Firms doubt India's repowering incentives

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Richard Heap
March 14, 2016
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This content is from our archive. Some formatting or links may be broken.
Firms doubt India's repowering incentives

Germany has become poster child for wind farm repowering due to the age of its fleet and the technical nous of its top manufacturers. Now India is looking to get in on the act.

Today, India’s Ministry of New & Renewable Energy is set to close consultation on a draft repowering policy that it published last week. This proposes that all sub-1MW turbines that were installed before 2000 should be replaced with newer models. Its idea is to enable the owners of these schemes to produce more power from the high-wind sites they occupy.

The MNRE wants to encourage owners to pursue these repowering projects by offering an incentive: an interest rate rebate of 0.25% for schemes funded by the Indian Renewable Energy Development Agency, on top of the interest rate rebates available for new projects. The policy would also force Indian transmission operators to upgrade grids, and exempt the wind farm from the terms of its power purchase agreements while being upgraded.

It looks like a good idea. An estimated 3GW of the India’s total installed capacity of 25GW is in these older projects, and the World Institute of Sustainable Energy has reported that India has the potential to add around 2.8GW to its total capacity by repowering. If this new policy allows investors to grow returns from outdated projects that we should welcome it.

But we have so far seen a muted reaction to the plan from the wind industry. Developers have argued that the incentive is not enough to encourage a spate of repowerings.

Sunil Jain, chief executive of developer Hero Future Energies and president of the Wind Independent Power Producers Association, was quoted in India’s Economic Times saying the incentives were not sufficient because firms would have to replace substations as well as the turbines. “Repowering is more expensive than putting up a new project,” he said.

It also introduces uncertainty for owners as there is no guarantee that the companies they are selling their power to will want to buy extra capacity from their enlarged scheme. This means there is no guarantee they will see a return on their investment in the project.

And it is always risky for owners to make their future returns reliant on grid upgrades.

The investor has no control over whether the transmission operator completes the work on time. We heard from ReNew Power chief executive Sumant Sinha in our ‘Emerging Markets’ report last week that exporting power to the grid is one of the biggest headaches for those working in the wind sector in India. And there is no deadline in the draft law for when repowering has to be completed, and no penalties for not doing so, so many will not bother.

There is hope for these sites, though. We are seeing investors moving into India, including the Canadian giant Caisse de Dépôt et Placement du Québec. Its $150m plan to invest in wind and other renewables may not be huge compared to the size of the market, but its goal of partnering with Indian renewables firms should help breathe life into old projects.

An incentive to repower is important — but the fresh perspective that outside investors can bring could be just as valuable.

Germany has become poster child for wind farm repowering due to the age of its fleet and the technical nous of its top manufacturers. Now India is looking to get in on the act.

Today, India’s Ministry of New & Renewable Energy is set to close consultation on a draft repowering policy that it published last week. This proposes that all sub-1MW turbines that were installed before 2000 should be replaced with newer models. Its idea is to enable the owners of these schemes to produce more power from the high-wind sites they occupy.

The MNRE wants to encourage owners to pursue these repowering projects by offering an incentive: an interest rate rebate of 0.25% for schemes funded by the Indian Renewable Energy Development Agency, on top of the interest rate rebates available for new projects. The policy would also force Indian transmission operators to upgrade grids, and exempt the wind farm from the terms of its power purchase agreements while being upgraded.

It looks like a good idea. An estimated 3GW of the India’s total installed capacity of 25GW is in these older projects, and the World Institute of Sustainable Energy has reported that India has the potential to add around 2.8GW to its total capacity by repowering. If this new policy allows investors to grow returns from outdated projects that we should welcome it.

But we have so far seen a muted reaction to the plan from the wind industry. Developers have argued that the incentive is not enough to encourage a spate of repowerings.

Sunil Jain, chief executive of developer Hero Future Energies and president of the Wind Independent Power Producers Association, was quoted in India’s Economic Times saying the incentives were not sufficient because firms would have to replace substations as well as the turbines. “Repowering is more expensive than putting up a new project,” he said.

