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CHAPTER 2 – EVOLUTION OF WIND POWER IN INDIA

Development of wind power started in India during the 6th five-year plan (1983-84).
The national program for wind energy includes wind resource assessment activities,
R&D support, development of manufacturing and infrastructure capability,
installation, generation and manufacture of wind generators, policy support etc.
The Wind Resources Assessment Programme is being implemented through the State
Nodal Agencies, Field Research Unit of Indian Institute of Tropical Meteorology
(IITM-FRU) and Center for Wind Energy Technology (C-WET).

The Ministry of New and Renewable Energy T h e $B e g in n in g$ Lib e ra liza / o n $E ra $ R e fo rm s$ C u rre n t$Sce n a rio $ • • • • • • • • • • • • • • • • • • • • • • • • • • CHAPTER 3 – WIND GENERATION PROCESS • .India is the only country in the world with a separate ministry for renewable energy sources.

Therefore. the more is the energy received by the turbine. Up to 100 meters of altitude.3. a wind turbine can not convert more than 16/27 (59. Hence. density and speed of wind is dependent on geography. rotor area. 3. The denser or heavier the air.3%) of kinetic energy of wind into mechanical . WPD= ½ * ρ * V 3 Where ρ = Density of air V= wind speed Calculating wind energy: The kinetic energy produced by rotating the wind turbine can be given by the expression KE= ½ * WPD * A * T A= Cross sectional area (Depending on diameter of the turbine blades) and T= Time period given Betz Law: It has been scientifically proven that at any given time. acting on the rotor blades. and height of turbine and wind speed. Amount of energy produced depends on air density. wind density (measured in watts/square meter) is a reliable measure to assess wind potential. These currents are affected by earth’s rotation and contours of the land. surface roughness and obstacles influence winds. These surface winds are the source of wind power.2 Wind Turbines Wind turbines convert the force of wind energy into a turning force (torque).1 Factors Driving Wind Energy Differential heating of earth’s surface and atmosphere induces vertical and horizontal air currents.

theoretical maximum power efficiency of a wind turbine stands at 0. efficiency of machine parts etc. With a very large rotor and a very small generator. the type and size of turbines and the availability of grid.2 Common Terminologies Capacity Factor (Plant Load factors. Wind turbines are fundamentally different from fueled power plants in this respect. Capacity Factor = Actual amount of power produced over time / Power that would have been produced if turbine Operated at maximum output 100% of the time The average utilization factor in the country is about 21% which varies from 17% to 26% depending upon the wind power density. 3. Taking into consideration wear and tear. The most electricity per rupee invested is gained by using a larger generator and accepting the fact that the capacity factor will be lower as a result. in reality only about 10-30% of wind energy is converted into electricity. a wind turbine will run at full capacity whenever the wind blew and would have a 60-80% capacity factor. but it would produce very little electricity.PLF): Capacity factor is a way to measure the productivity of a wind turbine or any other power production facility. It compares the plant’s actual production over a period of time with the amount of power the plant would have produced if it had run at the full capacity for the same amount of time.59.45 power coefficient (Cp).energy. . In practice the power limit stands around . Therefore.35-.

New wind turbine installations are moving towards better aerodynamic design. Large generators are very efficient in high wind speed. The other end of the generator is connected to an electrical grid. a step-up substation. Vertical Axis: Vertical axis turbines are used for small scale applications. which provides mechanical energy. 4. The balance of plant comprises the remainder of the wind farm infrastructure. including access roads. Most horizontal axis turbines built today are two.or three-bladed. A wind generation plant comprises of a supporting structure and turbines. however. and variable speed gearless operation using advanced power electronics.1 Types of Wind Turbines Horizontal Axis: They consist of a tall tower. interconnection infrastructure to the electricity transmission system and an operation and maintenance building. and other components. A step up transformer converts low voltage from collection to high voltage level of electric power transmission and distribution system. . lighter and larger blades. In India. blades spin in a plane parallel to the ground. but are not energy efficient. the controller. Small generators usually require less force to start. Blades of vertical-axis wind machines work on the same principle as horizontal-axis machines: shape of blades causes a pressure difference when the wind blows over them. turbines can comprise of 2 or 3 blades. atop which sits a fan-like rotor that faces into or away from the wind. direct drive. the generator. causing the blade assembly to spin. concrete foundations. but find it difficult to turn when it’s less windy. The towers are secured using concrete foundations and are connected to an electrical collection system. an electrical collection system. higher towers. operating platforms. In a vertical-axis machine. A generator is attached to one end of a wind turbine.CHAPTER 4 – TECHNOLOGY A windmill captures wind energy and converts it into electrical energy.

