The Indian offshore wind market is attractive yet challenging. The risks cannot be ignored or wished away, but industry can be kick-started with a targeted approach. To deal with the uncertainty, the government needs to provide a clear market road map and players need to commit to a price trajectory.
By Sidharth Jain, MEC Intelligence, India
In 2018, India announced an expression of interest for a 1GW offshore wind project and laid out the national targets of 5GW by 2022 and 30GW by 2030. Preliminary assessments have shown a combined potential of 160GW for offshore wind projects in Gujarat and Tamil Nadu. At present, 70GW is earmarked for the development of projects, out of which detailed investigations have been planned for 1.7GW.
However, developments have been few and slow in the past two years. This is because offshore wind is expensive to install due to the higher amount of engineering needed to install and operate a plant in the sea. The cost, excluding grid, is estimated to be in the range of INR 6–8 per kWh (€ 70–90 per MWh). This is 2–3 times the cost of renewables currently, which has stalled the progress of commercial activity.
Nevertheless, offshore wind may be inevitable for India’s fast-growing electricity demand towards 2030, as the other available options fall short by nearly 50GW as per MEC Intelligence estimates. Offshore wind is a green alternative to meet this demand–supply gap compared with polluting new coal, which is expected to be available at € 65 per MWh in 2030. Globally, large targets have been a precursor of a decline in costs. Europe today has 22GW of offshore wind projects, and recent tender awards in Europe for offshore wind were subsidy free. This was made possible by clear volume road maps leading to the development of larger turbines and large-scale serial production and installation techniques. Similarly, in India we have both land-based wind and solar moving towards becoming the lowest cost source of energy when reaching ~70GW of installed capacity. The resource quality in India is not as high compared with Europe and hence the landed cost of power will be higher. However, this is not unique and innovation will be needed to bring the costs down along with improving the economies of scale.
To kick-start the industry, the government has taken the initial step of coming up with a big target, which has attracted global attention. However, it should now back it up with a tender road map and clarify whether today’s bid price will be the only criteria or whether unlocking a new industry is a priority.
Players must think big regarding the potential of the Indian market and assist the government by committing to a cost reduction strategy which converges on the price of coal. In doing this, players can explore the synergies available from the adjacent industries of onshore wind and oil and gas, which are quite mature in India. Additionally, the players need to become more comfortable with local business practice and develop relations to help them navigate the complex labyrinth of regulations in India.