It also introduces uncertainty for owners as there is no guarantee that the companies they are selling their power to will want to buy extra capacity from their enlarged scheme. This means there is no guarantee they will see a return on their investment in the project.

And it is always risky for owners to make their future returns reliant on grid upgrades.

The investor has no control over whether the transmission operator completes the work on time. We heard from ReNew Power chief executive Sumant Sinha in our ‘Emerging Markets’ report last week that exporting power to the grid is one of the biggest headaches for those working in the wind sector in India. And there is no deadline in the draft law for when repowering has to be completed, and no penalties for not doing so, so many will not bother.

There is hope for these sites, though. We are seeing investors moving into India, including the Canadian giant Caisse de Dépôt et Placement du Québec. Its $150m plan to invest in wind and other renewables may not be huge compared to the size of the market, but its goal of partnering with Indian renewables firms should help breathe life into old projects.

An incentive to repower is important — but the fresh perspective that outside investors can bring could be just as valuable.

Germany has become poster child for wind farm repowering due to the age of its fleet and the technical nous of its top manufacturers. Now India is looking to get in on the act.

Today, India’s Ministry of New & Renewable Energy is set to close consultation on a draft repowering policy that it published last week. This proposes that all sub-1MW turbines that were installed before 2000 should be replaced with newer models. Its idea is to enable the owners of these schemes to produce more power from the high-wind sites they occupy.

The MNRE wants to encourage owners to pursue these repowering projects by offering an incentive: an interest rate rebate of 0.25% for schemes funded by the Indian Renewable Energy Development Agency, on top of the interest rate rebates available for new projects. The policy would also force Indian transmission operators to upgrade grids, and exempt the wind farm from the terms of its power purchase agreements while being upgraded.

It looks like a good idea. An estimated 3GW of the India’s total installed capacity of 25GW is in these older projects, and the World Institute of Sustainable Energy has reported that India has the potential to add around 2.8GW to its total capacity by repowering. If this new policy allows investors to grow returns from outdated projects that we should welcome it.

But we have so far seen a muted reaction to the plan from the wind industry. Developers have argued that the incentive is not enough to encourage a spate of repowerings.

Sunil Jain, chief executive of developer Hero Future Energies and president of the Wind Independent Power Producers Association, was quoted in India’s Economic Times saying the incentives were not sufficient because firms would have to replace substations as well as the turbines. “Repowering is more expensive than putting up a new project,” he said.

It also introduces uncertainty for owners as there is no guarantee that the companies they are selling their power to will want to buy extra capacity from their enlarged scheme. This means there is no guarantee they will see a return on their investment in the project.

And it is always risky for owners to make their future returns reliant on grid upgrades.

The investor has no control over whether the transmission operator completes the work on time. We heard from ReNew Power chief executive Sumant Sinha in our ‘Emerging Markets’ report last week that exporting power to the grid is one of the biggest headaches for those working in the wind sector in India. And there is no deadline in the draft law for when repowering has to be completed, and no penalties for not doing so, so many will not bother.

There is hope for these sites, though. We are seeing investors moving into India, including the Canadian giant Caisse de Dépôt et Placement du Québec. Its $150m plan to invest in wind and other renewables may not be huge compared to the size of the market, but its goal of partnering with Indian renewables firms should help breathe life into old projects.

An incentive to repower is important — but the fresh perspective that outside investors can bring could be just as valuable.

Germany has become poster child for wind farm repowering due to the age of its fleet and the technical nous of its top manufacturers. Now India is looking to get in on the act.

Today, India’s Ministry of New & Renewable Energy is set to close consultation on a draft repowering policy that it published last week. This proposes that all sub-1MW turbines that were installed before 2000 should be replaced with newer models. Its idea is to enable the owners of these schemes to produce more power from the high-wind sites they occupy.

The MNRE wants to encourage owners to pursue these repowering projects by offering an incentive: an interest rate rebate of 0.25% for schemes funded by the Indian Renewable Energy Development Agency, on top of the interest rate rebates available for new projects. The policy would also force Indian transmission operators to upgrade grids, and exempt the wind farm from the terms of its power purchase agreements while being upgraded.

