India - Wind power draws global majors

It’s the latest and among the fastest growing sectors within global energy today, and has already made its presence felt in India.

A long coastline, low installation costs and ready local availability of key raw materials have all made India a favourite destination for offshore wind power, with global majors such as Areva, Siemens and GE queuing up to explore opportunities in the country.

High-profile investors such as Vinod Sethi, private equity major Blackstone and new clean technology funds have already invested in offshore wind energy companies planning for India, as this sector is expected to offer electricity tariffs at 40% less cost than that from traditional sources. “Offshore wind is the new growth area and has immense opportunities in India due to cheaper costs,” Areva Renewables global CEO Anil Srivastava told ET.

“Faster project building time and lower costs will make it an attractive option in India,” he said, adding that his company was currently studying the possibilities for such a venture in India.

Areva, the world’s largest nuclear plant builder, has already built 600 megawatts of offshore wind projects in Europe and has estimated that installation costs in India could be 30-40% less than that in Europe, where it is about $2.2 for every megawatt of offshore wind built. Like Areva, other majors such as Siemens and GE have been exploring similar opportunities in the country.

Cheaper tariffs will be the driving force for building offshore wind projects as prices of electricity are expected to grow due to tight coal supplies and surging demand. Spot rates for electricity have more than doubled to about Rs 10 per kilowatt hour, compared to Rs 4, last year.

“Such projects will also not have the tricky issue of acquiring land and if the cost parameters work out, then it’s a great option,” said Kuljit Singh, a partner with Ernst & Young.

Typically, in offshore wind projects, a large part of the offshore area will be offered to developers, who will build a minimum of 200-400 mw of wind power projects. Each such project will have a height of over 80 metres using about 600-900 tonnes of high-grade steel. This steel can be sourced locally.

Since offshore wind projects can be built close to big consumption centres that are typically located in coastal areas, the long western coastline will suit such a model as most large industries are situated along the country’s western coast.

In 2008, offshore wind power contributed 0.8 gigawatts of the total 28 gw of wind power capacity constructed in Europe. One gigawatt can power close to 650,000 homes in Europe. By 2009, 26 offshore wind farms had been constructed with an average rated capacity of 76 mw per farm.

“Offshore wind has a great investment theme,” said Vinod Sethi, a partner with investment firm Sethi Capital, and an major investor who earlier headed Morgan Stanley. “We have invested in an Austrian firm that will bring this technology to India.”

The growth potential also prompted Tulsi Tanti-promoted Suzlon to borrow heavily to acquire Germany’s REpower, mainly because of its expertise in offshore wind energy.

Barely two years into implementation, the UK has already emerged as one of the major users, with the country’s offshore wind power capacity now reaching 1 gigawatt of generating capacity. Also, compared to traditional power projects in thermal and other areas, it takes about 42 months, or just above three years to complete a wind farm.

For more information please contact Trevor Sievert at ts@windfair.net