Last month, the Ministry of External Affairs notified the Offshore Wind Energy Lease Rules, 2023 ("Rules") thrusting India forward in its pursuit of developing offshore wind projects. As a result, India's vast coastlines, once simply a scenic escape, will now undergo transformation to facilitate the development of offshore wind energy projects and thereby contributing significantly to our clean energy efforts.
The momentum for offshore wind energy projects had earlier gained push with the release of the National Offshore Wind Policy on October 6, 2015 ("Offshore Wind Policy") and the revised Strategy for Establishment of Offshore Wind Energy Projects on September 23, 2023 ("Strategy") by the Ministry of New and Renewable Energy ("MNRE"), amongst many other initiatives by the nodal bodies. Further, in September 2023, MNRE also issued a public notice to hold the first-ever tender to allocate seabed sites along the coast of Tamil Nadu for developing offshore wind projects.
We have provided below an overview of the provisions outlined in the Rules.
What do the Rules say?
The Rules inter alia govern the process, conditions and manner of granting of lease of designated areas within India's Exclusive Economic Zone (up to 200 nautical miles offshore) (depending upon wind resource assessment followed by marine spatial planning), to select person or entity, for development of an offshore wind energy and associated wind transmission projects. MNRE will oversee these regulations, with the National Institute of Wind Energy playing a key role in the regulatory process as an autonomous institution under MNRE's administrative control.
The key provisions under the Rules, for developers keen on undertaking lease for the establishment of offshore wind energy projects, are as follows:
- Lessee Selection Process: The Offshore Wind Policy will serve as the guiding framework for the selection of the lessee. Clearances from the Ministry of Defence, Ministry of Home Affairs, Ministry of External Affairs, Ministry of Environment, Forest and Climate Change, Department of Space and Ministry of Ports, Shipping and Waterways are mandated prior to the grant of lease.
- Area and Period: A lease would cover 25 to 500 square kilometres of area depending on the project's size and would be valid for three years (with an additional two years of extended period) for resource measurement and related study or survey activities. For the construction and operation of the project, the lease will be extended for thirty-five years, with the potential for extension depending on the functional viability and safety of the project. Any assignment or transfer would require prior written permission from MNRE.
- Rights: Subject to lease conditions, the lessee will have the exclusive right to carry out the activities of the project and have the right to use waterways for such work. Fishing for livelihood and other compatible activities may be permitted if they don't interfere with the wind farm and are in the public interest. Extraction of minerals, materials and other resources from the seabed is not allowed.
- India presence: Lessee is required to have an Indian local office for conducting all operations. Further, a nodal officer will need to be designated, who will be responsible for complying with all the terms and conditions of the lease.
- Security Deposit and lease fee: Before the grant of the lease, a refundable security deposit will need to be deposited within three months from the letter of demand. Additionally, the Lessee will have to provide the following: -- a refundable security deposit of INR 1,00,000 per megawatt for the installation and commissioning of an offshore wind energy project; -- a refundable security deposit of INR 50,000 per megawatt for a separate offshore wind transmission project;
The deposit will be returned at the end of the lease term post decommissioning, but in case of delay or cancellation of the lease due to breach by the lessee, it will be forfeited.
- Cancellation of lease: Violation of terms and conditions of the lease, failure to use or misuse of the designated leased areas, irreparable damage to flora and fauna and failure to produce requisite documents will lead to the cancellation of the lease.
- Decommissioning: The lessee is required to decommission and clear all installations from the seabed within a period of two years of termination of the lease by either reusing, recycling or responsibly disposing of all the materials. Decommissioning has been defined as "decommissioning of the wind turbines, machinery and used cables as well as uprooting and demolition of the foundation structures along with removal of the debris and returning the seabed to its original configuration in accordance with applicable law/international practices." MNRE will also issue separate decommissioning guidelines.
- Dispute resolution: The Rules attempt for an amicable resolution firstly by a committee chaired by the Secretary, MNRE, failing which it would be referred to arbitration under the Arbitration and Conciliation Act, 1996.
Additionally, lessees are required to mark lease boundaries with visible notices and maintain them, subject to MNRE's and stakeholder's satisfaction. MNRE may also direct norms for turbine spacing, sub-station spacing, and minimum turbine distances from lease boundaries.
Parting thoughts
While it is commendable that India has embarked on the path of developing offshore projects, however, the significant challenges that lie ahead cannot be undermined and will have to be resolved. Concerns about project viability, tariff, lack of supply chain infrastructure, achieving economies of scale, safety and national security concerns remain major hurdles.
The need of the hour is to have continued public-private partnerships coupled with technical know-how, financial support and ease of doing business, which will potentially unleash our offshore capabilities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
