Abstract 

The energy industry is a vital contributor to India’s economy as it forms the base for the daily functioning of an average and several industries. The sector is India is highly regulated with robust legal and regulatory mechanisms. The primary legislation regulating the sector in India is the Electricity Act, 2003. India being third largest producer and fourth largest consumer of electricity had to take initiatives to ensure that energy consumption is efficient and sustainable to successfully execute government schemes like Make in India, Atmanirbhar India. Therefore, India’s attention in the energy sector is shifted to the renewable sources like offshore wind energy. The geographical structure and the eager investors into the project make it an ideal place for business. However, the Offshore Wind Energy Policy of India fails to recognize the ground reality of such capital-intensive projects.

The blog aims to analyse the Offshore Wind Energy Policy in detail by understanding the advantages and challenges of the policy. Further, the blog makes an comparative analysis of various jurisdictions like Germany and UK’s offshore wind energy policy to better understand the changes that can be implemented in India.

Introduction 

India is the fourth-largest producer of wind power after major players like China, USA and Germany. In recent times, Government of India has taken several efforts to increase the wind power via offshore windmills. It is evident from the vast 7,500 kms coastline that India could very much benefit from offshore wind energy sector than onshore sector due to existence of strong consistent wind speeds and a reduced amount of turmoil.

In light of the Paris Agreement obligations, India aims to ensure that at least 40% of the power generation will be made from renewable resources or non-fossil sources. Renewable energy accounts for 36% of the India’s power capacity generated from hydropower plants, onshore wind and solar energy sector. Unfortunately, it is predicted that there will be a downfall of 47 GW between 2022-27 due to the rapid need for energy [1]. Therefore, this is the right time for India to invest in offshore energy sector to meet its national demands and obligations set.

Brief on Regulatory Framework and Position of India

The Ministry of New and Renewable Energy (MNRE) is responsible for generating policies and schemes necessary to ensure that electricity generation through renewable resources is encouraged. In addition to this, National Institute of Wind Energy (NIWE) is primary wing that is responsible for executing any agreements relating offshore wind energy projects in the country. The National Offshore Wind Energy Policy in 2015 is the comprehensive regulatory document available for the operation of offshore wind energy projects in India. It aimed to utilize the potential availability of energy generation through offshore wind energy projects. It further aims to indulge in research and development projects.

Notable aspects of The National Offshore Wind Energy Policy [2], 2015 includes:

1. Call for proposals will be done through a system called the International Competitive Bidding process (ICB) which will enable NIWE to shake hands with the successful bidder to exploit this renewable energy source [3]. There are various upon which a successful bidder would be selected like tariff, total cost, sharing of revenue etc. [4]

2. NIWE acting as an implementer will receive and evaluate eligible applicants for further procedural requirements such as clearances/NOCs from the respective governmental ministries and departments. [5]

3. A unique feature which enables interested private parties who are experts to conduct studies and surveys that allows them to collect data on offshore blocks (Technical Assessment). For this purpose, NIWE has issued Assessment Guidelines that provides for the process of application, privileges and restrains in accordance with the Technical Assessment. These developers do not have the right to generate any revenue with the use of the data collected during the surveys and assessment. The data will be considered as confidential information relating to the national security of India.

The Government to further better regulate the leasing aspect of offshore wind energy projects released the Draft Offshore Wind Energy Lease Rules, 2019. The leasing rules state that these blocks will provide for a period of 30 years for installing and operation. Additionally, 5 years for prospecting. The lease holders will be allowed to carry out number of activities such construction of waterways, underwater cables but will not be allowed to use any natural resources available in the allotted area. In other words, the lease holders shall not acquire any rights to minerals in the leased area such as extraction of resources from the sea and ocean bed. [6] The draft rules allow for leasing of 100sqm-500sqm dependant on the size of the project and shall be allowed up to 200 nautical miles from the coast of India. [7]

The Government of India with its assessment has recognized areas in and around Karnataka, Kerala and Gujarat as eligible for offshore wind energy generating areas. In the latest rules of 2019, a proposed project maybe cancelled if the assessment indicates environmental damage to the marine ecology.

Advantages

Offshore windmills have far more potential than onshore windmills are for two primary reasons. Firstly, onshore windmills are becoming difficult to acquire due to the non-availability of land area in the vicinity of high-density wind. Secondly, offshore windmills are far more efficient than onshore windmills.

