Energy Policy 56 (2013) 672–683

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Energy Policy
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Offshore wind energy policy for India—Key factors to be considered

Swaminathan Mani n, Tarun Dhingra 1
University of Petroleum and Energy Studies (UPES), College of Management and Economics Studies, Energy Acres, PO Bidoli, Via Prem Nagar, Dehradun–248007, Uttarakhand, India

H I G H L I G H T S

c We identify the components of an offshore wind energy policy by literature survey.

c 21 components are identified that form the master list of building blocks.
c These components are then logically grouped under five themes.
c A 100 wind energy stakeholders in India are interviewed to rank these components.
c Offshore wind energy policy can formulated using the components with highest score.

a r t i c l e i n f o a b s t r a c t

Article history: Indian Economy is growing at a healthy pace during the last few years. To sustain this growth, power
Received 14 March 2012 sector needs to build additional generation capacity. However, continued dependence on fossil fuels to
Accepted 21 January 2013 power the growth of electricity generation capacity, is hardly sustainable. Renewable Energy source
Available online 19 February 2013
forms a miniscule portion (25 GW,  12%) of India’s overall power generation today (202 GW). The
Keywords: share of wind energy (17 GW) is 67% of the total renewable energy basket. But the contribution from
Offshore wind energy policy offshore wind farms is non-existent, as all the wind energy generated in India is only through onshore
Indian offshore wind wind farms. India needs a policy framework to encourage the development of offshore wind farms.
Energy policy India Several European countries have effective offshore wind energy policies that have helped them to
accelerate the growth of their offshore wind energy sector. This paper does an exhaustive literature
survey, to identify 21 building blocks of a successful offshore wind energy policy initiative adopted by
select European countries, which have been classified under 5 broad categories—Government support,
Fiscal and quota based incentives, Availability of local expertise, Capital for investments and Building
an enabling ecosystem, which can be leveraged by India to articulate its own offshore wind energy
policy.
& 2013 Elsevier Ltd. All rights reserved.

1. Introduction electricity and over 400 million Indians have no access to

electricity. Acute energy scarcity in India will hamper its indus-
The total power generation capacity in India in April 2012 was trial growth and economic progress. However, these rapid
202 GW (Ministry of New and Renewable Energy (MNRE), 2012). enhancements in additional generation capacity need to come,
Of this, 66% was fossil-fuel-fired power plants, 19% hydroelectric in large proportions, from clean energy sources, as continued
power, 2% nuclear power, and 12% renewable energy, as shown in dependence on fossil fuel to power its economy will leave a
Table 1. In the business as usual scenario, coal is likely to devastated ecology apart from draining the foreign exchange
dominate the energy fuel mix in the future too (Ministry of reserves. India dependence on the fossil fuels contributes sig-
Power, 2011). nificantly to greenhouse gases emissions. If India failed to protect
India that is experiencing accelerated growth is likely to its environment, not only its economic growth would be impeded
consume energy more than ever before (Planning commission, but also would pose serious health hazards (Pode, 2010).
2010). This growth also places massive demands on the con- Increased awareness and regulations around greenhouse gas
sumption of energy. India today only produces 660 billion kW h of emissions, environmental concerns and global warming will put
additional pressure on India to move away from polluting
n
fossil fuels.
Corresponding author. Tel.: þ91 9989047746; fax: þ 91 135 2776090.
India has access to substantial renewable energy sources
E-mail addresses: [email protected],
[email protected] (S. Mani), [email protected] (T. Dhingra). whose potential can be tapped to bridge some of the deficit
1
Tel.: þ91 9837321447. experienced in power generation and reduce the pressure on the

0301-4215/$ - see front matter & 2013 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.enpol.2013.01.031
 S. Mani, T. Dhingr / Energy Policy 56 (2013) 672–683 673

Table 1 Table 3
Total installed power generation capacity in India as of 30th April 2012. Projections for electricity requirement for India.
Source: CEA, 2012. Source: Ministry of Power, Government of India (2000–2011).

Fuel MW (%) Age Year Billion kW h Installed capacity (GW)

Total Thermal 133363.18 65.97 Year @8% @9% @8% @9%

Coal 113,782.38 56.29
Gas 18,381.05 9.09 2006–2007 700 700 140 140
Oil 1,199.75 0.59 2011–2012 1029 1077 206 215
Hydro 38,990.40 19.29 2016–2017 1511 1657 303 331
Nuclear 4,780.00 2.37 2021–2022 2221 2550 445 510
Renewable energy sources 25017.88 12.37 2026–2027 3263 3923 655 785
Total 2,02,151.46 100.00 2031–2032 4793 6036 962 1207

