Govt okays viability gap funding scheme for offshore wind energy projects

The Union Cabinet has approved the Viability Gap Funding (VGF) scheme for offshore wind energy projects with a total outlay of ₹7,453 crore, including an outlay of ₹6,853 crore for installation and commissioning of 1 gigawatt of offshore wind energy projects.

This includes 500 megawatts each off the coast of Gujarat and Tamil Nadu and grant of ₹600 crore for upgradation of two ports to meet logistics requirements for offshore wind energy projects.

The VGF scheme is a major step towards implementation of the National Offshore Wind Energy Policy notified in 2015 with an aim to exploit the vast offshore wind energy potential that exists within the exclusive economic zone of India, the government says in a Cabinet note.

The VGF support from the government will reduce the cost of power from offshore wind projects and make them viable for purchase by distribution companies (discoms). While the projects will be established by private developers selected though a transparent bidding process, the power excavation infrastructure, including the offshore substations, will be constructed by Power Grid Corporation of India Ltd (PGCIL). The Ministry of New and Renewable Energy, as the nodal ministry, will coordinate with various ministries and departments to ensure successful implementation of the scheme, the Centre says.

Construction of offshore wind energy projects and its operations also require specific port infrastructure, which can handle storage and movement of heavy and large dimension equipment. Under the scheme, two ports in the country will be supported by the Ministry of Ports, Shipping and Waterways to meet the requirements of offshore wind development.

Offshore wind is a source of renewable energy which offers several advantages over onshore wind and solar projects, such as higher adequacy and reliability, lower storage requirement and higher employment potential.

“Development of offshore wind sector will lead to economy-wide benefits by attracting investments, development of indigenous manufacturing capabilities, creation of employment opportunities across the value chain and technology development for offshore wind in the country. This will also contribute towards achieving India’s energy transition targets,” the government says.

The successful commissioning of 1 GW offshore wind projects will produce renewable electricity of about 3.72 billion units annually, which will result in annual reduction of 2.98 million ton of CO2 equivalent emission for a period of 25 years, it says.

“This scheme will not only kick-start the offshore wind energy development in India but also lead to creation of required ecosystem in the country to supplement its ocean based economic activities. This ecosystem will support the development of initial 37 GW of offshore wind energy at an investment of about ₹4,50,000 crore,” the Centre says.

India will need to spend about $385 billion to achieve the country’s target of 500 gigawatts (GW) renewable energy capacity by 2030, according to Moody’s. To meet the 500GW target, India requires an annual capacity addition of around 44GW.

Moody’s estimates that the total investment needed to add the necessary 310GW of additional renewable energy capacity over the next seven years will be $190 billion to $215 billion, or $32 billion to $36 billion annually.