Parl panel suggests viability gap funding for offshore wind projects

The Parliamentary Standing Committee on Energy has suggested offering viability gap funding (VGF), which is estimated at more than ₹27,700 crore, for setting up offshore wind energy projects and related transmission infrastructure to evacuate power.

Emphasising the higher capacity utilisation factor (CUF) of offshore wind energy farms compared to onshore ones, the panel suggested that the Ministry of New & Renewable Energy (MNRE) should launch time-bound environmental impact assessment studies for setting up such projects.

The committee also observed that even as offshore wind power is costly compared to onshore wind power, the latter has a significantly higher CUF compared to the former. Further, as per global trends, the cost of offshore wind energy reduces gradually with an increase in cumulative installed capacity, the panel said.

Moreover,to achieve the enhanced target of 500 gigawatts (GW) of non-fossil fuel-based installed energy capacity by 2030, there is a need to harness every possible renewable energy resource, it added.

Viability gap funding

The committee said that initially VGF may be provided to make offshore wind energy projects viable and associated transmission infrastructure needs to be built to enable power evacuation from these projects. In its response to VGF, the MNRE said, “A total VGF of ₹14,212 crore is estimated to establish 3 GW of offshore wind energy projects (1 GW off the coast of Gujarat and 2 GW off the coast of Tamil Nadu).”

Besides, separate transmission and evacuation infrastructure with an estimated cost of ₹13,500 crore will be required to be built through central transmission utility to enable power evacuation through these offshore wind power projects, the Ministry added.

Based on a preliminary assessment of satellite data and data available from other sources, eight zones each in Gujarat and Tamil Nadu have been identified as potential offshore zones. The initial assessment of offshore wind energy potential within the identified zones has been estimated to be about 70 GW off the coast of Gujarat and Tamil Nadu.

Need for offshore wind farms

On reasons behind developing offshore wind power, MNRE told the panel that India’s targets are so high that the country will need every source of energy including off-shore wind power.

“Second — one of the advantages of developing offshore wind energy would be that the manufacturing of offshore wind turbines will be encouraged in the country. Third — due to certain characteristics of offshore wind energy such as seasonality, etc, the contribution of off-shore in firm wind power will be higher,” it added.

Besides, according to the initial analysis carried out by the National Institute of Wind Energy (NIWE), the annual average CUF of offshore wind energy projects in India ranges between 35-55 per cent for Tamil Nadu and 35-40 per cent for Gujarat.

In the case of onshore wind energy projects in India, the annual average CUF would range between 25-40 per cent, the Ministry pointed out. However, at present, onshore wind power projects are more cost-effective than offshore wind energy.

It is estimated that per megawatt (MW) of an offshore wind energy project will be in the range of ₹20-25 crore. Costs depend on various parameters such as technology, wind and marine conditions, distance from the shore, etc. Besides, the Levelised Cost of Energy (LCoE) as per the global offshore wind energy scenario would be in the range of ₹6.5-10 per unit, initially.

However, based on global trends, it has been observed that with increasing economies of scale, more competitive supply chains, and further technological improvements, the tariff can reduce significantly for subsequent projects, MNRE informed the panel.

Published on

August 15, 2022

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