CDM: cheering wind projects in india

8/9/2019 CDM: cheering wind projects in india

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CDM: CHEERING WIND ENERGY PROJECTS

IN INDIA


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Abstract:

One of the alternative form of energy is being considered today is wind power. The

cumulative installed capacity of wind power project is far below their gross potential.

India is perceived to be one of the most attractive Non-Annex I countries for CleanDevelopment Mechanism (CDM) project development. There are more than 1500

projects in the CDM pipeline out of which 418 projects are of wind energy. The total

potential for wind power in India was first estimated by the Centre for WindEnergy

Technology (CWET) at around 48 GW. In India wind development started in 1990s but

in recent years it grew at a faster pace after 2005(Kyoto Protocol came into force). One of

the major barriers in wind development is high investment on its equipments. Wind

power projects would of interest under CDM because it directly displaces the GHG

emissions. The main objective of the present study is to analyze the factors cheering

Wind Power Project of CDM in India. The wind power installed capacity of India in year

2000 is 1075.7 MW (indiastat.com) but at the end of 2009, wind power installedcapacity

of India is more than 10,927 MW (GWEC). In this study, an attempt has been made to

analyze and review the development of wind energy in India and how CDM made impact

on wind power industry in India.


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Introduction

At the UN Conference for Human Environment in Stockholm in 1972 pollution was the

main theme of the agenda. The meeting drew attention to the fact that something

dramatic was happening to environment and that the parties present should find out about

the effects and causes and take voluntary steps towards reducing pollution . Eighteen

years later the UN General Assembly launched United Nation Framework Convention on

Climate Change (UNFCCC). In 1992 during the UN Conference on Environment and

Development the UNFCCC was opened for signature and 189 parties make an agreement

for reducing emission of Green House Gases (CO2, CH4, N2O, HFC, PFC, SF6),

responsible for Global Warming. After this conference the progress has been reviewed

every year. The Conference of Parties held at Kyoto, Japan on 11 December, 1997 was

the landmark, the signatories in Kyoto committed to reduce their emissions by 5.2 %

from the level of 1990 over the five year period 2008-2012. This is known as Kyoto

Protocol and was entered into force on 16 February, 2005.

The major feature of the Kyoto Protocol is that it sets binding targets for 37 industrialized

countries and the European community for reducing greenhouse gas (GHG) emissions.

The reason is that these countries are principally responsible for the current high level of

GHG emissions in the atmosphere as a result of more than 150 years of industrial

activity.

One of the provisions of the Kyoto protocol, known as Clean Development Mechanism

allows developed countries to finance GHG emissions avoiding projects in developing

countries, and receive credits for doing so, which they may apply towards meeting

mandatory limits on their own emissions . CDM allows developing countries to generate

CER (Certified Emissions Reduction) and sale of CER helps to accelerate development

of wind energy in India. This opportunity will help the Indian industry to make profits by

investing in less pollutant and clean renewable projects based solar, wind, small hydro

electric and biomass energy resources. The estimation shows that India has vast potential

of CO2 mitigation by using wind energy.


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Wind Condition in India

Wind in India is influenced by the strong south-west summer monsoon, which starts in

May-June, when cool, humid air moves towards the land. The weak north-east winter

monsoon, starts in October, when cool, dry air moves towards the ocean. During the

period March to August, the winds are uniformly strong over the whole Indian Peninsula,

except the eastern peninsular coast. Wind speed during the period November to March

are relatively weak, though higher winds are available during a part of the period on the

Tamil Nadu coastline. This feature of India has been of interest amongst private investors

in setting up commercial wind power projects in India.

Figure: Wind power potential in India(Source: Centre for Wind Energy Technology (C-WET), Government of India)


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Wind Power and CDM

The CDM project development process in India picked up in early 2002. The main

objective of Kyoto Protocol is to stabilize GHG concentrations in the atmosphere at a

level that would prevent dangerous anthropogenic interference with the climate system.

The CDM allows Annex I parties to implement wind project in India to reduce GHG

emissions. On the one hand CDM allows Annex I countries to achieve their commitments

in cost-effective manner and on the other hand it helps Non Annex I countries to achieve

sustainable development.

