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If 2020 had any saving grace, it came perhaps in the form of a bountiful monsoon. Rainfall in the June-to-September southeast monsoon period—at 109% of the long-period average—was above the 50-year mean for the second year in a row in a country where seasonal rains water half the cropland.

However, no such silver lining lay in store for the wind energy sector. Typically, the monsoon brings along with it wind speeds that range between 23 kilometres and 29 kilometres per hour, fuelling the turbines that harness the whimsical force of nature in order to generate electricity. Last monsoon, the average wind speed was 20-27kmph, the slowest on record. Around two-thirds of wind energy in India is generated during the four months ending September.

Naturally, the average capacity utilization factor (CUF) of wind turbines, a measure of efficiency that indicates the extent to which installed capacity is deployed, declined. At the end of the financial year in March 2021, CUF was 17% compared with 20% in the previous two years.

Wind speeds were below normal across most areas, particularly in July and September, resulting in widespread deficits in CUF across much of India during the monsoon months, according to consultant UL.

“Wind speed was one of the lowest last year in a 100 years," said Praveer Sinha, chief executive officer and managing director of Tata Power Ltd, quickly adding: “These are aberrations, and one has to look at weather patterns on a longer term. It can’t be predicted based on short-term occurrences."

“Climate change is happening, and wind patterns are changing. These are cyclical changes that are happening globally and in India also—be it wind speeds or solar irradiance. It can’t be a standard. Last year, the wind speed was the lowest. However, it averages out over a period of time," Sinha added.

That is at least the expectation. What is at stake is India’s renewable energy transition and its global climate obligations. Under the Paris agreement on climate change adopted in 2015 and signed the following year, India pledged that by 2030, 40% of its installed power production capacity would come from solar, wind, biomass and hydropower. The consequent reduction in carbon emissions would be up to 35%.

As part of the plan, the central government set a target of building 175 gigawatts (GW) of renewable energy capacity by 2022, including 60GW of wind power. At the end of March 2021, the country had in place capacity to produce 38.78GW of wind power. Capacity addition had already slowed due to the pandemic and procedural red tape, with the monsoon winds throwing down another challenge.

For the slow wind speeds during the last monsoon, experts are blaming climate change catalysed by global warming and erratic rainfall patterns. It has a tinge of irony because alternative forms of energy such as wind power were supposed to lower global warming, caused by the burning of fossil fuels.

“Wind power potential in India is heavily influenced by the Indian summer monsoon—the better the monsoon, higher the wind potential. Driven by variability in the monsoon, the wind energy potential in India has witnessed a decline over the last few years, with 2020 being the lowest so far," said Srivatsan Iyer, CEO of Hero Future Energies, an alternative energy power producer and an arm of the Hero Group.

Faltering pace
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Faltering pace

Climate volatility

Our in-house research as well as external sources suggest that based on long-term data, the wind potential has declined by 10-12%, with the decline most prominent in the northern and western parts of the country," Iyer said in an emailed response to queries from Mint.

“If climate change continues, and one of its effects is the warming of the Indian Ocean, one might expect a further decline in wind potential, but with the volatility in global climate patterns, we could also see a return of the wind potential to earlier higher levels, as part of ‘reverting to the mean’," Iyer added.

Investors in green energy projects haven’t missed the trend, which is visible across Gujarat, Maharashtra, Madhya Pradesh, Chhattisgarh, and Goa, apart from the southern states. Wind turbine makers like Denmark-based Vestas Wind Systems A/S have even introduced a new turbine targeted at low- and ultra-low wind speed conditions.

“Climate change is a factor for low wind speed. Last year, we didn’t observe intense heat waves during May and June over central India, which drives up wind speed. Even this year, as the pre-monsoon activities have started, we are witnessing the same phenomenon as last year, with the temperature subsiding over Telangana, Madhya Pradesh, Chhattisgarh and interior parts of Maharashtra," said Mahesh Palawat, chief meteorologist at weather forecasting company Skymet.

Skymet has projected a normal June-to-September monsoon this year too, with the rainfall likely to be 103% of the 50-year average.

“While there is indication that the temperature may rise again, which in turn will result in a higher wind speed, one can’t be sure about that," Palawat added.

Even a slight variation in wind speeds has a significant impact on the wind energy sector that has transitioned from a feed-in tariff regime—in which fixed prices are paid to renewable power producers for each unit of electricity produced and fed into the grid—to tariff-based competitive auctions. Wind power tariffs have tumbled to a record 2.43 per kilowatt hour.

