CHAPTER 2 EVOLUTION OF WIND POWER IN INDIA

Development of wind power started in India during the 6th five-year plan (1983-84).
The national program for wind energy includes wind resource assessment activities,
R&D support, development of manufacturing and infrastructure capability,
installation, generation and manufacture of wind generators, policy support etc.
The Wind Resources Assessment Programme is being implemented through the State
Nodal Agencies, Field Research Unit of Indian Institute of Tropical Meteorology
(IITM-FRU) and Center for Wind Energy Technology (C-WET).

India is the only country in the world with a separate ministry for renewable energy
sources- The Ministry of New and Renewable Energy

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C u rre n t$Sce n a rio $

CHAPTER 3 WIND GENERATION PROCESS

3.1 Factors Driving Wind Energy

Differential heating of earths surface and atmosphere induces vertical and horizontal
air currents. These currents are affected by earths rotation and contours of the land.
Therefore, density and speed of wind is dependent on geography. Up to 100 meters of
altitude, surface roughness and obstacles influence winds. These surface winds are the
source of wind power.

3.2 Wind Turbines

Wind turbines convert the force of wind energy into a turning force (torque), acting on
the rotor blades. Amount of energy produced depends on air density, rotor area, and
height of turbine and wind speed. The denser or heavier the air, the more is the energy
received by the turbine. Hence, wind density (measured in watts/square meter) is a
reliable measure to assess wind potential.
WPD= * * V 3
Where = Density of air
V= wind speed
Calculating wind energy:
The kinetic energy produced by rotating the wind turbine can be given by the
expression
KE= * WPD * A * T
A= Cross sectional area (Depending on diameter of the turbine blades) and T= Time
period given
Betz Law: It has been scientifically proven that at any given time, a wind turbine can
not convert more than 16/27 (59.3%) of kinetic energy of wind into mechanical

energy. Therefore, theoretical maximum power efficiency of a wind turbine stands at

0.59.
In practice the power limit stands around .35-.45 power coefficient (Cp).

3.2 Common Terminologies

Capacity Factor (Plant Load factors- PLF):

Capacity factor is a way to measure the productivity of a wind turbine or any other
power production facility. It compares the plants actual production over a period of
time with the amount of power the plant would have produced if it had run at the full
capacity for the same amount of time.
Capacity Factor = Actual amount of power produced over time / Power that would
have been produced if turbine Operated at maximum output 100% of the time
The average utilization factor in the country is about 21% which varies from 17% to
26% depending upon the wind power density, the type and size of turbines and the
availability of grid.
With a very large rotor and a very small generator, a wind turbine will run at full
capacity whenever the wind blew and would have a 60-80% capacity factor, but it
would produce very little electricity. The most electricity per rupee invested is gained
by using a larger generator and accepting the fact that the capacity factor will be lower
as a result. Wind turbines are fundamentally different from fueled power plants in this
respect.
Taking into consideration wear and tear, efficiency of machine parts etc, in reality
only about 10-30% of wind energy is converted into electricity.

CHAPTER 4 TECHNOLOGY
A windmill captures wind energy and converts it into electrical energy.
A wind generation plant comprises of a supporting structure and turbines. In
India, turbines can comprise of 2 or 3 blades. A generator is attached to one end of a
wind turbine, which provides mechanical energy. The other end of the generator is
connected to an electrical grid. Small generators usually require less force to start, but
are not energy efficient. Large generators are very efficient in high wind speed, but
find it difficult to turn when its less windy. A step up transformer converts low
voltage from collection to high voltage level of electric power transmission and
distribution system.
The balance of plant comprises the remainder of the wind farm infrastructure,
including access roads, concrete foundations, operating platforms, an electrical
collection system, a step-up substation, interconnection infrastructure to the electricity
transmission system and an operation and maintenance building. The towers are
secured using concrete foundations and are connected to an electrical collection
system.