thereby improving capacity factors. Over the past five years. Wind turbines with 75-90 meter rotor diameter have gained momentum as compared with 40-50 meter used in 2005-06.CENTRAL POLICIES AND INITIATIVES . This paper has already discussed (enter link for comparison below) how hub height increases wind power potential. Larger rotor diameters: Larger rotor diameters can significantly add to the efficiency of a wind turbine.1 Latest Technological Advancements: Increase In hub Height: The hub height is the distance from the turbine platform to the rotor of an installed wind turbine and indicates how high your turbine stands above the ground. steel tubular and concrete tubular towers. Hub height has been increased to 80-90 meters as opposed to 7075 meters 5 years back. there has been a growing trend towards use of wind turbines with higher rotor. Wind turbines are also available with lattice. Both technologies have their own advantages and disadvantages.Two types of wind turbines namely stall regulated and pitch regulated are being deployed in the country and abroad for grid-interactive power. This trend is expected to continue in future as well. This leads to increase in wind turbine efficiency. 4. not including the length of the turbine blades Significant improvement in capacity utilization was observed due to increase in average hub height. Turbines with rotor diameters of upto 120 metres are already available in the market. CHAPTER 5 . The stall regulated wind turbines have fixed rotor blades whereas pitch regulated wind turbines have adjustable rotor blades that change the angle of attach depending upon wind speed.

when AD benefits were (AD) revoked. investments are built on AD. Finance Bill 2016 extends this benefit to power transmission projects from April 2017. The Union Budget 2016 has A significant decline in capped the AD benefit to a capacity addition was maximum of 40% from observed during 2012-13. MoF Income Additional depreciation of can be availed. MoF Agency Income Investors can claim 80% The cap of 40% AD from Accelerated (Ministry Tax Dept Depreciation in the first April 2017 can be a cause of depreciation of year from 1st April 2014. concern in the wind industry benefits Finance) which aids in writing off the as 70% of the wind sector investments quickly. IT 80IA MoF Income The law allows a power The benefit is set to expire in . business of generation and distribution of power. Incentive Ministry Implemen Description Comments ting 1. April 2017.The central Ministry of Finance has stipulated several policies and incentives to boost investments in this sector. Note: Only one of AD or GBI 2. 3. The extension of additional Additional (Ministry tax Dept 20% is allowed in respect of depreciation to transmission Depreciatio of the cost of new plant or power projects is a welcome n Allowance Finance) machinery acquired and indicator of the government’s for power installed by certain commitment towards power projects assessees engaged in the sector.

The eligible date for projects in the power sector to avail the benefit under Section 80-IA of the Income Tax Act stands extended from March 31.00 Lakhs per MW during first four years.50 per unit of electricity (GBI) Renewabl Developm fed into the grid for a period e Energy) ent not less than 4 years and a Agency) maximum period of 10 years with a cap of Rs. 4.e. Priority Sector MoF RBI Banks can now provide loans upto a limit of Rs150 GBI is set to expire in 2017 . 100 Lakhs per MW. 2014 to March 31. The total disbursement in a year will not exceed one fourth of the maximum limit of the incentive i. 5. GBI will Generation (Ministry (Indian be provided to wind Based of New Renewabl electricity producers @ Rs. Incentive and e Energy 0.000 MW. 25. The GBI scheme will be applicable for entire 12th plan period having a target of 15. MNRE IREDA Under the scheme. However for Corporates MAT @ ~21% shall be applicable. Rs. 2017.Tax holiday (Ministry Tax Dept producer to claim tax of exemption for upto 10 years Finance) within the first 15 years of a March 2017 project's operations.

and micro. biomass. obligated entity individual SERC’s are Purchase Regulator Regulator should purchase electricity currently below the Obligation y y from renewable energy recommendations given by (RPO) Commissi Commissi sources. the loan limit has been set to Rs 1 million per borrower. Central National Renewable Energy The viability and present Renewable Electricity Load Certificate (REC) scenario of REC market is Energy Regulator Despatch mechanism is a market discussed in this paper (insert Certificates y Centre based instrument to promote link to section) (RECs) Commissi (NLDC) renewable energy and on facilitate compliance of (CERC) renewable purchase obligations (RPO). Central State According to Electricity The RPO targets set by Renewable Electricity Electricity Act. 7. wind. For individual households. the State Electricity 2014 recommends to Regulatory Commissions penalize states upon Non- (SERCs). The responsibility <>.Lending million to borrowers for solar. This concept seeks to address the mismatch between availability of RE sources . on ons of setting RPO targets and (CERC) (SERCs) implementation rests with Electricity Amendment Bill. 6. compliance of RPO targets. 2003.hydel power generation. and also for renewable energy based public utilities like street lighting systems and remote village electrification.

