India: National Offshore Wind Energy Policy, 2015

Last Updated: 6 November 2015
Article by DSK Legal

Overview of the National Offshore Wind Energy Policy, 2015 as approved by the Union Cabinet to facilitate offshore wind farming in the territorial waters of India

Wind energy is widely recognized as being one of the most efficient and cost-effective sources of energy among renewable energy technologies. Development of renewable energy sources is one of the key goals of the Government of India (GOI) under the National Action Plan for Climate Change of 2008. Offshore wind energy is yet to be deployed on a sizeable scale in large parts of the world and has largely been unutilized other than in some of the developed countries such as the United Kingdom and Germany.

In order to make offshore wind energy at par with conventional sources of energy in India, policy regimes of the GOI supporting and incentivizing its development are essential. On September 9, 2015 the Union Cabinet gave its approval for the National Offshore Wind Energy Policy, 2015 (Policy) with the intent to support and incentivise the development of offshore wind energy in India. The Policy was released in the public domain by the Ministry of New and Renewable Energy (MNRE) on October 1, 2015 and shall come into force from the date of notification in the Official Gazette.

Preliminary potential assessments along the western coastline of India have been encouraging and estimates suggest that offshore wind farms of capacity 1 GW along the coastline of Tamil Nadu and Gujarat are feasible.

The Policy lays down the guidelines for setting up offshore wind farms within territorial waters which extend up to 12 nautical miles from the coastal baselines of India.

A major change that has been specifically introduced in the Policy departing from the draft of the Policy which was released by the GOI in 2013, is the specific applicability of the Policy also to the Exclusive Economic Zone (EEZ) which extends to 200 nautical miles from the coastal baselines. Under the United Nations Convention on the Law of the Sea, 1982, a multilateral treaty to which India is a signatory, it has the right to establish structures to produce energy from water, currents and wind.

Key aspects of the Policy are as follows:

1. International Competitive Bidding: National Institute for Wind Energy (NIWE) will allocate the blocks to the project developers through an open international competitive bidding process. It has been clarified in the Policy that on grounds of national security, NIWE shall reserve the right to refuse participation of entities without providing any specific details. The selection of project developers through competitive bidding process requires a basis of selection generally ranging from the tariff, total cost of project, sharing of production benefits or revenue, rate of lease on land etc.

2. Facilitator of Clearances and Intermediate Off-taker: A single window clearance agency or nodal agency, the NIWE has been given the responsibility of facilitation of necessary clearances for project developers and intermediate offtake of energy from the offshore wind energy project in order to thereafter sell it to various state utilities and distribution licensees so as to integrate it with the national grid.

The notification of blocks by the NIWE is dependent on clearances from the Ministries of Defence, Home, External Affairs, Environment & Forests and the Department of Space. Project developers would thereafter have to obtain clearances from various Ministries of both the Central and State Governments, which will be facilitated by the NIWE.

The Policy demarcates requirements of various approvals and clearances for the clarity of project developers into two stages. A clear time schedule for such clearances will be issued by MNRE.

The broad parameters to for the power purchase agreement to be entered into between NIWE and the project developer would be the time frame for commissioning of the project, period of the agreement, commitment to minimum works program in terms of project capacity, monitoring and inspection by MNRE and/or NIWE and the specific decommissioning program.

The allocation and lease will stand relinquished if the project developer fails to commence commercial operations by a certain time frame.

3. Costs: The Policy identifies various challenges to successful large-scale deployment of offshore wind power such as proper resource characterization, subsea cabling, turbine foundation, installation of turbines, interconnection with utilities and coastal security.

Such challenges and issues would elevate the costs of the project developers in comparison with other renewable energy and conventional energy generation projects thereby impacting end costs of the consumer, thereby requiring larger incentives and subsidies from the GOI in order to become competitive.

Further, appropriate changes to the renewable energy certificate mechanism and regulations governing renewable energy purchase obligations are required in order to support and incentivize the development of offshore wind energy in India.

The draft of the Policy as released in 2013 had specifically laid out certain fiscal incentives such as tax holidays and exemption from customs duty, excise duty and service taxes.

The Policy however provides a blanket clause, declaring that all fiscal and financial incentives available to onshore wind energy projects which also include other exemptions and generation based incentives would be available to offshore wind energy projects. Similarly, bundling of power from offshore wind energy projects with conventional power has been expressly provided for. Such initiatives will assist the development of offshore wind energy in the country.

4. Environmental Aspects: Various surveys and comprehensive studies have to be conducted such as Environmental Impact Assessment, oceanographic surveys, environmental audit etc., before the blocks of offshore wind energy can be demarcated.

Surveys may be conducted by only those entities with proven track record and expertise. NIWE will issue guidelines on the conduct of surveys that are to be followed by such entities. Several clearances from the Ministry of Defence of the GOI have to be obtained for conduct of such surveys and studies.

The project developer has to submit a detailed decommissioning program and site restoration program prior to start of the construction work. Project developer also has to submit a security deposit or financial guarantee to ensure proper decommissioning. These programs will require clearances from the Ministry of Environment, Forests and Climate Change.

5. Security: The project developer shall have the responsibility under the Policy to ensure the security of the offshore wind energy project. The Policy does not provide any clarity on the methodology to be followed by the project developer for ensuring the security of such installations. Vulnerability assessments have to be conducted by the project developer in this regard and the project developer has to obtain comprehensive insurance cover on the installations.

A separate single window clearance agency or nodal agency Headquarter, Offshore Defence Advisory Group will advise MNRE and/or NIWE regarding planning and policy aspects of offshore security and defence within territorial waters and the EEZ. The Directorate General of Shipping in consultation with the MNRE will declare the offshore wind farm as a 'Restricted Area'.

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.

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