investments and Building an enabling ecosystem. These levers can

Table 2
Achievement of renewable energy sources (in MW) in India, April 2012.
be exploited by the policy makers in India to grow the offshore
Source: Ministry of New and Renewable Energy (MNRE) (2012). wind energy sector in the country. It is hoped that this research
will add to the existing body of knowledge, as very little literature
Renewable energy systems Target for 2 Achievement Cumulative is currently available on the offshore wind energy sector in India.
012-2013 during April achievement
2012 up to 30.04.2012
1.1. Projections for energy requirement for India
Wind power 2500 36.65 17389.31
Small hydro power 350 5.75 3401.06 The projections of power requirement for the Indian economy
Biomass power 455 16.00 1166.10
Bagasse cogeneration 7.5 1992.73
growing at 8% and 9% per annum is given in Table 3 below
Waste to power—urban 20 – 89.68 (Ministry of Power, 2005). Taking even a conservative growth of
-Industrial – – Indian economy at 8% per annum for the next 2 decades; India
Solar power (SPV) 800 37.72 979 needs an installed capacity of over 950,000 MW from the present
Total 4125 103.62 25017.88
170,000 MW—a capacity addition of over 40,000 MW every year
for the next 20 years or around 750 MW every week. Of course
the capacity addition figures are much higher if one considers the
need to commission fossil based power plants. India has begun economy growth rates of over 9% per annum.
well by having a dedicated ministry for renewable energy for India experienced a generation deficit of approximately 10%
policy formulation and for providing oversight. Several proactive and a corresponding peak load deficit of 12% (over 15 GW). India
initiatives from the ministry, research institutions, academia, is likely to import over 100 Million Tonnes of Coal in 2011/12. The
private investments, thought leaders, financial institutions and oil import bill is expected to rise to $120 billion in 2011/12.
project developers have resulted in India installing over
25,000 MW from clean energy sources in the overall power
installed capacity of 202,000 MW as of April 2012 which has 2. Renewable scenario in India
contributed to India becoming No 5 in the world in terms of
installed wind energy capacity (Table 2). Thankfully, India is blessed with generous sustainable
However, India has not tapped the potential it has in the resources, as shown in Table 4, to make a shift to renewables;
offshore wind energy sector. India has over 7000 km of coastline, abundant solar resources available for 300 days in a year, plentiful
access to funds, technological knowhow, project management small hydro potential in the Himalayan states, long coast line of
capabilities, economic need, captive market and ecological com- over 7000 km for tapping the offshore wind energy, several zones
pulsions to adopt offshore wind energy in an accelerated manner. with wind speeds of over 7 m/s for onshore wind energy installa-
Today, Europe is a world leader in adoption of offshore wind tions, a predominantly agrarian economy to act as a perennial
energy in their countries which was due to several investor supply chain for Biofuels
friendly policies formulated by EU. India has similar experience Consequently, India has made an impressive start in the
of proactive policies driving the growth of onshore wind energy renewables journey (Ministry of New and Renewable Energy
sector in the country. (MNRE) 2010). India’s long coast is likely to offer a large potential
However, India is yet to formulate policies focused on offshore to harness offshore wind energy; proper assessment and devel-
wind energy that would encourage the growth of that sector in opment of this potential would offer challenges and new oppor-
the country. India can consider and implement some of the best tunities to India’s wind energy industry (Bhattacharya and Jana,
practices of select countries in Europe that have successfully 2009).
harnessed offshore wind energy for electricity generation. This
research does an extensive literature survey of the offshore wind 2.1. Review of literature and current scenario
energy policies adopted by 4 countries (the UK, Germany, Nether-
lands and Denmark) with largest installation of offshore wind Usha Rao and Kishore (2009) used the theory of diffusion of
farms to understand the basic elements of policy formulation. innovation to study the growth of wind power technology in
This research would also attempt to fill the gap of absence of different states of India. It is found that there is a correlation
literature on factors that drive the growth of offshore wind energy between the diffusion parameters and the composite policy index.
for India, by identifying a set of 21 variables that form the core Hence is strong policy framework is a prerequisite for the growth
components of offshore wind policy. These 21 variables were of offshore wind energy in India. As per (Goyal, 2010) Onshore
subjected to factor analysis to logically group these variables wind power development in India grew over 27% when dedicated
under 5 broad categories or levers viz., Government support, Fiscal policies for renewable energy sources were declared by the
and quota based incentives, Availability of local expertise, Capital for Government. As stated by Pillai and Banerjee (2009) onshore
674 S. Mani, T. Dhingr / Energy Policy 56 (2013) 672–683

Table 4
Development of grid connected renewable power in India (in MW)
(Source: Ministry of New and Renewable Energy (MNRE), Government of India & Planning Commission reports, 2011).

Achieved In process Anticipated Targets Estimated

potential

Five–year plan Cumulative 10th plan– Anticipated in the By the end of the By the end of the Medium term
installed capacity additions during 11th plan 11th plan 13th plan
by the end of 9th the plan period (additions during (Cumulative (cumulative
plan the plan) installed capacity) installed capacity)

Years Through 2002 2002-2007 2007-12 Through 2012 Through 2022 10 Years

Wind 1667 5415 10,500 17,582 40,000 102,000

Small Hydro 1438 520 1400 3358 6500 15,000
Biomass 368 750 2100 3218 7500 23,700
Solar 2 1 1000 1003 20,000 20-30MW/Sq. km
Total 3,475 6,686 15,000 25,161 74,000  150,000