operating & Feed in Regulator Regulator fuel costs and the normative Tariff y y generation from each Commissi Commissi resource. 8. 9. a levelized tariff is on ons formulated with due (CERC) (SERCs) consideration for return on equity. including 100% FDI in wind sector. Such tariffs once decided hold over the length of the PPA(~20yrs).and the requirement of the obligated entities to meet their RPO. . generally in the range of 16%. Several policies in addition to the one referenced above has been adopted by the government to bolster the wind power sector. 10 GW (Bio Mass (excluding large hydro) by Target of e Energy e Energy Power). National Ministry Ministry This 175 GW comprises of The adoption of a large target Renewable of New & of New & 100 GW (Solar). Central State After considering all Preferential Electricity Electricity relevant fixed. Achieving future RE denominated this calls for US $120 electricity system. and 5 GW (Small 2022 is a bold step towards a 175 GW by (MNRE) (MNRE) Hydro Power). 2022 billion in capital investment and equity of US $40 billion. 60 GW of 175 GW of RE capacity Energy Renewabl Renewabl (Wind). Tariffs are revised each year for new upcoming projects.

IREDA refinance scheme. National clean energy fund. National wind mission and UDAY. Excise and customs duty exemption. . National Green Energy corridor.

including ROE at 10% P. and 24% P. based on the recommendations given by CERC in Central Electricity Regulatory Commission (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulations. Return on equity. India adopts constant tariffs over 13 years.A for the first 10 years.13 years or more. consisting of fixed components such as: a.A from year 11 onwards. e. 2012. b. d. Interest on working capital. In this way FiT provides long-term certainty about receiving financial support. Interest on loan capital.STATE POLICIES AND INITIATIVES 6. Tariff Options The electricity purchase tariffs for renewable energy projects. which is considered to lower investment risks Wind energy sector follows a single part tariff structure. Definition A feed-In-Tariff is a guarantee of payment to renewable energy developers for the electricity they produce. This assures the producers that the electricity they produce will be purchased. Tariff levels are usually guaranteed for a longer period. Methodology 1.1 Feed-In-Tariff Mechanism The various state electricity regulatory commissions determine the tariff to be given to power generators. Operation and maintenance expenses. A single all . For wind energy projects. Depreciation. c.CHAPTER 6 . and wind power in particular are calculated based on the projected cash flow of a generic 1 mW plant over 25 years of useful life.

2. 9.” Levelised Tariff Levelised Tariff = (Arithmetical Average of Tariff over the life of the plant/PPA) / Discount Factor Discount Factor Discount factor is the post tax weighted average cost of the capital on the basis of normative debt: equity ratio (70:30) specified in the Regulations . 5. Capital Investment Capacity Utilization Factor Operation and Maintenance expenses Insurance cost Debt-Equity ratio Term of Loan and Interest Life of plant and machinery Return on Equity Depreciation rate applicable Interest and Components of Working Capital 3. 4. Provided that for renewable energy technologies having single part tariff with two components. Tariff Components 1. 8. 2) For the purpose of levellised tariff computation.inclusive tariff is determined for each technology. 2. the discount factor equivalent to Post Tax weighted average cost of capital shall be considered. the tariff design for renewable energy generating stations is as under: 1) The generic tariff shall be determined on levellised basis for the Tariff Period. 7. 3. tariff shall be determined on levellised basis considering the 6 year of commissioning of the project for fixed cost component while the fuel cost component shall be specified on year of operation basis. Tariff Design In terms of Regulation 10 of the RE Tariff Regulations. 3) Levellisation shall be carried out for the ‘useful life’ of the Renewable Energy project while Tariff shall be specified for the period equivalent to Tariff Period. 6. 10.

inclusive of all capital works like plant and machinery. civil works. taking in to account changes in wholesale price index of steel and electrical machinery. land cost.Capital cost for wind energy project shall include wind turbine generator including its auxiliaries. --. financing and interest during construction. transportation charges.Central Electricity Regulatory Commission (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulations. site development charges and other civil works. Return On Equity Sub-Regulation (2) of the Renewable Energy tariff Regulation stipulates the normative Return on Equity (ROE) as under: a) 20% per annum for the first 10 years. erection and commissioning. evacuation cost up to inter-connection point. CERC has adopted an indexation mechanism. financing charges and IDC” Capital Cost Calculation The initial capital cost for the fiscal year 2012-13 was recommended by CERC in the order . Debt to Equity Ratio D/E ratio has been fixed at 70:30 for wind energy projects. and evacuation infrastructure up to interconnection point. and 16 b) 24% per annum from the 11th year onwards . 2012.Discount factor= Wd* Rd*(1-T)+ We*Re Where Wd:We= Debt: Equity Rd= Interest rate on debt Re= Interest rate on equity Capital Cost “Capital cost is the total project cost.