CDM stimulate investments from Annex I countries in wind power and assist developing

countries like India to achieve sustainable development with lower GHG emissions. The

income earned by CERs increases the total income of a project and improves the

competitiveness of wind power against fossil power generators. To qualify a wind power

project as a CDM project, it has to go through the clearly defined process to ensure real

emission reduction. The steps in project registration of CDM are:

InInvests in a

Annex I countries CDM Projects Non-Annex I countries


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Effectiveness of CDM in India

The wind energy sector in India has a sustainable development since more than a decade.

Wind energy is seen by Indian governments and business developers as one of the best

solutions to provide clean and affordable electricity. One major hurdle in the

development of wind projects in India is certainly the lack of financing, for which CDM

was created as a solution.

CDM plays a vital role in financing wind power projects in India. More than 80 projects

have been registered in CDM till 2010, contributing 20% of total wind power projects

registered globally. This can be seen by increasing number of wind projects in CDM

pipeline till March 2010.

The wind power industries are rushing to get carbon credits from CDM but are facing

difficulty on its convoluted rules and processes. Most wind power installations have

already applied for CDM, or are in the process of doing the same. Of the

1578 CDM projects from India, about 418 (approx. 30%) are wind power projects. If all

projects in the pipeline get registered, it would add up to 7,170 MW, roughly 72 percent

of the installed capacity. The statistics of total number of large and small scale Indian

wind energy projects in the CDM Pipeline are shown as:


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Projects in CDM Pipeline

State Total Large Scale capacity Total Small Scale capacity Total

Gujrat 646.35 332.75 979.1

Andhara Pradesh 0 18 18

Karnataka 1070.7 267.225 1337.925Maharashtra 961.15 441.2 1402.35

Madhya Pradesh 64.9 55.25 120.15

Kerala 0 12.8 12.8

Rajasthan 500.55 204.625 705.175

Tamil Nadu 1927.6 667.2 2594.8

Total 5171.25 1999.05 7170.3

Source: CDM Pipeline (as seen on 31 March 2010)

The CDM has a unique role in making projects viable for companies in India. In order

that a large number of high-quality CDM projects are developed in India and result in

Certified Emission Reductions as specified by the international CDM Executive Board,

the finance from CDM in India has to be suitably geared up.


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Wind Power Industry in India

The Indian Wind Industry became a global player in past few years. The progress of wind

energy generation in India makes the country one among the top rankers in the world.

World capacity reached 159,213 MW (World Wind Energy Report 2009) out of which

India has contributed 10,925 MW. The installed capacity of top ten countries in 2008 and

2009 is given as:

Source: World Wind Energy Report 2009

India is playing an important role in the worlds wind energy market. By 2005 India was

fourth largest in the global wind market and now ranks fifth in total installed capacity.

The positive development of wind energy in India has mainly been driven by progressive

state level legislation, including policy measures such as renewable portfolio standards

and feed-in-tariffs. At the moment, there is no coherent national renewable energy policy

to drive the development of wind energy. The total installed wind power capacity in India

from 1991 to 2009 can be seen from the chart


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0

2,000

4,000

6,000

8,000

10,000

12,000[MW]

39

39

79

185 576 820 940 1,015

1,077

1,220

1,456

1,702

2,125

3,000

4,430

6,270

7,845

9,655

10,92

6

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Cumulative Installed Wind Power Capacity in MW from 1991-2009

(Data Source: Earth Policy Institute - Eco-Economy Indicator)

Wind power in India is concentrated especially in southern state Tamil Nadu and it is the

state having largest wind power with 4.57 GW installed at the end of 2009, contributing

41.9% of total installed wind power in India. Other states like Maharashtra, Gujarat,

Madhya Pradesh and Karnataka are also the major player in this field. The major

contribution made by different states till 2009 can be seen in the chart.

State wise Installed Wind Power in MW till 2009

Gujarat

16%

Karnataka

13%

Maharashtra

19%

Madhya

Pradesh2%

Rajasthan

8%

Tamil Nadu

42%


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Development of wind power projects in some States of India before and after 2000

At the end of March 2010 National CDM authority of India has approved 418 wind

projects. Although India has started wind power development in 1990s, the CDM projects

have picked up in August 2002 after signing and ratifying Kyoto Protocol. We can see

the total installed wind capacity in different states of India from 1992 to 2000 is 1075.7

MW.