wind development has been accelerated by the provision of (2004) conclude that the ‘‘resource-adjusted costs to society of
several incentives and enabling policies. As per (Bhide et al, the FIT is currently lower than the cost of the TGC systems’’. Held
2011) several promotional incentives have been made available et al. (2006), Ragwitz et al. (2006) show that instruments, which
for wind power projects. As per (Purohit and Purohit, 2009), are effective for the promotion of RES-E are frequently economic-
minimum level of remuneration appears necessary to encourage ally efficient as well.
wind power deployment. Singh and Sood (2008, 2011) gives the Hvelplund (2001) advocating feed-in tariffs on the grounds that
comparative overview of all existing regulatory policies for the they alone have fostered dramatic capacity growth. Ackermann et al.
promotion of electricity generation from renewable energy (2001), Haas et al. (2007), Reiche and Bechberger (2004), Saidur
sources that are either implemented or in the process of et al. (2010) mentions that almost all countries that utilize wind
implementation. energy for power generation have policies specific to wind energy.
\Similarly, multiple international literatures corroborate the view Johnstone et al. (2010) and Frondel et al. (2010) studied the impact
that focused policies interventions by several countries around the of public policies on RE, and concluded that the effect of public
world have encouraged the growth of renewable energy sources. policies largely depends on the kind of RE source. Buen (2005)
Saidur et al. (2010) have found that FIT, RPS, incentives, pricing law concludes that policy has contributed to high degree of innovation
and Quota system are the most useful energy policies practiced by and diffusion of Wind energy in Denmark; whereas lack of cogent
many countries around the world, which has helped these countries policy derailed the wind energy sector in Norway–thereby establish-
to significantly accelerate the generation of wind energy. As per ing a direct correlation of policy measures and performance of Wind
(Luthi and Prassler, 2011) while the cost of wind energy has come Industry in Nordic. Lund (2009) mentions the fast and high
close to grid parity in locations with consistently strong winds, its penetration of wind energy technologies indicates a very favourable
growth has been, and still is, largely driven by policy incentives. long-term policy framework. The main key to the Danish success in
Menanteau et al. (2003) have shown that a number of renewable the development of wind power during the 1990s has been a stable
energy technologies have benefited to varying degrees from support legal framework and a favourable policy environment (Haas et al.,
of incentive programs introduced in the industrialized countries 2007).
over the last 20 years. The impact of these instruments has been So, several literatures confirm the hypothesis that a stable,
particularly felt in the case of wind energy, which is now nearly focussed, policy environment needs to be created to accelerate
competitive with conventional technologies. As per (Gutermuth, the growth of wind/renewable energy sector in the country. The
2000) the feed-in tariffs in operation in Germany, Denmark and literatures also help identify the various components or con-
Spain have led to sustained development of wind power, both in structs of a successful policy initiative.
terms of installed capacity and at the industrial level. (Alishahi et al.,
2012) have shown that different methods of structuring incentives
have important impacts on the investment strategies of wind energy 3. Discussions
generation. Lewis and Wiser (2007) has clearly proven that a stable
feed-in tariff to be one of the most successful mechanisms to date The inferences drawn from the survey is grouped into few key
for promoting large-scale wind energy markets. messages as shown in Table 5.
Huber et al. (2004) give a concise summary of comprehensive There is no study which has been carried out to develop and
effects of different design elements of renewable energy policy empirically test a model of constituents of effective offshore wind
instruments. Their major conclusions were that well-designed energy policy for India. This paper would attempt to fill the gap of
FITs were more effective and cost-efficient than other promotion absence of literature on offshore wind energy policy for India by
schemes. Boyle (2007) mentions that uncertainty of policy envir- identifying a set of variables that form the core components of
onment was one of the deterrents to offshore wind development policy intervention needed for India to proliferate of offshore
in the UK. An analysis carried out by Dinica (2006) examines the wind farms in the country.
diffusion of renewable energy technologies taking into account The following superset of variables, as shown in Table 6, was
the role of investors. Mitchell et al. (2006) compare the UK quota found from the literature survey that formed the building blocks
obligation system with the German FIT system and come to the of policy roadmap adopted by these countries. No one country has
conclusion that low risks implicate high policy effectiveness and adopted all the factors in their policy but have picked a smaller
that the German FIT-system provides higher security for investors set that probably suited their local conditions. As part of this
than the British Renewables Obligation. Butler and Neuhoff exercise, 100 stakeholders of Wind Energy in India were asked to
 S. Mani, T. Dhingr / Energy Policy 56 (2013) 672–683 675

Table 5
Summary of literature survey organized as per themes.

S.No Themes Select author(s) Context Inferences

1 Current status and future plans of Planning Commission of India (2009), Kirit Parekh reports India India needs abundant supply of power to support its
energy sector in India (2009), Line Ministries (2008, 2009) growth. Use of fossil fuels is not sustainable in the long
run.
2 Fallout due to use of fossil fuels Breeze (2008), World Climate program (2010), Pode Global Continued use of fossil fuel will leave a totally degraded
(2010), Saidur et al. (2010) ecology for the future
3 Renewable energy scenario/ MNRE (2010), Bhattacharya and Jana (2009), Bhide and India Details about the immense Renewable Energy potential
potential in India Monroy (2011), Usha Rao and Kishore (2009), Srinivasan that can be harnessed by India.
(2009), Goyal (2010), Pillai and Banerjee (2009), Singh
and Sood (2011). World Bank (2010), Lalwani and Singh
(2010), Purohit and Purohit (2009)
4 Renewable Energy policy of India MNRE (2010), Bhide and Monroy (2011), Usha Rao and India Policy aspects of renewables but no mention of
Kishore (2009), Srinivasan (2009), Goyal (2010). Singh offshore wind energy, either in the policy aspects or
and Sood (2008). World Bank (2010). potential aspects.
5 Renewable energy in Haas et al. (2007), Bloem et al. (2010), EWEA (2008, Europe History and growth of renewables in Europe with focus
Europe—focus on wind (both 2009), Wiser and Bolinger (2010), Lund, 2011, Moller on Wind Energy sector growth (both onshore and
onshore and offshore wind) (2011), Green and Vasilakos (2011). offshore wind) and current status.
6 Policies adopted by countries in Lewis and Wiser (2007), Beccali (2003), Luthi and Europe Several literature that talks about how having a
Europe to for Wind energy sector– Prassler Prasseler (2011), Alishahi (2012), Dinica (2006), consistent and cogent policy has helped grow the wind
focus on offshore wind energy Huber (2003), Held et al. (2006), Ragwitz et al. (2006), energy sector in Europe (specifically the offshore wind
Mitchell et al. (2006); Toke (2011), Butler and Neuhoff energy sector)
(2004)Sperling et al., 2010, Foxton (2005), Aitken (2010).
7 Slow adoption of offshore wind in Boyle (2007), Buen (2005), Meyer (2007), Van Rooijen Europe How inconsistent or lack of cogent policies can slow or
some European countries due to and Van Wees (2006) reverse the growth of wind energy sector in Europe.
lack of cogent/consistent policies

