The Indian wind power industry, having grown five fold in the last four years, may lose the wind behind its sails unless the government steps in with more creative forms of support, a report by consultant Ernst & Young said. (‘Renewable energy in India – the evolving dynamics’,)
The report pointed out that the existing installations in India suffer from poor utilisation due to the loading of incentives towards the setting up of wind mills, rather than their actual usage.
According to the report, the average plant load factors (PLFs) of Indian wind farms stand at around 15%, which are low as compared with the global average of 30%. There is hence an urgent need for a significant modification of the policy regime to ensure that the wind power sector grows in a healthy manner.
Under the current policy, any company investing in wind energy installations can add 80% of its investment to the company’s depreciation account, thus bringing down overall taxable profits. This policy has led to companies blindly investing in wind farms without studying the power generation ability of the same, the report authored by E&Y partner Kuljit Singh and Anvesha Thakker, said. Since a company has to have large revenues and profits to take advantage of the tax concessions offered by the accelerated depreciation scheme, many independent power producers have shied away from the sector in India, they said.
According to the report’s recommendations, to provide an impetus to pure-play wind power companies, the government should give an option to collect subsidies on the power generated and not the money invested.
As of now, a generation related subsidy of 50 paise per unit is available in place of the investment-related incentive, but the scheme is available to a maximum of 49 MW out of the nearly 1500-2,000 MW of wind energy added every year.
Wind energy major Suzlon agreed that generation-based subsidies will have to be increased if it is to compete with fossil fuels such as coal and oil, which produce power at around Rs 2-3 per unit. According to the company, their cost of production is around Rs 4 per unit, whereas the maximum price we can get in the market is Rs 3.5, but it also drops to Rs 2.5 in many states.
The company pointed out that for its (Suzlon’s) clients, the depreciation incentive is a factor, but most have set up wind farms to meet their own captive power requirements. Suzlon also feels that for pure-play wind-energy investments, if the power price offered can give a return of 16-20%, there will be no dearth of investors.
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