Wind energy industry demands restoration of accelerated depreciation

Industry players feel that restoration of accelerated depreciation for wind energy project will help the industry to grow India is one of the leading wind energy markets in the world and provides good business opportunities for domestic and foreign players. Diverse incentives supported by a long term policy and regulatory framework at the central and state levels have played a crucial role in achieving this goal. India has cumulative installed capacity of 19051.5 MW as on January 2013. The Accelerated Depreciation (AD) has been an important driving force in wind power development in the country so far. A large number of wind power projects in the country have availed the AD benefit. The government has withdrawn AD incentive for wind power projects since April 2012. According to Indian Wind Power Association, withdrawal of AD has caused loss of revenue, capacity addition and has affected the micro, small and medium enterprises, which tapped wind energy as a clean and prime source to meet their requirements.Restoration of AD is in demandWhile talking about need of restoration of AD for wind energy projects, Rakesh Bhatia, VP, Renewable Energy, DPSC, said, “India is short of power. Coal and gas is in short supply and other issues are holding installation of thermal power plants. Under the present situation, renewable energy is the only solution and therefore to meet energy requirement it is necessary to encourage renewable energy. The capital cost per MW of wind power plant is high, present bank finance rates are also high. Investors need government support to sustain the investment. AD to some extent compensate for the differential expenditure.”On other hand, Narasimhan Santhanam, Director, Energy Alternatives India, said, “In Indian Wind Turbine Manufacturers Association (IWTMA)’s opinion the AD will bring the traditional investors to invest more in wind power industries that are keen to derive indirect financial benefits. These industries have indeed been the drivers so far for this industry’s growth.” AD benefit is available for a whole range of renewable energy investments, including coal power plants. “Why discriminate against wind power alone?” asked Mr Santhanam. “AD benefit will definitely spur investments from the non-IPP segment, which has currently gone down significantly resulting in the lackluster growth of the wind power sector in terms of capacity addition in last 18-months,” he adds.

Investment in renewable energy has gone down significantly in FY 2012-13. Government needs to declare AD and generation based incentive (GBI) on priority.- Rakesh Bhatia, VP, Renewable Energy, DPSC
Investment in wind energy sectorTalking about the investment status in wind energy sector, Mr Bhatia said, “Investment in renewable energy has gone down significantly in FY 2012-13. Government needs to declare AD and generation based incentive (GBI) on priority.”Whereas, Mr Santhanam adds, “The government has reinstated the GBI for wind; however, the specifics of the GBI have not yet been spelt out. The GBI rate be higher than what it was earlier i.e. 50 paise per kWh with upper limits. This could result in a significant acceleration of the wind independent power producer (IPP) sector which stands to benefit the most from GBI. In addition, state like Tamil Nadu is constructing a green corridor for evacuating wind power. Lack of evacuation infrastructure is one of the key bottlenecks for the growth of wind power in at least Tamil Nadu, which is the state with the highest installed capacity.”

With costs of grid power for industrial and commercial in the Rs. 6-7 per kWh range, the landed cost of wind power, in the range Rs. 5-6 per kWh, is becoming an attractive proposition- Santhanam, Director, Energy Alternatives IndiaSurvival strategiesWind energy sector in India is facing challenges like volatility in wind generation, availability of land for wind farms, inadequate grid infrastructure, high borrowing cost, lack of incentives for wind farm operators etc. Talking about how the industry is coping up to the challenges Mr Bhatia said, “Survival of wind industry has become difficult as investors have deferred their plans. Industry is trying to optimise manufacturing process and indigenous development of components. Industry is also trying to reduce logistical costs by setting manufacturing facility of towers and blades near to the sites.” Mr Santhanam, “The industry, especially the OEM companies, are predominantly focusing on the IPP segment, as this is a segment which is looking forward to significant growth now that GBI has been reinstated in principle. To a certain extent, the increase in wind tariffs in states such as Andhra Pradesh has also provided some relief to many wind power plant developers.”Lastly, sale to private companies as third party sale is picking up significant momentum. “With costs of grid power for industrial and commercial in the Rs.6-7 per kWh range, the landed cost of wind power, in the range Rs.5-6 per kWh, is becoming an attractive proposition. This attractive economics is subsequently driving investments in the IPP segment whose business cases revolve around sale to private companies rather to state utilities,” Mr Santhanam concludes.

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