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Business News/ Industry / Energy/  Govt may lease out sea floor for offshore wind projects

Govt may lease out sea floor for offshore wind projects

Another plan is to call for bids for wind farms in Gujarat under viability gap funding route

The govt notified a national offshore wind energy policy in 2015 and made efforts to establish the sector in the country, but the move has not taken off. Bloomberg Premium
The govt notified a national offshore wind energy policy in 2015 and made efforts to establish the sector in the country, but the move has not taken off. Bloomberg 

NEW DELHI : India is considering leasing out its ocean floor straddling Tamil Nadu to offshore wind farms, with the base amount set at 1 lakh per sq km, to help it hit net zero emissions by 2070.

Despite having a 7,600-km coastline, India does not have any offshore energy projects, prompting a major government focus on the segment to move away from thermal power.

To be sure, the government notified a national offshore wind energy policy back in 2015 and has made efforts to establish the sector in the country. But the move has not taken off as anticipated. The plan involves announcing bids for 2GW each of wind power projects in Gujarat and Tamil Nadu, Union minister for new and renewable energy Raj Kumar Singh said.

The plan has two components: in Tamil Nadu, the ocean floor along its 1,076-km coastline may be bid out, while in Gujarat (1,600 km coast), the wind farm projects will be floated on the viability gap funding (VGF) route, where the government gives capital support for projects that are financially unviable.

“There are two bids we have decided. One bid is in offshore Gujarat. We have carried out all surveys, and we have got all the clearances. That bid will be a plain and simple bid on VGF. We will fix a tariff at, let’s say 4 per unit... Now you bid on the VGF. There are two states which are willing to take it at 4, Gujarat and Tamil Nadu," he told Mint.

“First 2,000 MW will be in Gujarat based on this (VGF). The next 2,000 MW will be in Tamil Nadu, which will be different because we have not carried out wind surveys there. So, we have to carry out wind surveys. There, what we are saying is that we will bid out the ocean floor on a five-year lease."

Under the first model of bidding, the government has allowed two years for companies to carry out a wind survey in order to estimate the potential energy production of the proposed wind farm, following which bids will be sought based on VGF.

Companies which would be selected under the second mode of bidding, where ocean floors would be leased out, would have the option of selling power directly to commercial and industrial customers, based on which the government will give the power producer carbon credits upon setting up the carbon market. “There, you have the option of not participating in any bid but setting up capacity yourself and selling it to the industry by yourself, that is market-based. We shall give you carbon credits or REC (renewable energy certificates). We shall give you RECs, which will be converted to carbon credit once this carbon market comes."

The much-anticipated carbon market is expected to be set up soon after the Energy Conservation (Amendment) Bill 2022, which proposes to set up the market, is passed by the Rajya Sabha. It has been tabled in the upper house after being cleared by the Lok Sabha in the monsoon session.

Singh said power would be transmitted free to the national grid under renewable power projects, and the developer can then sell it to any industry or enterprise in the country.

The Centre is of the view that tariffs on offshore wind power in cases where the ocean floor is bid out would be cheaper than the current tariffs paid by the industry.

“That is drawing a lot of interest because that power will cost, let’s say, 6-6.50 per unit. But at 6.50 per unit, the CUF (capacity utilization factor) will be almost 50%. That is going to be very lucrative for an industry which currently has to pay 9-11 per unit because of cross-subsidy. Now, if they get this offshore wind for 6.50, that will bring their cost (of power) down," said Singh, who is also the power minister.

The ministry of new and renewable energy has set a target of 30 GW of offshore wind installations by 2030.

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Rituraj Baruah
Rituraj Baruah is a senior correspondent at Mint, reporting on housing, urban affairs, small businesses and energy. He has reported on diverse sectors over the last six years including, commodities and stocks market, insolvency and real estate. He has previous stints at Cogencis Information Services, Indo-Asian News Service (IANS) and Inc42.
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Updated: 05 Oct 2022, 12:11 AM IST
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