4.1 Types of Wind Turbines

Horizontal Axis: They consist of a tall tower, atop which sits a fan-like rotor that faces
into or away from the wind, the generator, the controller, and other components. Most
horizontal axis turbines built today are two- or three-bladed.
Vertical Axis: Vertical axis turbines are used for small scale applications. Blades of
vertical-axis wind machines work on the same principle as horizontal-axis machines:
shape of blades causes a pressure difference when the wind blows over them, causing
the blade assembly to spin. In a vertical-axis machine, however, blades spin in a plane
parallel to the ground.
New wind turbine installations are moving towards better aerodynamic design, lighter
and larger blades, higher towers, direct drive, and variable speed gearless operation
using advanced power electronics.

Two types of wind turbines namely stall regulated and pitch regulated are being
deployed in the country and abroad for grid-interactive power. The stall regulated
wind turbines have fixed rotor blades whereas pitch regulated wind turbines have
adjustable rotor blades that change the angle of attach depending upon wind speed.
Both technologies have their own advantages and disadvantages. Wind turbines are
also available with lattice, steel tubular and concrete tubular towers.

4.1 Latest Technological Advancements:

Increase In hub Height:

The hub height is the distance from the turbine platform to the rotor of an installed
wind turbine and indicates how high your turbine stands above the ground, not
including the length of the turbine blades
Significant improvement in capacity utilization was observed due to increase in
average hub height. Hub height has been increased to 80-90 meters as opposed to 7075 meters 5 years back.
This paper has already discussed (enter link for comparison below) how hub height
increases wind power potential.

Larger rotor diameters:

Larger rotor diameters can significantly add to the efficiency of a wind turbine. Over
the past five years, there has been a growing trend towards use of wind turbines with
higher rotor. Wind turbines with 75-90 meter rotor diameter have gained momentum
as compared with 40-50 meter used in 2005-06. This trend is expected to continue in
future as well. Turbines with rotor diameters of upto 120 metres are already available
in the market. This leads to increase in wind turbine efficiency, thereby improving
capacity factors.
CHAPTER 5 - CENTRAL POLICIES AND INITIATIVES

The central Ministry of Finance has stipulated several policies and incentives to boost
investments in this sector.

Incentive

Ministry

Implemen Description

Comments

ting
1.

MoF

Agency
Income

Investors can claim 80%

The cap of 40% AD from

Accelerated

(Ministry

Tax Dept

Depreciation in the first

April 2017 can be a cause of

depreciation

of

year from 1st April 2014,

concern in the wind industry

benefits

Finance)

which aids in writing off the

as 70% of the wind sector

investments quickly.

investments are built on AD.

The Union Budget 2016 has

A significant decline in

capped the AD benefit to a

capacity addition was

maximum of 40% from

observed during 2012-13,

April 2017.

when AD benefits were

(AD)

revoked.
Note: Only one of AD or GBI
2.

MoF

Income

Additional depreciation of

can be availed.
The extension of additional

Additional

(Ministry

tax Dept

20% is allowed in respect of

depreciation to transmission

Depreciatio

of

the cost of new plant or

power projects is a welcome

n Allowance

Finance)

machinery acquired and

indicator of the governments

for power

installed by certain

commitment towards power

projects

assessees engaged in the

sector.

business of generation and

distribution of power.
Finance Bill 2016 extends
this benefit to power
transmission projects from
April 2017.
3. IT 80IA

MoF

Income

The law allows a power

The benefit is set to expire in

Tax holiday

(Ministry

Tax Dept

producer to claim tax

of

exemption for upto 10 years

Finance)

within the first 15 years of a

March 2017

project's operations.
However for Corporates
MAT @ ~21% shall be
applicable. The eligible date
for projects in the power
sector to avail the benefit
under Section 80-IA of the
Income Tax Act stands
extended from March 31,
2014 to March 31, 2017.
4.