The Draft Offshore Wind Energy Lease Rules, 2019 aims to balance the eager prospective of offshore wind energy against the possible ecological damage that it could cause. The rules provide for cancellation of leases in case there is an identification of damage to flora and fauna. [8] It further provides for a notice period to the lessee before assuming control of the project to avoid any serious damage to the environment, life and property [9]. The Central Government post an enquiry may order the shutting down of the Wind Farm if in their opinion the project affects the flora and fauna of the marine environment where the project is proposed to be built. [10]

Compared to the onshore wind energy instalments, offshore wind energy would require relatively lesser offshore windmills/turbines to produce the same energy. The additional advantage to offshore wind energy is that there is higher Capacity Utilisation Factor (CUF) which means that offshore energy will enable considerably higher operating power. [11] As noted earlier, unlike onshore wind energy, the wind speed is much higher and direction is consistent in nature which is not restricted by land infrastructures and natural structures like hills.

Comparison with other Jurisdictions

  • United Kingdom

United Kingdom is one of the leading countries dealing offshore wind farms which has already reached its capacity of renewable energy under the Renewables Obligation. UK was intending to make full use of their onshore and offshore wind energy generation, for this purpose they were focused on EU 2020 renewable. This means that UK must rely on renewable sources for 30% of their energy consumption. UK is also part of the Climate Change Act [12] which requires in the reduction of carbon emissions by 80% within 2050. Despite having successful onshore energy productions, it was difficult of UK to satisfy these obligations. Therefore, the investment into offshore energy production grew. It is important to note that the Crown Estate is in possession of almost of the seabed and therefore has the exclusive right to provide leases for the same. Leases are provided in rounds, for example, developers are given 25-year lease in round 1 and 50 years in round 2 etc. The process after the developer acquires the lease is of tedious nature where for example, in England and Wales a planning inspector provides permission for both offshore projects and onshore projects based on environmental assessments, purchase powers. In contrast, Scotland has separate applications for offshore energy projects which have caused bureaucratic hiccups like it typically takes around 3-4 years to even prepare the application and a primary survey which would further take around 2 years. This is because in England, there is a requirement to finish all the due process within 15 months of submitting the application whereas in Scotland there is no such limitation.

  • Germany

The Offshore Wind Energy Projects in Germany initially did not gain much traction but in recent years, we see that the industry has been rapidly emerging. Germany is becoming the most active market in Europe. In 2014, Germany was able to provide grid connection with 628 MW from offshore wind capacity and it aims to increase this to 15 GW by 2030. [13] One of the major reasons why Germany is motivated to increase their offshore wind energy capacity is because it will aim them to completely incapacitate their nuclear reactors by 2022. This sets the country for a difficult goal to achieve with respect to renewable energy. This can be witnessed in the regulation, The Renewable Energy Act,[14] where it specifies that around 45% of the electricity must come from renewable resources by 2035. The regulations gradually decrease the reliance on non-renewable resources and aims to increase the dependence on renewable electricity production by almost 80% in 2050. Germany in its organization structure is aiming to integrate energy policy along with industrial policy so to ensure that supply and demand is met with each other. Germany with its tactical planning gradually converted all its onshore energy to offshore energy sector. This is evident from the fact that most of the major player involved in the production and manufacturing of offshore wind turbines originate from Germany.

Initially, Germany under its Marine Spatial plan discovered potential zone areas for offshore wind energy projects. It ensured that such zone do not clash with natural reserves as well as shipping routes of the country. This allowed the developer to focus on a particular area to apply for the offshore wind energy sector. The developers are invited through an open-door approach. The Government after selecting the developer would direct them to obtain the permits and licenses. The beneficial aspect of the regulations is that these regulations are consolidated into one so to ensure that applications are processed quickly. They include environmental impact assessment, leasing regulations and licensing.  Germany follows a three step consultation process to finalize an offshore wind energy project. The first consultation deals with relevant governmental authorities, stakeholders and specialized government agencies such as the maritime and Hydrographic agency etc. The second consultation deals within the assessment and evaluation of the environmental impacts of the project designed. This shows that India too resonates with the objective of balancing energy policy against protection of ecology in the marine environment. The last consultative procedure includes the final decision taken by the experts and competent authorities of the government in view of the environmental impact assessment. If the authorities decide to proceed with the project, then the developer must comply with several conditional clauses within 2.5 years from the date of allotment. The developer then is given the lease for a period of 25 years if the conditions are met by them. The rules also require that a developer must provide with continuous evaluation of project in terms of environmental concerns and report must be submitted every year in order to cross check with initial findings of the environmental impact assessment.

