India Wind Targets are Sensitive to Policy and Regulations: GWEC

India is the world’s fourth-largest onshore wind market by installations, with 37.5 GW of capacity as of 2019. The technical potential at 120-meter hub height is a whopping 695 GW, according to the National Institute of Wind Energy, and the government has set a wind capacity target of 60 GW by 2022 and 140 GW by 2030. Wind is already the second most competitive energy source on India’s grid. However, project installation has been decelerating recently, with only 2.3 GW installed in 2019. That is around half of the 4.1 GW of volume installed in 2017 and reflects slow execution when held against the 12 GW of capacity awarded in central and state tenders since 2017.

The India wind sector and installations have been traditionally erratic in nature and highly sensitive to policy changes. After the introduction of central auctions which transformed the wind procurement mechanism in the country, the market entered a state of limbo. Infrastructure was not ready to facilitate the capacity auctioned via central auctions. And states – the traditional wind procurement channel in India – took an extremely reclusive approach to create new demand. This resulted in declining installations from 2018-2020.

The market continues to be a bag of juxtapositions towards 2022, MEC+ and GWEC’s latest report,  “India wind outlook towards 2022: Looking beyond headwinds”, analyses the factors which have led to a drag on the market growth for India’s wind energy industry over the past two years, and provides an assessment on the forecast along with a pathway to overcoming these challenges to realise the high potential of the market.

The report adds that the delay in the availability of land, grid evacuation and issues in timely payments continue to drag on the existing wind pipeline, impacting scheduled dates of commissioning. The inhibitors combined with weak balance sheets of the developers will expose cracks in the deployment capabilities. While some capacity is already cancelled, more capacity is severely delayed and at risk of cancellation. The bottlenecks primarily shape up the capacity additions between 2020-2022.

And further adds that the government has taken a mix of reactive and proactive steps to resolve the issues in land, grid and payment delays. Understanding the impact of infrastructure bottlenecks in the market, the government has removed the pricing caps in the latest wind tender to provide developers with the flexibility of bidding and reboot interest. Payment guarantees are being created for short, medium and long-term defaults to promote investor confidence. The government is also planning a 25 GW plug-and-play wind park for wind capacity to resolve issues of land and grid and provide long-term volume visibility.

However, the report states that the government resolutions come in a little late, as the outcome of projects scheduled for commissioning in 2020 and 2021 has been largely decided. These projects will be impacted by the fault-lines that started emerging in 2017 around grid, land, aggressive pricing, financing and sales agreements. The capacity addition in the next three years will be uneven, with the market scaling towards 2022 and capacity deployment happening whenever and wherever these bottlenecks are eased or resolved. Total cumulative installations are expected to reach 50 GW in the base case and 54 GW in best case.