rank these factors (1 being the highest) and the normalized 4.1.3. Sampling element
results are presented. The sampling element was defined as people those who were
The ranking of these variables is based on the perception in the executive decision making authority in their respective
survey administered to the stakeholders of wind energy in India. companies/organization.
A variable having low scores does not mean they are unimportant.
Higher scores were given by the respondents to those variables
4.1.4. Sampling unit
that need immediate attention of the policy makers in India. The
The sampling unit was defined as those in executive leadership
21 variables found from literature were then subjected to factor
roles in organizations with interest in wind energy in India, who
analysis to logically group them under 5 factors using the
actively participates in large industry conferences as speakers or
statistical method as explained in the next section (Mani &
panel discussions chair or as session chair.
Dhingra, 2012).

4.1.5. Sampling technique

4. Methodology Proportionate stratified sampling was used during the data
collection process. The population was divided into different strata
Descriptive research (Conclusive research) was the chosen (Policymakers, Academia, Wind turbine manufacturers, association
research methodology as it renders itself to analysis using members) and number of elements from each stratum in relation to
statistical tools. Since the strategy of inquiry used was ‘survey’ its proposition in the total population was selected. The percentage
employing predominantly close ended questions, predetermined of these stakeholders in the sample size is given below
approaches and numeric data—quantitative research methodol-
ogy was the chosen methodology for analysis.
1. Wind Turbine Manufacturers—25%.
4.1. Sampling procedures 2. Policy Makers, MNRE, R&D Institutions—15%.
3. Project Developers & EPC Contractors—20%.
4.1.1. Target population 4. Independent power producers—10%.
The target population for the survey was any organization or 5. Thought leaders—10%.
individual having interest in the wind energy industry in India. 6. Financing Institutions (IREDA, EXIM Bank)—10%.
This included companies that have an active presence in India and 7. Others (Captive users, Regulatory agencies, Electricity Boards)–
all those who are keen to set up base in India to exploit the wind 10%.
energy potential offered by the country.

4.1.2. Sampling frame

4.1.6. Sample size
The respondents who have a stake in wind energy in India and
The sample size of 100 was considered for this research work.
who have an active presence in India were identified as part of the
sampling frame. The stakeholders of wind energy industry
include wind turbine manufacturers, policy makers, R&D institu- 4.1.7. Instrument design
tions, project developers, consultants, academia, wind industry The instrument that was used in the data collection exercise
associations, regulatory agencies, financial institutions, EPC con- for this research was a questionnaire which contained 34 ques-
tractors, thought leaders in wind energy and independent power tions in 8 sections. The questionnaire had most of the questions
producers. with pre-defined choices, as shown in Appendix B.
676 S. Mani, T. Dhingr / Energy Policy 56 (2013) 672–683

Table 6
Operating definitions of variables identified through literature survey.

SNo. Components/building blocks/variables Rank

1 Feed in Tariffs (FiT): Feed in tariff is the rate at which the renewable energy developer will be paid by the utilities/distribution companies for every unit 1
of electricity fed into the grid.
2 Accelerated Depreciation (AD): Companies that are setting up a renewable energy projects can avail depreciation at higher rates (80% in the case of wind 2
farms) in the first year of operation.
3 Generation based Incentives (GBI): GBI is a bonus payment given per unit of power injected into the grid to the renewable energy generator, over and 2
above the FiT system.
4 Legally enforceable RPO/REC: Renewable purchase obligation (RPO) mandates the distribution utilities to source a pre-decided quantity of electricity, 1
usually a proportion of their supply, from renewable energy sources. Making this RPOs/REC legally enforceable will make it attractive for investors.
5 Faster approvals/Single window clearance: Providing single window clearances for setting up offshore wind energy projects will reduce the gestation 1
period for project go-live and also enhance the ease of doing business.
6 Continuity of policies for long term (more than 10 years): Continuity of policies for a long term (10 years or more) for predictability and stability in the 2
policy environment.
7 Adequate evacuation infrastructure to transmit power from high seas: Availability of and access to transmission infrastructure/Grid connectivity from 1
the offshore wind parks to onshore substations.
8 Tariff determination on wind speeds and not on Zones: Specific tariff rates based on speed of the winds will help development of low wind speeds 5
areas.
9 Financial incentives like zero import duty, excise duty waiver: Offering financial incentives like waiver of custom duty, import duties exemptions, tax 3
related schemes for setting up of offshore wind parks.
10 Availability of expert EPC contractors: Shortage of skilled resources to install offshore wind farms will invariably delays the commissioning of these 3
farms which then has an impact on cash flows and profitability.
11 Availability of local manufacturing expertise for Wind Turbine: It is relatively inexpensive to source from domestic manufacturers compared to 3
imports and it also reduces the supply chain wait- time dependencies.
12 Growth of ancillary units (eg Gear box): Similar to the availability of wind turbines locally, growth of ancillary units that are locally present will 4
accelerate reduction in costs of components thereby increasing adoption.
13 Superior program execution skills of the developer: High quality program managers to supervise the installation and commissioning of offshore wind 2
parks.
14 Accurate data on offshore wind potential sites and wind speeds: The power output from a wind farm varies directly to the cube of the wind speeds and 1
hence impacts profitability. Hence, accurate data on offshore wind speeds is important to judge the financial attractiveness of the project.
15 Skills development and training of human resources: Offshore wind energy project needs 20 people for every MW of capacity installed to manage the 3
project. Skills development and training of these resources is important to ensure smooth functioning of these offshore wind farms.
16 Active Research institutions working on offshore wind energy: Research institutions that focus on innovation and technology advancement of the 3
offshore wind sector components, research on advances in foundation engineering etc. are vital to accelerate the growth of the offshore sector.
17 R&D facilities to localize production of expensive equipment: Growth of R&D facilities that work on finding ways to localize production of all 3
components of offshore wind equipment to reduce the overall costs of offshore wind farms.
18 ‘Priority sector’ tag to offshore wind energy sector: Declaring offshore wind as a priority sector will help the sector access funds from banks at 3
attractive rates thereby increasing the attractiveness of the investments in offshore wind projects.
19 Availability of capital at attractive rates of interest: If capital is made available at attractive rates, in the absence of priority sector tag - that would help 2
reduce the overall debt servicing burden for the offshore wind energy project developers.
20 Creation of offshore wind energy fund to reduce cost of capital: Creation of offshore wind energy fund, using the cess levied on coal and other fossil 2
fuels, and using the accrual to lend to offshore wind energy projects will ease the burden on the developers.
21 Moratorium on interest payments for the first 5 years of project go-live: The offshore wind project developers being offered a 5 year moratorium on 4
interest payment after the project goes-live will help in de-risking the investment from the vagaries of learning curve, which is inevitable in any project
with large capital investments.

