viability Gap Funding (VGF) policy to support offshore wind energy projects in India. The government has now sought proposals to lease out seabed lease rights for offshore wind energy projects.

It specifically included sub blocks off the coast of Tamil Nadu in the Gulf of Mannar. Additionally, SECI’s 500 MW tender would give exclusive rights to successful bidders over the allocated seabed. It will also allow them to conduct the required study, survey and subsequent Project development. The inception of tendering of offshore wind energy projects along the Gulf of Khambhat, in Gujarat offers developers an opportunity to use the 7600 km coastline for the projects in the state.

Turning point for Indian offshore wind 

This policy is a critical turning point for offshore wind energy in India. By addressing the financial barriers that have long discouraged private investments—such as high initial capital costs—the VGF policy aims to close the gap between project costs and returns. This policy is expected to lower the risks for developers, unlock large-scale offshore wind projects, and position India to play a significant role in the global renewable energy landscape.

It aligns with the global momentum toward offshore wind energy and follows MNRE’s first-ever wind energy tender for 4 GW announced in February this year. The government has sought proposals to lease out seabed lease rights for offshore wind energy projects. It specifically included sub blocks off the coast of Tamil Nadu in the gulf of Mannar. This tender would give exclusive rights to successful bidders over the allocated seabed. It would also allow them to conduct the required study, survey and subsequent Project development.

The recent global surge in offshore wind energy capacity in 2023 further highlights the timing’s significance for India. Globally, offshore wind capacity additions in 2023 saw a 27% rise, reaching 11 GW, up from 8 GW added in 2022 as per data shared in GWEC report. This makes 2023 the second-highest year for new offshore wind capacity, with 2021 holding the record at 20 GW. According to MNRE’s data, Offshore wind energy holds potential in eight states in India, but so far, only Gujarat and Tamil Nadu have shown signs of progress.

Offshore Wind Energy Growth In India

India’s recent 4 GW offshore wind tender marks a significant push for projects, which have been slow to progress since the 2015 offshore wind energy policy. The initially high logistical costs and insufficient investments in this sector kept wind energy manufacturers away from offshore projects. However, key financial allocations by the government in 2024 have shifted the tide in favor of offshore wind.

Even though the government in 2022, determined to set offshore wind energy projects up to 10 GW off the coasts of Gujarat and Tamil Nadu, and set the bidding trajectory equivalent to a project capacity of 4.0 GW per year for three years starting with the current FY 22-23. These projects were expected to be developed off the coast of Tamil Nadu and Gujarat for the sale of power through open access / captive / bi-lateral third-party sale/merchant sale.The government has also planned to develop a 5 GW project every year for five years i.e. up till FY 29-30. Yet it didn’t accumulate to any actionable plan until recently. The MNRE in 2022 also envisioned issuing the first bid, it had then set the target to issue bids in the three-four months following the government commitment, to lease out offshore wind energy blocks equivalent to 4.0 GW capacity off the coast of Tamil Nadu.

The government has now identified Gujarat and Tamil Nadu for building offshore wind projects in India this year, 2024. To accomplish this goal, the government has allocated Rs. 6,853 crore to install and commission 1 GW of offshore wind energy projects (500 MW each) along the coasts of the states.

This is a significant step to support SECI’s earlier initiative to survey, develop, finance, construct, commission, and decommission 4 GW of offshore wind projects off the coast of Tamil Nadu, and the government’s target to add 50% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030. Moreover, it enables the integration of diversified renewable energy sources into the grid.

Earlier this year, the government approved the Viability Gap Funding (VGF) scheme to fulfill the promises made under the offshore energy policy. Under this provision, Rs. 6,853 crore has been allocated to install and commission 1 GW offshore wind energy projects along the coasts of Gujarat and Tamil Nadu.

In addition to this, the project grants seabed lease rights for 4 GW of offshore wind projects. The survey and development activities encompass the designing, financing, construction, commissioning, operation, and decommissioning of these projects, along with their ongoing maintenance.

Benefits Of Tapping Into Offshore Wind Energy

Tapping into offshore wind energy could benefit wind energy manufacturers and contribute to India’s renewable energy mix. The government has allocated Rs. 600 crore to upgrade two ports, addressing the logistical costs for offshore wind projects. Once implemented, this initiative could generate 3.72 billion units of renewable energy. Additionally, the government is expected to invest Rs. 4,50,000 crore to add 37 GW of offshore wind energy capacity.

A Parliamentary Committee report recommends a Rs. 13,500 crore grant to build a Central Transmission Utility for evacuating power from these offshore wind projects. This aligns with the 60 GW wind energy target. The report also suggests that wind power generators (WPGs) should declare their project’s annual Capacity Utilization Factor (CUF) when signing the PPA, with an option to revise it once within the first three years of commercial operation. The CUF will be measured annually from April 1 to March 31, with a set limit of 22%.

A committee report on offshore wind remains optimistic about its growth, anticipating a reduction in offshore wind project costs. The Levelized Cost of Energy (LCoE) is expected to drop to a range of Rs. 6.5–10, following the global trend. According to IRENA’s latest report on renewable power generation costs, the global average LCOE for offshore wind fell by 7% in 2023, marking a 63% decline from USD 0.203/kWh in 2010 to USD 0.075/kWh in 2023.

Despite recent price reductions, the global weighted average installed costs for offshore wind saw only a marginal drop between 2022 and 2023, from USD 3,478/kW to USD 2,800/kW. This slight dip contributed to a decrease in the weighted average capacity of new projects, which fell from 42% in 2022 to 41% in 2023. In India, a similar drop in LCoE is expected, with future projects benefitting from economies of scale, competitive supply chains, and technological advancements.

Challenges Ahead

Offshore wind has proven advantageous in countries like China and those in Europe. However, Europe benefits from higher wind speeds, giving it a 6% lower LCOE compared to Chinese projects completed in 2023. Key challenges in India include the high capital cost of technology, lack of domestic supply chains and turbine models suited to Indian conditions, the non-availability of resource-related datasets, and complexities in securing approvals and clearances.

To address these challenges, the government is expected to develop a list of offshore wind energy manufacturers, similar to the RLMM list used for onshore wind projects. This signals a need for greater collaboration between wind turbine developers, SNAs, investors, and lenders to create a supportive framework for offshore wind development. While offshore wind power has significant potential, India still has a long way to go before replicating the success seen globally.