Challenges

1. Lack of Data:

Though the energy generated through offshore windmills is doubly efficient as onshore windmills, the relative cost for the same is much more due to the need for strong structures to sustain in the harsh ocean. [15] It is noted that businesses have to be more aware of ways to be sustainable and less energy intensive as the aim of these energy projects is to increase renewable capacity of 10 GW by 2030. The possibility of unsuccessful offshore wind projects can also be attributed to the lack of data bank, library focused on making technical information available or a department set up to receive and verify information regarding the potential of offshore wind energy sector in state agencies.

2. Lack of adequate infrastructure

In certain places in India like Gujarat and Tamil Nadu, are ideal for offshore windmills have very high potential but these states already use insurmountable renewable and the addition of energy from offshore windmills might be worrisome as the question arises whether their power produced will face offshore grid challenges. [16] Further, the success of these projects can only be possible if there are port facilities available for particular establishment of offshore energy sectors. For example, in Tamil Nadu and Gujarat there are 26 and 43 ports respectively but they are not built to have storage, construction and other facilities. The current regulation fails to identify such problems and mitigate the same.

3. Bureaucratic process:

There is a two-stage clearance process that a successful bidder must go through. The first stage clearance requires a green signal from the relevant authorities of Government of India and the second stage clearance requires a green signal from the relevant authorities by providing a NOC. As per the regulations, NIWE acts as a facilitator to ensure all clearance is provided in a given timeline but reality suggests that there the regulations are unclear causing unnecessary delay to cross the two-stage clearance process. This is further complicated by the State Governments who may have provide separate clearances for data collection, ports etc. The effect of such long drawn can make offshore wind energy projectors unattractive for future investors. There must be a strong federal and state cooperation present to ensure that local state interests align with national interests avoiding any disturbance or turbulence in their continued perform. [17]

4. Ownership rights of grid system:

The Policy does not clearly mention the target consumer of offshore wind energy so as to enable it to have a structured path for the disposal of the energy generated. Further, there also lacks clarity in understanding the property rights of offshore grid system. In the present Grid Code, wind powered projects have acquired the status of ‘Must Run’ which means that mills can only be stopped for reasons concerning safety and security. Nevertheless, there has been abrupt interruption of power and this has caused losses in Tamil Nadu and Andhra Pradesh. [18]

5. Overriding cost

Offshore windmills due to the need of strong infrastructure are relatively more expensive than onshore windmills. The offshore windmill installation also requires extensive research of the marine environment and geological surface area of the sea. The successful bidder may sometimes have invest additionally for waterways and to figure out the transmission of power from offshore to onshore powerhouses. There are two which could potentially decrease the cost of offshore wind power which includes the clustering of windmills which are geographically built on a smaller surface area to reduce the number of transmission infrastructure. Secondly, to allow for a designated agency of India to enter into contracts of purchase and sale of power from the offshore windmills which will encourage investors to readily invest due to the security of returns.

Conclusion

The activity in the offshore wind farms is yet to pick up in India owing to certain risks attached to the construction and implementation of the offshore wind projects. However, with policy initiatives and incentives, the developers and investors will look to make use of the vast coastline the country has for electricity generation. The technological advances in turbine construction and installation will aid in bringing down the cost and making offshore projects more efficient.   

Offshore wind is capital intensive. Even if the developers and investors interest is generated by policy initiatives and exemptions, the other challenge is attracting debt for these projects. Since, the risk associated with these projects is significantly high, lenders may take a cautious approach in financing these projects. For instance,  to reduce the long-term operating risk associated with offshore wind turbines, the lenders may obtain warranties from the manufacturers guaranteeing the turbines’ performance. Given the harsh conditions in which offshore turbines operate, these warranties will be for a longer duration than those normally provided in onshore wind projects.

Given the potential of the offshore wind industry in India, it remains to be seen how the offshore wind industry will develop in the long run [19].