4.2. Questionnaire development 4.2.2. Method of administration

The questionnaire was handed over predominantly in person
Structured–undisguised questionnaire was used in the survey at wind energy conferences in India, so that access to the right
– as they are reliable, standardized, simple to administer, easy to stakeholders and their response rates could be better compared to
tabulate and analyze – where the responses permitted to the mail interview.
respondents were predetermined on a 1–7 likert scale. The
instrument was checked for its reliability (using cronbach alpha) 4.3. Pilot testing
and validity using statistical techniques, which are beyond the
scope of this paper but can be obtained from books on advanced The questionnaire was pre-tested with 25 wind energy stake-
research methodology. Detailed questionnaire is attached as holders in the country during an international conference. The
Appendix B, which can be used by other researchers working in responses were added in a dummy table to make sure the
the field of renewable energy—as this questionnaire has been questions were understood correctly and the answers were in
checked for validity and reliability. line with the questions asked. A couple of ambiguous questions
were re-worded, ordering of the questions were changed as per
the feedback received before the questionnaire was administered
4.2.1. Information sought again.
The list of variables found from literature survey was pre-
sented to the respondents in the form of questions and they were
asked to choose an option (in the 7 point likert scale) whether a 5. Factor analysis
particular variable would aid the growth of offshore wind energy
in India [strongly disagree (1) to strongly agree rating (7)]. There Factor analysis was used in the research work to group the
were questions on their perspective on offshore wind energy in 21 variables identified under 5 factors based on their co-relations.
India to judge the integrity of answers and to prevent mechanical Factor analysis is a statistical procedure used to uncover
answers to the questions. relationships among many variables. This allows numerous
 S. Mani, T. Dhingr / Energy Policy 56 (2013) 672–683 677

inter-correlated variables to be condensed into fewer dimensions,  Extending financial incentives like subsidies, moratorium on
called factors. Factor analysis is a method of data reduction. It interest payment, zero duty on imports, excise duty waiver
does this by seeking underlying unobservable (latent) variables and tax benefits for offshore wind energy projects.
that are reflected in the observed variables (manifest variables).  Tariff determination on wind speeds and not based on zones.
The amount of variance a variable shares with all other variables 3. (Factor 3) Availability of local expertise
included in the analysis is referred to as communality. The  Expertise and availability of EPC contractors for commission-
covariation among the variables is described in terms of a small ing of the wind farms.
number of common factors plus a unique factor for each variable.  Manufacture and availability of offshore wind energy compo-
Factor analysis usually proceeds in two stages. In the first, one nents, locally.
set of loadings is calculated which yields theoretical variances and  Growth of ancillary units.
covariances that fit the observed ones as closely as possible  Superior program execution skills and capabilities.
according to a certain criterion. These loadings, however, may 4. (Factor 4) Enabling Institutional ecosystem
not agree with the prior expectations, or may not lend themselves  Active research institutions working in the field of offshore
to a reasonable interpretation. Thus, in the second stage, the first wind energy.
loadings are ‘‘rotated’’ in an effort to arrive at another set of  Build accurate data on offshore wind potential sites and wind
loadings that fit equally well the observed variances and covar- speeds (Wind resource map and Bathymetric data).
iances, but are more consistent with prior expectations or more  Skills development and training of the human capital on
easily interpreted. The variables usually load significantly on only offshore wind systems.
one factor. Based on the variables that load, a suitable name is  R&D to localize production of expensive equipments to bring
assigned to the factors. the overall costs down.

