In a view to accelerate the holistic development of offshore wind energy in India, Ministry of New & Renewable Energy (“MNRE”) on August 17, 2023, released the ‘Strategy for Establishment of Offshore Wind Energy Projects’ (“Strategy”). This Strategy outlines a structured approach to facilitate the development of offshore wind farms, aiming to meet the nation’s renewable energy targets and implementing transparent procedures. The Strategy document is discussed hereinbelow.
Background:
The Government of India on October 6, 2015 notified the National Offshore Wind Energy Policy, 2015 (“Policy”) for the development of offshore wind power in the country. This Policy framework allows for offshore wind power development up to a distance of 200 nautical miles from the baseline, encompassing India’s Exclusive Economic Zone (“EEZ”). MNRE was designated as the nodal ministry and National Institute of Wind Energy (“NIWE”) as the nodal agency for offshore wind energy developments in India.
NIWE conducted preliminary studies across the coastline of India. The studies indicated a substantial offshore wind potential off the southern tip of India and the west coast. The offshore wind potential was assessed by NIWE and the Facilitating Offshore Wind in India (“FOWIND”) consortium. Based of a multi-criteria approach involving parameters such as wind resource, bathymetry etc., NIWE and FOWIND identified eight zones each off the coasts of Gujarat and Tamil Nadu with high potential for offshore wind farms. The Strategy document also provides for an indicative auction trajectory for offshore wind projects, the approach for the three models is elaborated below.
Proposed Models:
The Strategy proposes three models to fast track the process and ensure a comprehensive growth. The following models are discussed hereinbelow:
Model A (VGF Model)
- Applicability
This model will be applicable to those demarcated offshore wind zones, where MNRE/NIWE has conducted or plans to conduct detailed studies or surveys. In phase-I of the model, 0.5 GW off the coast of Gujarat and an equivalent site off the Tamil Nadu coast will be considered (part of identified zone B3). MNRE will invite bids for procurement of offshore wind power capacity under this model.
For the initial offshore wind power projects, central financial assistance in form of viability gap funding (VGF) or any other financial incentive as decided by the Government of India will be provided to achieve the predetermined power tariff.
- Bidding process for site allocation
For Model A, a single-bid, two stage process followed by an e-Reverse Auction (e-RA) will be adopted wherein stage-I clearances have already been accorded. The e-RA will be based either on the tariff or the VGF amount required to make the project viable with a pre-determined tariff. The Solar Energy Corporation of India (SECI) shall be responsible for the bidding process. The document specifies the initial investigations undertaken by NIWE for a seabed area, off the coast of Gujarat, with an equivalent capacity of 1.0 GW for development of offshore wind project.
- Development Process
For Gujarat, MNRE or the designated agency will enter into a 35 year lease agreement with the successful bidders (“Developers”) in accordance with the lease rules to be notified. The Developers are required to pay the annual floor lease fees of Rs. 1 lakh/sq.km/year for the entire lease period and achieve stage-II clearances for installation and commissioning of offshore wind project. Thereafter, MNRE and the Developer shall enter into a concession agreement and the Developer shall commission the project within 4 years from the date of the concession agreement and in any case within 5 years. The sale of power will be managed through SECI or implementing agency. Eligible Developers shall be provided suitable financial incentives like VGF.
For Tamil Nadu, a site with an equivalent capacity of 1.0 GW has been identified. NIWE shall conduct the necessary surveys and float a bid for a 500 MW project. The procedure for project development would be similar to the process undertaken in Gujarat.
Model B (Non-VGF Model with Site Exclusivity)
- Applicability
This model is applicable for those sites identified by NIWE which focusses on offshore wind project development for the sale of power under open access, captive use, third party sale, bilateral power purchase agreement, or through power exchanges without any financial assistance from the government. The government may also call for bids for procurement of power for DISCOMs on the basis of tariff after two years.
- Bidding process for site allocation
(i) MNRE in consultation with NIWE shall identify offshore sites based on the required project capacities.
(ii) Allocation shall be done via competitive bidding process carried out under a single stage two envelop process which includes a technical bid and a financial bid.