MNRE

IREDA

Under the scheme, GBI will

Generation

(Ministry

(Indian

be provided to wind

Based

of New

Renewabl

electricity producers @ Rs.

Incentive

and

e Energy

0.50 per unit of electricity

(GBI)

Renewabl

Developm

fed into the grid for a period

e Energy)

ent

not less than 4 years and a

Agency)

maximum period of 10
years with a cap of Rs. 100
Lakhs per MW. The total
disbursement in a year will
not exceed one fourth of the
maximum limit of the
incentive i.e. Rs. 25.00
Lakhs per MW during first
four years. The GBI scheme
will be applicable for entire
12th plan period having a
target of 15,000 MW.

5. Priority
Sector

MoF

RBI

Banks can now provide

loans upto a limit of Rs150

GBI is set to expire in 2017

Lending

million to borrowers for

solar, biomass, wind, and
micro- hydel power
generation, and also for
renewable energy based
public utilities like street
lighting systems and remote
village electrification. For
individual households, the
loan limit has been set to Rs
1 million per borrower.

6.

Central

State

According to Electricity

The RPO targets set by

Renewable

Electricity

Electricity

Act, 2003, obligated entity

individual SERCs are

Purchase

Regulator

Regulator

should purchase electricity

currently below the

Obligation

from renewable energy

recommendations given by

(RPO)

Commissi

Commissi

sources. The responsibility

<>.

on

ons

of setting RPO targets and

(CERC)

(SERCs)

implementation rests with

Electricity Amendment Bill,

the State Electricity

2014 recommends to

Regulatory Commissions

penalize states upon Non-

(SERCs).

compliance of RPO targets.

7.

Central

National

Renewable Energy

The viability and present

Renewable

Electricity

Load

Certificate (REC)

scenario of REC market is

Energy

Regulator

Despatch

mechanism is a market

discussed in this paper (insert

Certificates

Centre

based instrument to promote link to section)

(RECs)

Commissi

(NLDC)

renewable energy and

on

facilitate compliance of

(CERC)

renewable purchase
obligations (RPO). This
concept seeks to address the
mismatch between
availability of RE sources

and the requirement of the

obligated entities to meet
their RPO.

8. National

Ministry

Ministry

This 175 GW comprises of

The adoption of a large target

Renewable

of New &

of New &

100 GW (Solar), 60 GW

of 175 GW of RE capacity

Energy

Renewabl

Renewabl

(Wind), 10 GW (Bio Mass

(excluding large hydro) by

Target of

e Energy

e Energy

Power), and 5 GW (Small

2022 is a bold step towards a

175 GW by

(MNRE)

(MNRE)

Hydro Power). Achieving

future RE denominated

this calls for US $120

electricity system.

2022

billion in capital investment

and equity of US $40
billion.

9.

Central

State

After considering all

Preferential

Electricity

Electricity

relevant fixed, operating &

Feed in

Regulator

Regulator

fuel costs and the normative

Tariff

generation from each

Commissi

Commissi

resource, a levelized tariff is

on

ons

formulated with due

(CERC)

(SERCs)

consideration for return on

equity, generally in the
range of 16%. Such tariffs
once decided hold over the
length of the PPA(~20yrs).
Tariffs are revised each year
for new upcoming projects.

Several policies in addition to the one referenced above has been adopted by the
government to bolster the wind power sector, including 100% FDI in wind sector,

IREDA refinance scheme, National clean energy fund, Excise and customs duty
exemption, National Green Energy corridor, National wind mission and UDAY.

CHAPTER 6 - STATE POLICIES AND INITIATIVES

6.1 Feed-In-Tariff Mechanism
The various state electricity regulatory commissions determine the tariff to be given to
power generators, based on the recommendations given by CERC in Central
Electricity Regulatory Commission (Terms and
Conditions for Tariff determination from Renewable Energy Sources) Regulations,
2012.
Definition
A feed-In-Tariff is a guarantee of payment to renewable energy developers for the
electricity they produce. This assures the producers that the electricity they produce
will be purchased.
Tariff levels are usually guaranteed for a longer period- 13 years or more.
In this way FiT provides long-term certainty about receiving financial support, which
is considered to lower investment risks
Wind energy sector follows a single part tariff structure, consisting of fixed
components such as:
a.
b.
c.
d.
e.