6. Factors obtained from statistical analysis

7. Variables grouped as different factors 5. (Factor 5) Availability of capital for investments

 Availability of capital at attractive rates of interest similar to
1. (Factor 1) Fiscal and quota based incentives what is extended to priority sector projects.
 Feed-in tariff (Higher tariff for offshore wind vis-a’-vis other  Moratorium on interest payments for the first few years of
renewable). project go-live.
 Accelerated depreciation.  Offshore wind energy fund from cess levied on carbon emissions
 Generation based incentives (GBI). or a Government backed guarantee to reduce the cost of capital.
 Enforcement of Renewable purchase obligations (RPO)/renew-  Financial Institutions willing to lend to offshore wind projects
able energy certificates (REC). as priority sector.
2. (Factor 2) Government support
 Faster approvals and Single window clearance mechanisms for
offshore wind energy projects. 8. Conclusions and recommendations
 Sustainability of policies environment for a longer term (10
years or more). India needs every avenue of energy source to power its
 Constructing evacuation Infrastructure and facilities for sto- economy. However, offshore wind energy is an untapped source.
rage of electricity not injected into the grid. Offshore wind policy formulation for India must cover five broad
678 S. Mani, T. Dhingr / Energy Policy 56 (2013) 672–683

areas of Government support, fiscal and quota based incentives, Research conducted by independent agencies like EWEA, EEA
availability of local expertise, capital for investments and suggest that investors prefer the Denmark model of government
enabling R&D ecosystem. All these 5 levers (factors) positively fully contributing to the building of transmission infrastructure
contribute to the growth of offshore wind energy in India, while recovering the costs from the public via a small increase in
(obtained logistic regression techniques beyond the scope of this tariff. Similar model (‘Socialising the costs’) can be thought of in
paper). The relative impact of these factors on the growth of India, as the capital investments needed for setting up offshore
offshore wind energy in India obtained using logistic regression wind energy farms are prohibitive vis-a -vis other renewable
techniques are fiscal and quota based incentives (33.6% impact), energy technologies. A project developer will not be able to bear
Government support (32%), enabling R&D ecosystem (25.3%), the additional costs of building the evacuation system as well.
availability of local expertise (5.7%) and capital for investments
(3.4%). As can be observed 3 levers (Fiscal and quota based 8.4. Develop and communicate policy intent for long term (10 years
incentives, Government support and enabling R&D ecosystem) or more)
have high impact on the growth of offshore wind energy in India.
Based on the research the following recommendations are made Published research has shown that having a focused policy for
to policy makers in India to foster the growth of offshore wind offshore wind energy farms and having a continuity of these
energy in the country. policies for longer term has helped offshore wind energy sector to
grow in countries compared to those countries that had ‘‘Traffic
8.1. Nodal agency for faster approvals signal’’ type of ‘start-wait-stop-start’ policy measures. Policy
continuity for long term gives the investors assurance of support
India needs to create a nodal agency, under MNRE, to act of the from the government for the sector; thereby reducing the risk of
‘‘single window approval’’ authority for all offshore wind energy future cash flows. Uncertainties in continuation of benefits have
projects, similar to what has been done in Denmark, which will slowed down investments in several countries like Sweden and
liaise with other government agencies, as needed, to secure all Netherlands in Europe. Even in India, when accelerated deprecia-
necessary approvals and consent for offshore wind energy farms. tion (AD) for onshore wind energy projects was withdrawn,
There are several ministries or departments in India that needs to investments have slowed down. Now project developers in India
be approached to obtain consent by the developers of offshore not only want accelerated depreciation to be re-introduced but
wind energy projects. Such cumbersome procedures will delay they also want an assurance from the government that such fiscal
the commissioning of these projects resulting in substantial cost benefits will continue for long term to make further investments
and time overruns, which could not be afforded by developers in the onshore wind energy sector.
who have to incur huge capital costs for offshore wind farms.
Expecting a project developer to obtain these approvals from 8.5. Legally enforceable payment mechanism
multiple agencies will be a daunting, show-stopper experience.
Hence, it is important that a nodal agency under MNRE should be Onshore wind energy developers in India have faced long
created to provide a single window clearance for offshore wind delays in realizing payments from the state distribution compa-
energy projects. Many of the challenges in obtaining approvals nies/electricity boards that purchase the electricity generated by
can be resolved, if MNRE identifies a large chunk of area in the these wind farms. This delay has severely affected the cash flows
seas that have all the clearances in place prior to inviting bids to and working capital of project developers. As offshore wind
installation of offshore wind energy technology park. energy projects are much more capital intensive than the onshore
wind farms, delays in releasing the payment on time will put the
8.2. Accurate data on wind speeds overall viability of the project in jeopardy. Unfortunately, the
financial health of most of the distribution companies in India is
India needs to build bankable data on wind speeds at the seas poor, which restricts their payment capacity on time. The project
to predict the exact potential of offshore wind energy. Wind developers are then left with no problem resolution mechanism
speeds are very critical to estimate the power output of the to realize the money due to them, in the event of a default or
offshore wind farms, which decides the cash flows and hence the delay by the state electricity boards or distribution companies.
viability of the project. As the power output varies directly to the Hence, suitable legal armour needs to be provided for the project
cube of the wind speeds, even a minor variation in estimating the developers to induce confidence that the money due to them will
wind speeds may results in huge deviation in the power output be disbursed on time by the SEBs. Legally enforceable payment
for the offshore wind farms. Hence, the need to predict the wind mechanism will offer the necessary problem resolution protection
speeds as accurately as possible. and a means of escalation mechanism, which can be exercised in
the event of severe delays of accounts receivables for project
8.3. Evacuation infrastructure developers, which is lacking at the moment.

