Anyone who’s experienced — or even read about — the widespread blackouts in cities across India, realizes how much power generation India has to add every year just to maintain what its growing, and rapidly developing, population and domestic industries need. But on the brighter side of all that electricity growth is that wind power is making up an increasing amount of the new power generation added in the country because wind power is now competitive with, and in some cases even cheaper than, coal in some places in India.
According to HSBC research, the bids for new coal projects in the Indian state Uttar Pradesh at the end of 2012 were in the range of 8 cents to 13 cents per kilowatt hour (4.5 to 7 rupees per kilowatt hour). The feed-in-tariff for wind in India (the price that’s fixed by regulation) is 6 cents to 11 cents per kilowatt hour (3.51 rupees to 5.92 rupees per kilowatt hour). That’s good news for clean power, though low feed-in-tariffs can cause other market problems in the long run.
1). India’s domestic coal industry’s got problems: India has the fifth largest domestic supply of coal in the world, but India’s own coal sector is rife with corruption, weak policies, and poor management. Essentially 80 percent of domestic coal production is managed by the government-controlled Coal India, which is hampered by problems. Since the domestic coal market has become so constrained, international imports of coal have been increasing significantly and coal imports are considerably more expensive than coal from Indian domestic sources. India still relies on coal for the bulk of its electricity, but coal is becoming more expensive.
2). Coal power uses a lot of water, too: India is also a water-constrained country, and coal power generation uses a lot of water — the vast majority of water that goes for industrial sources in India goes to thermal power generation. Some coal plants have been closed down due temporarily due to water shortages, and some of the big blackouts in India have been found to come from water shortages at coal plants. Water usage is also expected to grow in India, so power generation technologies that use less water could have an advantage.
3). Aggressive feed-in tariffs: Clearly India’s state-led feed-in tariffs for wind projects are giving considerable help to wind power generation projects. The rates for feed-in-tariffs are reviewed on a five year basis, and are supposed to be reviewed in some key states next year. The idea is to decrease the tariff rate slowly as wind power becomes more competitive on its own.
4). Low interest rates for wind projects: The Indian government has committed to help provide low interest debt financing for wind installations for the next five years. Low interest financing can make it easier for project developers to raise money to cover the cost of the construction of the project.
5). Weak natural gas resources: While the U.S. is experiencing a natural gas boom from cheap shale resources, India actually has a very small amount of natural gas domestic resources.
6). Nuclear power has faced obstacles: Public pressure post-Fukushima, and the Nuclear Liability Act, have meant construction on some nuclear plants has been on hold in states in India.
7). India needs a lot of power, from anywhere: With problems with domestic coal, a lack of natural gas reserves, and a push back on nuclear power, wind power offers one of the best options for India to add electricity. There’s a peak deficit of 12 GW of electricity right now in the country, according to HSBC. India wants to add 100 GW of power generation over the next five years, and that will be made up by mostly coal and clean power.
8). Wind power as a tech is getting cheaper: The creation of large publicly-traded wind turbine makers, and project developers, have led to wind power projects becoming more streamlined and cheaper and the wind industry is now at an economy of scale that has reduced costs. Wind power technology is one of the cheapest clean power options out there (not including hydro). Large wind tech companies in India include Suzlon, Wind World India, Regen, and Gamesa. GE, one of the largest wind turbine makers in the world, has also been making a significant play for India’s wind industry.
9). Top down wind targets: The Indian government has been quick to establish installation targets for both solar and wind, though these tend to be more aspirational than actual targets meant to be hit on time. The Indian government wants to have 15 GW of wind power installed in India over its next five-year plan from the Spring of 2013 to the Spring of 2017. The government wants 20 percent of its electricity to come from clean power by 2020. The country says it has a potential for 50 GW of wind power, though the wind industry thinks the country’s capacity is bigger than that.
10). Climate change plans: India, like many countries across the world, already seems to be experiencing an increase in extreme weather, particularly in some of the countries’ poorer regions. While not everyone is impressed by India’s climate change commitments, clean power is playing a factor in those plans.
Updated at 2:10 BST, to reflect that the idea of the Indian clean power feed in tariffs is to decrease the tariff rate slowly as wind power becomes more competitive on its own.