Return on equity;
Interest on loan capital;
Depreciation;
Interest on working capital;
Operation and maintenance expenses;

Methodology
1. Tariff Options
The electricity purchase tariffs for renewable energy projects, and wind power
in particular are calculated based on the projected cash flow of a generic 1 mW
plant over 25 years of useful life, including ROE at 10% P.A for the first 10
years, and 24% P.A from year 11 onwards.
For wind energy projects, India adopts constant tariffs over 13 years. A single all

inclusive tariff is determined for each technology.

2. Tariff Components
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Capital Investment
Capacity Utilization Factor
Operation and Maintenance expenses
Insurance cost
Debt-Equity ratio
Term of Loan and Interest
Life of plant and machinery
Return on Equity
Depreciation rate applicable
Interest and Components of Working Capital

3. Tariff Design
In terms of Regulation 10 of the RE Tariff Regulations, the tariff design for
renewable energy generating stations is as under: 1) The generic tariff shall be
determined on levellised basis for the Tariff Period. Provided that for
renewable energy technologies having single part tariff with two components,
tariff shall be determined on levellised basis considering the 6 year of
commissioning of the project for fixed cost component while the fuel cost
component shall be specified on year of operation basis. 2) For the purpose of
levellised tariff computation, the discount factor equivalent to Post Tax
weighted average cost of capital shall be considered. 3) Levellisation shall be
carried out for the useful life of the Renewable Energy project while Tariff
shall be specified for the period equivalent to Tariff Period.

Levelised Tariff
Levelised Tariff = (Arithmetical Average of Tariff over the life of the
plant/PPA) / Discount Factor

Discount Factor
Discount factor is the post tax weighted average cost of the capital on the basis
of normative debt: equity ratio (70:30) specified in the Regulations

Discount factor= Wd* Rd*(1-T)+ We*Re

Where Wd:We= Debt: Equity
Rd= Interest rate on debt
Re= Interest rate on equity

Capital Cost
Capital cost is the total project cost, inclusive of all capital works like plant
and machinery, civil works, erection and commissioning, financing and
interest during construction, and evacuation infrastructure up to interconnection point.
--- Capital cost for wind energy project shall include wind turbine generator
including its auxiliaries, land cost, site development charges and other civil
works, transportation charges, evacuation cost up to inter-connection point,
financing charges and IDC

Capital Cost Calculation

The initial capital cost for the fiscal year 2012-13 was recommended by CERC
in the order - Central Electricity Regulatory Commission (Terms and
Conditions for Tariff determination from Renewable Energy Sources)
Regulations, 2012.
CERC has adopted an indexation mechanism, taking in to account changes in
wholesale price index of steel and electrical machinery.
Debt to Equity Ratio
D/E ratio has been fixed at 70:30 for wind energy projects.
Return On Equity
Sub-Regulation (2) of the Renewable Energy tariff Regulation stipulates the
normative Return on Equity (ROE) as under: a) 20% per annum for the first 10
years, and 16 b) 24% per annum from the 11th year onwards

Useful Life
Wind energy 25

Control Period
Five years, first year being 2012-13 tariff determined for the RE projects
commissioned during the control period shall continue to be applicable for the
entire duration of the tariff period as specified in Regulation 6 of the RE Tariff
Regulations.