It looks like a good idea. An estimated 3GW of the India’s total installed capacity of 25GW is in these older projects, and the World Institute of Sustainable Energy has reported that India has the potential to add around 2.8GW to its total capacity by repowering. If this new policy allows investors to grow returns from outdated projects that we should welcome it.

But we have so far seen a muted reaction to the plan from the wind industry. Developers have argued that the incentive is not enough to encourage a spate of repowerings.

Sunil Jain, chief executive of developer Hero Future Energies and president of the Wind Independent Power Producers Association, was quoted in India’s Economic Times saying the incentives were not sufficient because firms would have to replace substations as well as the turbines. “Repowering is more expensive than putting up a new project,” he said.

It also introduces uncertainty for owners as there is no guarantee that the companies they are selling their power to will want to buy extra capacity from their enlarged scheme. This means there is no guarantee they will see a return on their investment in the project.

And it is always risky for owners to make their future returns reliant on grid upgrades.

The investor has no control over whether the transmission operator completes the work on time. We heard from ReNew Power chief executive Sumant Sinha in our ‘Emerging Markets’ report last week that exporting power to the grid is one of the biggest headaches for those working in the wind sector in India. And there is no deadline in the draft law for when repowering has to be completed, and no penalties for not doing so, so many will not bother.

There is hope for these sites, though. We are seeing investors moving into India, including the Canadian giant Caisse de Dépôt et Placement du Québec. Its $150m plan to invest in wind and other renewables may not be huge compared to the size of the market, but its goal of partnering with Indian renewables firms should help breathe life into old projects.

An incentive to repower is important — but the fresh perspective that outside investors can bring could be just as valuable.

Germany has become poster child for wind farm repowering due to the age of its fleet and the technical nous of its top manufacturers. Now India is looking to get in on the act.

Today, India’s Ministry of New & Renewable Energy is set to close consultation on a draft repowering policy that it published last week. This proposes that all sub-1MW turbines that were installed before 2000 should be replaced with newer models. Its idea is to enable the owners of these schemes to produce more power from the high-wind sites they occupy.

The MNRE wants to encourage owners to pursue these repowering projects by offering an incentive: an interest rate rebate of 0.25% for schemes funded by the Indian Renewable Energy Development Agency, on top of the interest rate rebates available for new projects. The policy would also force Indian transmission operators to upgrade grids, and exempt the wind farm from the terms of its power purchase agreements while being upgraded.

It looks like a good idea. An estimated 3GW of the India’s total installed capacity of 25GW is in these older projects, and the World Institute of Sustainable Energy has reported that India has the potential to add around 2.8GW to its total capacity by repowering. If this new policy allows investors to grow returns from outdated projects that we should welcome it.

But we have so far seen a muted reaction to the plan from the wind industry. Developers have argued that the incentive is not enough to encourage a spate of repowerings.

Sunil Jain, chief executive of developer Hero Future Energies and president of the Wind Independent Power Producers Association, was quoted in India’s Economic Times saying the incentives were not sufficient because firms would have to replace substations as well as the turbines. “Repowering is more expensive than putting up a new project,” he said.

It also introduces uncertainty for owners as there is no guarantee that the companies they are selling their power to will want to buy extra capacity from their enlarged scheme. This means there is no guarantee they will see a return on their investment in the project.

And it is always risky for owners to make their future returns reliant on grid upgrades.

The investor has no control over whether the transmission operator completes the work on time. We heard from ReNew Power chief executive Sumant Sinha in our ‘Emerging Markets’ report last week that exporting power to the grid is one of the biggest headaches for those working in the wind sector in India. And there is no deadline in the draft law for when repowering has to be completed, and no penalties for not doing so, so many will not bother.

There is hope for these sites, though. We are seeing investors moving into India, including the Canadian giant Caisse de Dépôt et Placement du Québec. Its $150m plan to invest in wind and other renewables may not be huge compared to the size of the market, but its goal of partnering with Indian renewables firms should help breathe life into old projects.

An incentive to repower is important — but the fresh perspective that outside investors can bring could be just as valuable.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.