Several research papers have concluded that availability of 8.6. Encourage R&D in offshore wind energy
evacuation infrastructure is one of the most important criteria for
growth of offshore wind energy in any country. Numerous India needs to encourage R&D efforts to accelerate learning,
projects in Europe are facing delays due to non-availability of bring down the costs of components, build knowledge base,
adequate evacuation infrastructure. Also, transmission infrastruc- develop skills in offshore wind farms and localize production of
ture costs are quite high for offshore wind farms, as sub-sea wind turbines. Offshore wind energy would need 20 additional
cabling requires superior engineering skills. European countries resources for every MW of capacity added. India has started well
have adopted different models for sharing the prohibitive costs to establish CWET (Centre for Wind Energy Technology, R&D arm
associated with construction of evacuation infrastructure. In of MNRE) to encourage skill development in wind energy.
Denmark, for instance, the costs associated with evacuation Similarly, R&D efforts to localize production of various compo-
infrastructure are being borne by the Government, whereas in nents of wind turbine (like gearbox like instance) that are
Netherlands the project investor bears the costs fully and in currently being imported at expensive rates, setting up of ancil-
Germany it is being borne by the Transmission System Operator. lary units to support the offshore wind industry are needed to
 S. Mani, T. Dhingr / Energy Policy 56 (2013) 672–683 679

accelerate the growth of offshore wind sector in India. Several EU European Union
countries in the world like China have reduced the overall cost of EEA European Environmental Agency
setting up of wind farms by as much as 50% due to localization. EXIM Bank Export-Import Bank
India needs to build R&D capability to achieve similar objectives. EWEA European Wind Energy Association
FDI Foreign Direct Investment
8.7. Fiscal and quota based incentives for offshore wind energy FiT Feed in tariff
GBI Generation based incentive
All the project developers surveyed for this research have GDP Gross domestic product
expressed their views that offshore wind energy in India would GHG Greenhouse gases
need a higher incentive (higher feed—in tariff vis-a -vis other GW Giga watt (¼ 1000 Mega watt)
renewable as adopted by Germany), higher renewable obligation IEA International Energy Agency
certificates (for example 2 ROCs for every 1 MW h of offshore IREDA Indian Renewable Energy Development Agency
wind energy as adopted by the UK) at least in the initial few years kW Kilo watt
to be established as another avenue for electricity generation. kw h Kilo- watt hour (1 unit of electricity)
Accelerated depreciation of 80% of capital cost in the first MNRE Ministry of New and Renewable Energy, India
year, which has been discontinued recently for onshore wind MT Million tonnes
farms, can be re-introduced. Generation based incentives (GBI) MW Megawatt ( ¼1000 kilo watt)
with a generous cap of (10% the cost of project as envisaged in REC Renewable Energy Certificates
select countries in Europe) over the life of project can be RES Renewable energy sources
considered. RPO Renewable purchase obligation
RPS Renewable purchase specification
8.8. Financial incentives SEB State Electricity Boards, India
SERC State Electricity Regulatory Commission
Offshore wind energy sector in India can be declared as a ‘priority SPSS Statistical Package for the Social Sciences (Software tool)
sector’ by the Government to help developers’ access inexpensive TGC Tradable Green Certificates
bank loans. A priority sector tag, similar to what is given to TW h Terra-watt hour (Billion units of power)
agriculture, will entail an interest rate of 2% for loans from the banks. WISE World Institute of Sustainable Energy, Pune, India
Presently, IREDA charges around 12% interest on the sum advanced WPD Wind power density
for renewable energy projects in the country. As a MW of offshore
wind farm is likely to cost Indian Rupees 15 Crores ( US $ 3 Million),
project developers will find it hard-pressed to service loans at higher Appendix B. Questionnaire
rates of interest. Hence, declaring offshore wind as a priority sector
will ease a huge amount of burden on project developers and Thanks for taking time to answer a set of questions on the
encourage them to take debt on their balance sheets. Cost of capital Wind energy (offshore) sector in India. There are no ‘right’ or
can also be reduced by levying a cess on fossil fuels and using the ‘wrong’ answers to these questions. Also, your exact identity will
sum collected to partly fund offshore wind energy projects in India. not be captured. So please feel free to respond to the best of your
Moratorium on interest payments for a period of minimum 5 years belief and conviction. The data collected will be used only for my
was another expectation from the project developers to invest in PhD research work and will not be shared with any third party. It
offshore wind sector in India. Apart from these the Government needs is likely to take about 10 minutes to complete this questionnaire.
to extend the same benefits given to onshore wind energy sector to Thanks.
offshore as well–in terms of zero import duty on equipment and You are an
excise duty waivers to kick start the growth of the sector.
Technology, market and finances are available in India. What is
needed is a policy framework. a. Wind Turbine Manufacturer
b. Policy Maker (MNRE, Planning Commission)
c. Regulatory Agency (CERC, SERC)
Appendix A. List of Abbreviations d. Financing Institution (IREDA or other banks)
e. Academic and R&D Institution with interest in Wind Energy
AD Accelerated depreciation f. Electricity board (Transmission and Distribution companies)
CEA Central Electricity Authority, India g. Project Developer
CERC Central Electricity Regulatory Commission h. EPC Contractor
CWET Centre for Wind Energy Technology i. Independent consultant/Thought leader
EPC Engineering, procurement and construction j. Others (Please specify)
680 S. Mani, T. Dhingr / Energy Policy 56 (2013) 672–683

Section I

1. India has good potential to grow the offshore wind energy sector in the country
(  ) Strongly Disagree (  ) Disagree (  ) Neutral (  ) Agree (  ) Strongly Agree
2. For offshore wind energy sector to take-off, comprehensive offshore wind energy policies have to be initiated by the
Government of India
(  ) Strongly Disagree (  ) Disagree (  ) Neutral (  ) Agree (  ) Strongly Agree
3. Currently, technological capability is available to harness the Offshore wind energy in India
(  ) Strongly Disagree (  ) Disagree (  ) Neutral (  ) Agree (  ) Strongly Agree
4. Capital and funds are available to develop the offshore wind energy sector in India.
(  ) Strongly Disagree (  ) Disagree (  ) Neutral (  ) Agree (  ) Strongly Agree
5. India has to eventually tap offshore wind energy to satisfy the ever growing demand for electricity in the country.
(  ) Strongly Disagree (  ) Disagree (  ) Neutral (  ) Agree (  ) Strongly Agree

Section II

For the questions below, please choose (on the 7 point scale) your response based on whether the variable proposed is an ‘absolute
must to have’ for the growth of offshore wind energy sector in India. Please ‘tick’ or ‘circle’ your response on the choice for e.g., Agree.