Tariff Period
13 years minimum

Interest On Loan
Sub-Regulation (1) of Regulation 14 of the RE Regulations provides that the
loan tenure of 12 years is to be considered for the purpose of determination of
tariff for RE projects. Sub-Regulation (2) of the said Regulation provides for
computation of the rate of interest on loan as under:
(a) The loans arrived at in the manner indicated in the Regulation 13 shall
be considered as gross normative loan for calculation for interest on loan. The
normative loan outstanding as on April 1st of every year shall be worked out
by deducting the cumulative repayment up to March 31st of previous year
from the gross normative loan.
(b) For the purpose of computation of tariff, the normative interest rate shall
be considered as average State Bank of India (SBI) Base rate prevalent during
the first six months of the previous year plus 300 basis points.
(c) Notwithstanding any moratorium period availed by the generating
company, the repayment of loan shall be considered from the first year of
commercial operation of the project and shall be equal to the annual
depreciation allowed.
Average Base rate for first six months of FY 14-15 10.00%

Depreciation
Regulation 15 of the RE Tariff Regulations provides for computation of
depreciation in the following manner:
"(1) The value base for the purpose of depreciation shall be the Capital Cost of
the asset admitted by the Commission. The Salvage value of the asset shall be
considered as 10% and depreciation shall be allowed up to maximum of 90%
of the Capital Cost of the asset.
(2) Depreciation per annum shall be based on Differential Depreciation
Approach' over loan period beyond loan tenure over useful life computed on
Straight Line Method. The depreciation rate for the first 12 years of the
Tariff Period shall be 5.83% per annum and the remaining depreciation shall
be spread over the remaining useful life of the project from 13th year onwards.
(3) Depreciation shall be chargeable from the first year of commercial
operation. Provided that in case of commercial operation of the asset for part
of the year, depreciation shall be charged on pro rata basis".

Interest On Working Capital

43. Regulation 17 of the RE Tariff Regulations provides for the working
capital requirements of the RE projects as under:
a) Operation & Maintenance expenses for one month;
b) Receivables equivalent to 2 (Two) months of energy charges for sale of
electricity calculated on the normative CUF;
c) Maintenance spare @ 15% of operation and maintenance expenses
Interest on Working Capital shall be at interest rate equivalent to the average
State Bank of India Base Rate prevalent during the first six months of the
previous year plus 350 basis points

O&M expenses
(a) Wind Energy: Regulation 27 of RE Tariff Regulations provides that the
normative O&M expenses for the first year of the control period (i.e. 2012-13)
as ` 9 lakh per MW and shall be escalated at the rate of 5.72% per annum over
the tariff period for determination of the levellised tariff. Accordingly, the
O&M cost norm for wind energy as ` 10.63 Lakh/MW for FY 2015-16.

Capacity Utilisation Factor

Energy: Annual Mean Wind Power Density (W/m2)
Wind zone - 1 (Upto 200) 20 %
Wind zone - 2 (201 - 250) 22
Wind zone - 3 (251 - 300) 25
Wind zone - 4 (301 - 400) 30
Wind zone - 5 (Above 400) 32

Subsidy
Regulation 22 of the RE Tariff Regulations provides as under:
The Commission shall take into consideration any incentive or subsidy
offered by the Central or State Government, including accelerated
depreciation benefit if availed by the generating company, for the renewable
energy power plants while determining the tariff under these Regulations.
Provided that the following principles shall be considered for ascertaining
income tax benefit on account of accelerated depreciation, if availed, for the
purpose of tariff determination:
i) Assessment of benefit shall be based on normative capital cost,
accelerated depreciation rate as per relevant provisions under Income Tax
Act and corporate income tax rate.
ii) Capitalization of RE projects during second half of the fiscal year. Per unit
benefit shall be derived on levellised basis at discount factor equivalent to
Post Tax weighted average cost of capital.

3. Tariff Calculation
The net/Gross generated value of electricity is computed on 1MW. The NPV of

total cash outflow over 25 years/ NPV of energy generated is taken for tariff
consideration.

StatewiseFeedInTariffs
ComparisonofFeedInTariffsofStates:
UnderProgressMaharastraandTamilNaduCovered.