(iii) The selected Developer must establish an assigned minimum installable wind power capacity; however, the Developer is free to establish addition capacity to optimize site utilization.
(iv) The allocation of sites will be based on competitive criteria outlined in the Request for Selection (RfS).|
(v) The sites would be provisionally allocated to the successful bidders for a period of two years to conduct necessary surveys.
(vi) MNRE will issue a 'Letter of Consent' to the selected bidders for carrying out offshore wind measurements and surveys after obtaining necessary clearances.
- Development Process
The Developer is required to submit a detailed project report and enter into concession and lease agreement, for a period of 35 years for the project development and power sale. Government may call for bids for procurement of power for DISCOMs on the basis of tariff after 2 years. The developer must commission the project within 3 years from the date of the concession agreement. The Developers are required to pay the site allocation fee for a period starting from the survey lease agreement till the commercial operation date of the project, thereafter, lease fee as per the floor price is to be paid by the developer till the end of the lease agreement. After the study/survey period, clearances issued to Developers will be withdrawn, and they must relinquish the lease and deposit the acquired data.
Initial potential sites for 14 GW offshore wind capacity are proposed under Model-B. The first bid for 4.0 GW capacity is tentatively planned for December 1, 2023, followed by a second bid for 3 GW in the financial year 2024-25.
Model C (Non-VGF Model without Site Exclusivity)
- Applicability
This model will be applicable for the sites identified by the developers within the EEZ, excluding those sites that are identified under Model A and Model B.
- Bidding process for site allocation
The developer may select any site within the EEZ excluding the sites already identified under Model A and Model B and submit a proposal for survey to NIWE with the required details as per the Guidelines for Wind Power Assessment Studies/surveys issued by NIWE. For the development of the offshore wind power project, NIWE will facilitate as a one stop shop for coordinating and obtaining stage-I and stage-II clearances.
In case, more than one Developer proposed to conduct study or survey in the same site, there will be a minimum gap of 1km between the mast location/LIDAR site & bore holes of each of the developers. The sites will be allocated for study/survey for a period of three years, on a first come first serve basis, after receiving an in-principal approval and consent letter from NIWE.
The government will initiate the bidding process for the development of project/allotment of seabed, in any one of the following methods:
(i) Bidding on lease, allocation fee, revenue sharing in case of open access, captive use, or third party sale.
(ii) Tariff based competitive bidding in case of power procurement by DISCOMs, central/ state governments.
(iii) Any other transparent bidding mechanism as identified by the government.
The developers who have conducted surveys of respective sites can also submit proposals for project development under this model. In such case, site specific bidding shall be conducted with the first right of refusal to the developer who had conducted the survey, and project development shall be carried out without any financial assistance.
- Development Process
MNRE or its designated agency and Developers shall enter into a concession and lease agreement for a period of 35 years, and the Developers shall commission the project within 4 years from the date of the concession agreement. The Developer is required to not share the survey data with any third party.
Connectivity with the grid:
The Developer shall be responsible for set up of offshore wind projects, inter-array cables, and transmission of power up to offshore interconnection point. The Central Transmission Utility shall be responsible for the development of off-shore sub-station and transmission infrastructure beyond such point.
Metering:
The metering shall be done at the connecting point as per the metering regulations.
Advantages:
The benefit of waiver of Inter State Transmission System (ISTS) charges will be applicable to all projects commission until December 31, 2032.
For projects commissioned under Model B, benefits like provision of power evacuation infrastructure from the off shore pooling delivery point, renewable energy credits with multipliers, carbon credit benefits etc., as determined by the central/state government from time to time shall be applicable.
For projects commissioned under Model C, benefits like provision of power evacuation infrastructure from the off shore connecting point, renewable energy credits with multipliers, carbon credit benefits etc., as determined by the central/state government from time to time shall be applicable.
Review:
The Strategy document shall be reviewed by MNRE from time to time.
Please find attached a copy of the Strategy.
This update has been contributed by Rachika Agrawal Sahay (Partner), Siddhant Satapathy (Senior Associate) and Sirisha Prasad (Associate).
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