the normative interest rate shall be considered as average State Bank of India (SBI) Base rate prevalent during the first six months of the previous year plus 300 basis points. first year being 2012-13 tariff determined for the RE projects commissioned during the control period shall continue to be applicable for the entire duration of the tariff period as specified in Regulation 6 of the RE Tariff Regulations. the repayment of loan shall be considered from the first year of commercial operation of the project and shall be equal to the annual depreciation allowed”. (c) Notwithstanding any moratorium period availed by the generating company.Useful Life Wind energy — 25 Control Period Five years.00% . The normative loan outstanding as on April 1st of every year shall be worked out by deducting the cumulative repayment up to March 31st of previous year from the gross normative loan. Average Base rate for first six months of FY 14-15 10. Tariff Period 13 years minimum Interest On Loan Sub-Regulation (1) of Regulation 14 of the RE Regulations provides that the loan tenure of 12 years is to be considered for the purpose of determination of tariff for RE projects. (b) For the purpose of computation of tariff. Sub-Regulation (2) of the said Regulation provides for computation of the rate of interest on loan as under: “(a) The loans arrived at in the manner indicated in the Regulation 13 shall be considered as gross normative loan for calculation for interest on loan.

Provided that in case of commercial operation of the asset for part of the year. (3) Depreciation shall be chargeable from the first year of commercial operation. Interest On Working Capital 43. The depreciation rate for the first 12 years of the Tariff Period shall be 5. c) Maintenance spare @ 15% of operation and maintenance expenses Interest on Working Capital shall be at interest rate equivalent to the average State Bank of India Base Rate prevalent during the first six months of the previous year plus 350 basis points” . depreciation shall be charged on pro rata basis". Regulation 17 of the RE Tariff Regulations provides for the working capital requirements of the RE projects as under: a) Operation & Maintenance expenses for one month. The Salvage value of the asset shall be considered as 10% and depreciation shall be allowed up to maximum of 90% of the Capital Cost of the asset.Depreciation Regulation 15 of the RE Tariff Regulations provides for computation of depreciation in the following manner: "(1) The value base for the purpose of depreciation shall be the Capital Cost of the asset admitted by the Commission. (2) Depreciation per annum shall be based on ‘Differential Depreciation Approach' over loan period beyond loan tenure over useful life computed on ‘Straight Line Method’.83% per annum and the remaining depreciation shall be spread over the remaining useful life of the project from 13th year onwards. b) Receivables equivalent to 2 (Two) months of energy charges for sale of electricity calculated on the normative CUF.

2 (201 .4 (301 .400) 30 Wind zone . Per unit benefit shall be derived on levellised basis at discount factor equivalent to Post Tax weighted average cost of capital”.e. Tariff Calculation The net/Gross generated value of electricity is computed on 1MW. Capacity Utilisation Factor Energy: Annual Mean Wind Power Density (W/m2) Wind zone .1 (Upto 200) 20 % Wind zone . Accordingly. 3.300) 25 Wind zone . if availed. including accelerated depreciation benefit if availed by the generating company. accelerated depreciation rate as per relevant provisions under Income Tax Act and corporate income tax rate.5 (Above 400) 32 Subsidy Regulation 22 of the RE Tariff Regulations provides as under: “The Commission shall take into consideration any incentive or subsidy offered by the Central or State Government. ii) Capitalization of RE projects during second half of the fiscal year.3 (251 .72% per annum over the tariff period for determination of the levellised tariff. the O&M cost norm for wind energy as ` 10. for the renewable energy power plants while determining the tariff under these Regulations.O&M expenses (a) Wind Energy: Regulation 27 of RE Tariff Regulations provides that the normative O&M expenses for the first year of the control period (i. for the purpose of tariff determination: i) Assessment of benefit shall be based on normative capital cost. 2012-13) as ` 9 lakh per MW and shall be escalated at the rate of 5. The NPV of .63 Lakh/MW for FY 2015-16. Provided that the following principles shall be considered for ascertaining income tax benefit on account of accelerated depreciation.250) 22 Wind zone .

total cash outflow over 25 years/ NPV of energy generated is taken for tariff consideration. State wise Feed In Tariffs­ Comparison of Feed In Tariffs of States: Under Progress­  Maharastra and Tamil Nadu Covered. .