About the Authors 

Vibhore Chaturvedi is a Senior Associate at Fox Mandal, Mumbai.

Muskaan Singh is a 4th-year law student at University of Petroleum & Engineering Studies (UPES), Dehradun and is an Associate Editor at IJPIEL.

Deepa Shrisha is a 4th-year law student at School of Law, Christ University (SCLU), Bengaluru and is a Junior Editor at IJPIEL.

Editorial Team 

Managing Editor: Naman Anand  

Editors-in-Chief: Akanksha Goel & Aakaansha Arya  

Senior Editor: Gaurang Mandavkar  

Associate Editor: Muskaan Singh  

Junior Editor: Deepa Shrisha

Preferred Method of Citation 

Vibhore ChaturvediMuskaan Singh, and Deepa Shrisha, “Offshore Wind Farms – India’s Opportunity” (IJPIEL, 09 September, 2021). 

<https://ijpiel.com/index.php/2021/09/09/offshore-wind-farms-indias-opportunity/>

Endnotes 

[1] Anjali Lathigara, Offshore Wind Power in India: Key policy advances can lead to rapid gains for sector, Evwind (December 9, 2020). https://www.evwind.es/2020/12/09/offshore-wind-power-in-india-key-policy-advances-can-lead-to-rapid-gains-for-sector/78461

[2] National Offshore Wind Energy Policy, ¶1 (2015). 

[3] Id, ¶7.2

[4] Ajoy Halder, India: Regulatory Framework for Development of Offshore Wind Projects in India, MONDAQ
(MARCH 12, 2021).https://www.mondaq.com/india/oil-gas-electricity/1032756/regulatory-
framework-for-development-of-offshore-wind-projects-in-india

[5] Id, ¶7.2.1.

[6] Mayank Aggarwal, Draft rules for offshore wind farms: Environmental damage could lead to cancellation of clearance, MONGABAY (FEBRUARY 19, 2019) https://india.mongabay.com/2019/02/draft-rules-for-
offshore-wind-farms-environmental-damage-could-lead-to-cancellation-of-clearance/
 

[7] Vaselina Petrova, India issues draft rules to support offshore wind energy leasing RENEWABLES NOW
(FEBRUARY 4, 2019) https://renewablesnow.com/news/india-issues-draft-rules-to-support-
offshore-wind-energy-leasing-641678/

[8] Draft Offshore Wind Energy Lease Rules, cl.17, No.225 of 2018 (India).

[9] Draft Offshore Wind Energy Lease Rules, cl.22, No.225 of 2018 (India). 

[10] Draft Offshore Wind Energy Lease Rules, cl.24, No.225 of 2018 (India).

[11] Id.

[12] Climate Change Act, 2008, C.1 § 1 (Eng).

[13] Offshore Wind Policy and Market Assessment – A Global Outlook, EUROPEAN UNION AND FOWIND (DECEMBER 2014).

[14] Erneuerbare Energien Gesetz [The Renewable Energy Act (EEG)], August,2014. 

[15] Oil and Natural Gas Corporation eyes offshore wind energy projects , THE ECONOMIC TIMES (AUGUST 30,2021) https://economictimes.indiatimes.com/industry/renewables/oil-and-natural-gas-
corporation-eyes-offshore-wind-energy-projects/articleshow/85767290.cms

[16] Mayank Aggarwal, Draft rules for offshore wind farms: Environmental damage could lead to cancellation of clearance, MONGABAY (FEBRUARY 19, 2019) https://india.mongabay.com/2019/02/draft-rules-for-
offshore-wind-farms-environmental-damage-could-lead-to-cancellation-of-clearance/

[17] Prabir Kumar Dash, Offshore Wind Energy in India, 23-25, MINISTRY OF NEW AND RENEWABLE ENERGY (JUNE 2019). 

[18] Ajay Halder, Offshore Wind Power in India: Where do we stand, HALDER &amp; ASSOCIATES (NOVEMBER 1, 2019) https://www.iflr1000.com/NewsAndAnalysis/Offshore-Wind-Power-in-India-Where-do-we-stand/Index/9998

[19] Challenges in the Development and Financing of Offshore Wind Energy – Roger Williams
University Law Review (2009) https://www.downtoearth.org.in/blog/energy/india-s-offshore-wind-energy-a-roadmap-for-getting-started-78010