Windia: The developing nation that’s leading the world in the wind sector
Conaill Soraghan explores how a country beset by power cuts has emerged as a world-leader in the wind energy sector.
With their population set to overtake China’s by 2020 according to the population reference bureau, India will become the world’s most populous country. Powering a nation of this scale is an almighty task and in order to do so the country has emerged as world-leader in the wind energy sector. How has India done it and what lessons can be learned from the meteoric rise?
India ranks fifth in the world in terms of total installed wind energy capacity and for the past three years has had the highest growth of these five countries. Only ten years ago there were very few wind turbines in India but since then a period of incredible expansion has led to over 300 times as much electricity being generated from wind turbines as illustrated in the graph. While the debate in Europe and the Americas is about how to meet national demand, India still struggles to even meet demand. The priority for the Indian government is captured by their National Electricity Policy target of “Electricity for all by 2012” which aims to make up the 12.7% gap between electricity demanded and electricity generated at peak times 1. This makes their rise in the wind energy sector all the more impressive and reveals how the Indian wind sector is growing.
The key driver of this persistent growth has been the government’s robust public policy regime. The Ministry for New and Renewable Energy (MNRE) was created to develop and deploy new and renewable energy sources. The main piece of policy they have developed supporting wind power is the Electricity Act 2003, which provides a framework for investment in renewable energy technologies. The act aims to revolutionise the entire power sector in India by addressing generation, distribution, transmission and trading in power. In accordance with the act, 10% of the power supplied to consumer has to be generated using renewable sources of energy. Furthermore generation has been de-licensed; this allows any company to enter the generation market without permission from some central authority. The result has been increased competition and foreign investment.
A tax-driven policy was the key financial incentive for wind power development which rewards installing wind turbines. However, as the great wind rush of California taught us, incentives based on installed capacity are fundamentally flawed (see box). The lack of emphasis on operation can lead to installation of inefficient machines. In December 2009, the MNRE approved a generation based incentives (GBI) scheme that pays suppliers for every unit of energy that is generated from a renewable source for a ten year period. This is a much more effective incentive that encourages the developer to produce output once the turbines are installed. The scheme pays 0.5 Indian rupees for every kilowatt hour of energy produced from renewable sources. This means that a state of the art wind turbine in India rated at 2 megawatts would generate roughly £50,000 annually from the subsidy alone.
The GBI is similar to the style of policy created in other countries which lead the world in wind power such as Denmark, Germany and Spain. One way that India has differentiated itself is by exploiting the fact that they have the potential to become a global manufacturing hub. Their policy encourages local wind turbine manufacturing by manipulating customs and excise duties in favour of importing wind turbine components over importing complete wind turbines 2. This will help India, but goes against the ideas of a free-global market. Critics suggest it will hamper the world economy, and is thus in the long run, a poor strategy for the Indian market.
Currently Indian wind turbine manufacturers are producing turbines that are smaller on average than those produced by their foreign competitors. The largest wind turbine in the Indian market today is the Suzlon S88 with a power output of 2.1 megawatts whereas the German Enercon E-112 is capable of generating almost three times as much power with a rating of 6 megawatts. Larger turbines are not only more efficient, but also reduce the overall cost of energy for a wind farm because given a target power to be generated by the farm, there are less structures to be built and maintained. Therefore, the trend seen across the world is for the average turbine size to steadily increase as the wind sector matures. The main reason for the Indian technology lag is the poor roads in India imposing limits on the size of structures that can be transported around the country.
Despite the experience that European and American companies have gained through building wind turbines since the 70s, the Indian manufacturer Suzlon has become the sixth largest manufacturer in the world in the 15 years that they have been doing business. They have developed a world-leading global innovation network. Among many other overseas subsidiaries, they own Hansen based in Germany, the second largest gearbox manufacturer in the world. They have research centres across Europe and manufacturing facilities in China and the USA to support deployment in high growth regions. In spite of the aggressive global expansion, Suzlon still manufactures most of its wind turbines in India, and India makes up most of its annual sales[lref id=2].
In the crowded west, nations are already building large wind farms offshore, but in India, the offshore wind sector is in its infancy. There is resource mapping currently underway but the complete lack of policy or incentive schemes means that there is no encouragement for moving offshore. There is no immediate need for offshore wind farms as competition for space is less fierce in India as elsewhere. However, lack of national demand will lead to Indian companies focussing on onshore turbines. If they do this, they will struggle to compete in a growing global market that is likely to become dominated by offshore technology.
Danish wind power consultants BTM forecast in 2010 that demand in India for wind capacity would grow by between 2.5 and 4 GW annually for the next few years[lref id=3] – that means every year building more than the complete installed wind capacity of Scotland. There may be no sign that this strong growth in India will settle soon, however, many barriers still exist. According to a 2010 report on the state of the Indian wind industry, the two most pressing issues are the need for grid infrastructure improvement and lack of long term policy to increase investor confidence 3.
If India, one of the G20 developing nations, can make renewable energy a national priority while they struggle to even keep the lights on in major cities, it will be clear that the global power industry is evolving towards a cleaner and more sustainable future. The case study of Suzlon illustrates that conditions in the Indian wind market are well suited for private interests. In terms of the public interests, government policy has helped Suzlon go global whilst building up a strong manufacturing base within India. This provides employment and means that investments in clean energy not only help meet renewable targets, but keep the investments within the Indian economy.