“Since moving from a feed-in tariff regime to a tariff-based competitive system, risk profile in wind sector investment has significantly changed. To remain competitive, use of 2 MW plus turbines (to maximise output) and aggressive assumption on capacity utilisation factor is leading to huge downside exposure in case of a bad wind season," said Debasish Mishra, a partner at Deloitte Touche Tohmatsu India LLP.

Clear and present danger

To be sure, some investors caution against reading too much into one monsoon season, which witnessed a deceleration in wind speeds.

“Wind speeds are influenced by a complex interplay of multiple factors. Hence, it is difficult to establish a structural change in wind patterns. However, some studies conducted in the recent past seem to suggest that India has witnessed a slight decrease in long-term average wind speed during the monsoon," said Peeyush Mohit, chief operating officer at O2 Power Pvt. Ltd, backed by Stockholm-based alternative asset manager EQT Partners and Singapore’s Temasek Holdings.

Yet, given that the financial and technical modelling of wind projects depends largely on past weather data, changing meteorological variations are a cause of concern that can’t be discounted.

“Last year was definitely unique given that even as we had a good monsoon, the wind speed dipped. While lenders operate assuming above 90% probability for wind speed on the data available, the private equity companies assume 75% probability for wind speed while making investments. It was for the first time that we saw good monsoon but low wind speed," said the chief executive of a Hyderabad-based company with a large wind project portfolio. The CEO requested anonymity.

India’s clean energy developers are already being squeezed by curtailed power procurement, delayed payments and tariff shopping by distribution companies (Discoms), and difficulties in procuring land and connectivity. Wind-speed deceleration, if it emerges as a trend, may force upward prices of power at project auctions.

“If we continue to see lower wind patterns, the bidding prices for PPAs (power purchase agreements) may change," warned Tejpreet S. Chopra, chief executive officer of BLP, a renewable energy generation and technology company.

At play is a projected investment requirement of around $80 billion by 2022 and $300 billion till 2030 across India’s clean energy space. The space has attracted investment of 4.7 trillion over the past six years, and it is estimated to generate a 1 trillion investment opportunity yearly until 2030.

“Undoubtedly, wind energy is a key constituent of achieving our low carbon goals," Somesh Kumar, power and utilities leader at consultant EY India. “Though we had set up clear targets, lately we have witnessed both infrastructure and regulatory challenges, as also the issue of reliable wind availability even in monsoon months. The latter is seemingly a recent trend and needs to be watched carefully. It’s fine as an aberration but may become alarming if the trend was to continue year after year and also in other months," he added.

Queries emailed to a spokesperson for the ministry of new and renewable energy remained unanswered as of press time.

Seeking a second wind

Meanwhile, India is also exploring plans to harness the enormous wind power potential along its 7,600km coastline. The country already has the world’s fourth largest wind power generation capacity with a mature industry ecosystem, and an estimated wind power potential of 302GW at 100 metres above ground level. That potential has already drawn the world’s biggest sovereign wealth funds and private equity investors to bet on India.

“If last year’s pattern keeps repeating, it is a cause of concern. The general view is that last year was a one-off ," said Actis LLP partner Sanjiv Aggarwal, responsible for its Asia energy business. Actis has made significant bets in the renewables space.

Despite all the uncertainty, the Indian green energy deal space is still abuzz. The latest case in point being ReNew Power’s proposed merger with Nasdaq-listed special purpose vehicle RMG Acquisition Corp at an enterprise value of around $8 billion. Greenko recently raised $940 million for refinancing through its latest dollar bond sale, and Actis plans to invest $850 million in India to build two green energy platforms, including one that will focus on setting up grid-connected solar and wind power parks.

“Global interest in the energy transition is strong. Investment in wind energy is made with 25-year wind projections, which are cyclical. Therefore, even though we saw a poor wind season last year, I believe investments in wind will continue to be strong," said Chopra of BLP.

Malcolm Wrigley, chief operating officer of CLP India, the local unit of CLP Group, concurs. “We at CLP India remain steadfast in our focus to develop wind projects which will consider the broader long-term wind forecasting and not just the low-wind experience of a single outlier year," Wrigley said in an email response to queries from Mint.

But plans to de-risk are already afoot, just to be on the safe side in case the winds continue to be fickle. Vikram Kailas, co-founder and managing director of Mytrah Energy that has a wind portfolio of 1.7GW, said: “One has to follow a portfolio approach to wind assets. Wind will vary from site to site, and year to year and the only way to mitigate this risk is to own a portfolio that is across the country."

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