6. Feed-in tariffs is ‘an absolute must’ to grow the Offshore wind energy sector in India
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
7. Accelerated depreciation has to be offered to grow the Indian offshore wind sector
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
8. Generation based incentives (GBI) must be offered to grow the offshore wind energy sector in India
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
9. Legally binding Renewable purchase obligation (RPO/REC) is an essential prerequisite to see the growth of offshore wind
energy sector in India
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree

Section III

10. Faster approvals (like Single window clearance mechanisms) is an ‘absolute must’ to grow the offshore wind energy sector
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
11. Sustainability of policy environment, on offshore wind, for a longer term (say 10 years or more) is very important to
accelerate the growth of offshore wind energy sector.
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
12. Construction of transmission infrastructure to evacuate power from offshore wind farms in the seas, is an important
prerequisite to grow the offshore wind energy sector.
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
13. Extending financial incentives (like subsidies, moratorium on interest payment, zero duty on imports, excise duty waiver)
for offshore wind projects is a must.
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
14. Tariff determination on wind speeds, and not based on zones, is an essential pre-requisite for the growth of offshore wind
energy sector
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree

Section IV

15. Expertise and availability of EPC contractors for commissioning of the offshore windarms will be a determining factor in the
growth of offshore wind energy sector in India.
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
16. Manufacture and availability of offshore wind energy components (like gearbox), locally, will be very important to grow the
offshore wind energy sector in India.
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
17. Growth of ancillary units is key to grow the offshore wind energy sector in India.
 S. Mani, T. Dhingr / Energy Policy 56 (2013) 672–683 681

Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
18. Superior program execution skills and capabilities available for execution of projects is critical to grow the offshore wind
energy sector in India.
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree

Section V

19. Research institutions to build accurate data on offshore wind potential sites and wind speeds (Wind Resource map and
Bathymetric data) is critical to grow the offshore wind energy sector in India.
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
20. Institutions focussing on Skills development and training of the human capital, needed to work on offshore wind farms, will
be needed to grow the offshore wind sector.
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
21. R&D investments to localize production of expensive equipments, to bring the overall costs down, will be crucial to grow
the offshore wind energy sector in India.
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree

Section VI

22. Availability of capital at attractive rates of interest, similar to what is extended to priority sector projects, is an absolute
must ‘to grow the offshore wind energy sector in India
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
23. Moratorium on interest payments for the first 5 years of project go-live, is needed to grow the offshore wind energy sector
in India.
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
24. Creation of an offshore wind energy fund, from cess levied on carbon emissions or a Government backed guarantee to
reduce the cost of capital, will be needed to grow the offshore wind sector.
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
25. Access to funds (from financial institutions) is not a problem to set up offshore wind energy farms in India.
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
26. Declaring offshore wind energy sector as a‘‘priority sector’’ for lending will help in the growth of offshore wind energy in
India
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree

Section VII

27. Offshore wind energy sector can still grow in India without dedicated policies for the sector.
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
28. It’s still premature to talk about offshore wind energy in India. Time has not come as yet to tap the offshore wind power in
India.
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
29. Offshore Wind energy policies adopted successfully by select European countries (Germany, Denmark and the UK) can be
used as a reference by India for bringing out its own offshore wind policy.
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree
30. I/my company will not consider investments in offshore wind energy sector in India, until dedicated offshore wind energy
policies are put in place in India.
Strongly Disagree 9 Disagree 9 Somewhat Disagree 9 Neutral 9 Somewhat Agree 9 Agree 9 Strongly Agree

Section VIII

Please complete the following sentences

682 S. Mani, T. Dhingr / Energy Policy 56 (2013) 672–683

Offshore Wind Energy sector in India

To harness the Offshore Wind Energy India needs to___
Large companies will be interested to invest in offshore wind energy in India if ___
Please rank these variables in order of priority (e.g., Rank 1 means highest priority) that will influence the growth of the offshore wind
energy sector.

Sno Variable Rank

1 Feed in tariffs (FiT) for offshore wind energy farms.

2 Accelerated depreciation for offshore wind energy projects.
3 Generation based Incentives (GBI) for offshore wind farms.
4 Legally enforceable RPO/REC to buy power from offshore wind farms.
5 Faster approvals/single window clearance for offshore wind projects.
6 Continuity of offshore wind policies for long term (more than 10 years).
7 Adequate evacuation infrastructure to transmit power from high seas.
8 Tariff determination on wind speeds and not on zones.
9 Financial incentives like zero import duty, excise duty waiver for offshore.
10 Availability of expert EPC contractors to deploy offshore wind farms.
11 Availability of local manufacturing expertise for offshore wind turbine.
12 Growth of ancillary units (e.g., gear box) for offshore wind farms.
13 Superior program execution skills of the developer to develop wind farms.
14 Accurate data on offshore wind potential sites and offshore wind speeds.
15 Skills development and training of human resources on offshore wind.
16 Active research institutions working on offshore wind energy.
17 R&D facilities to localize production of expensive equipments.
18 ‘Priority sector’ tag to offshore wind energy sector.
19 Availability of capital at attractive rates of interest.
20 Creation of offshore wind energy fund to reduce cost of capital.
21 Moratorium on interest payments for the first 5 years of project go-live.

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