States Up to

March

1992

March

1993

March

1994

March

1995

March

1996

March

1997

March

1998

March

1999

March

2000

Total

installed

capacity

Gujarat 14.5 1.6 10.6 37.7 51.2 31.1 20.1 0 0 166.8

Karnataka 0.6 0 0 0 2 3.3 11.2 2.6 14.6 34.3

Madhya

Pradesh

0.6 0 0 0 6.3 2.7 2.7 6.2 4.1 22.6

Maharashtra 1.1 0 0 1.5 0 2.8 0.2 23.3 50.3 79.2

Rajasthan 0 0 0 0 0 0 0 0 2 2

Tamil Nadu 22.3 11.1 50.5 190.9 281.7 119.8 31.1 17.8 45.6 770.8

Source: www.indiastats.com

Installed Capacity by Region before year 2000

Yearwise Growth of wind power (Capacity in MW)-1992-2000

0

50100

150

200

250

300

350

400

Upto

March

1992

March--

1993

March--

1994

March--

1995

March--

1996

March--

1997

March--

1998

March--

1999

March--

2000


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As Kyoto Protocol came into force in 2005, the wind power development geared up and

the possibility to register projects under CDM has provided a further incentive to develop

wind energy in India. The necessary condition for a project to be registered in CDM is

that it should be developed after year 2000. CDM plays a certain role in financing of

wind farms in India, so that number of CDM projects in wind energy increases

continuously every year after 2000 as the statistics says.

State March

2001

March

2002

March

2003

March

2004

March

2005

March

2006

March

2007

March

2008

December

2009

Total

installed

capacity

Gujarat 0 0 6.2 28.9 51.5 84.6 284 616.4 458.9 1530.5

Karnataka 10.4 24 55.6 84.9 201.5 143.8 266 190.3 379.2 1355.7

Maharashtra 110.6 209.4 2 6.2 48.8 545.1 485.3 268.2 248.5 1924.1

Madhya

Pradesh

0 0 0 0 6.3 11.4 16.4 130.4 25.1 189.6

Rajasthan 5.3 8.8 44.6 117.8 106.3 73.3 111.8 69 317.5 854.4

Tamil Nadu 41.9 44.9 132.8 371.2 675.5 857.6 577.9 380.7 722.8 3805.3

Source: www.indiastats.com

Installed Capacity by Region after year 2000

Yearwise Growth of wind power (Capacity in MW)-2001-2009

0

500

1000

1500

2000

2500

March --2001

March --2002

March --2003

March --2004

March --2005

March --2006

March --2007

March --2008

December--2009

From above two tables and graph, we are able to see the growth of wind projects in CDM

pipeline. From the graph shown above, it is clear that most wind power projects are

developed after 2005


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Facilities provided by Government of India to Influence Wind Projects in India

The promotion of renewable energy in India is mainly driven by state governments.

There are so many factors supports Indian and outside bodies to deploy wind power

projects in India internally as well as externally. Some of these factors are discussed here.

National Policies

The Indian government has envisaged a capacity addition of more than 70,000 MW by

2012. The grid infrastructure problems are getting more pressing as installed capacity

grows. The Indian governments stated target is for renewable energy to contribute 10%

of total power generation capacity and have a 4-5% renewable share in the electricity mix

by 2012. This means that renewable energy would grow at a faster rate than traditional

power generation, accounting for around 20% of the total added capacity planned in the

2008- 2012 timeframe.

The ministry for new and renewable energy (MNRE) issued guidelines to all state

governments to create an attractive environment for the export, purchase, wheeling and

banking of electricity generated by wind power projects. The support for wind power in

India includes the following measures:

Fiscal and financial incentives

Concession on import duty on specified wind turbine parts

80% accelerated depreciation over one or two years

10 year income tax holiday for wind power generation projects

Excise duty relief on certain components

Some states have also announced special tariffs, ranging from Rs 3-4 per kWh,

with a national average of around Rs 3.50 per kWh

Wheeling, banking and third party sales, buy-back facility by states

Guarantee market through a specified renewable portfolio standard in some states,

as decided by the state electricity regulator by way of power purchase agreements

Reduced wheeling charges as compared to conventional energy land policies:


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The Ministry of Environment and Forests has issued guidelines for diversion of

forest lands for non-forest purposes, particularly to enable wind generation

Clearance of leasing and forest land for up to a period of 30 years for wind

developers.

Financial assistance

Indian Renewable Energy Development agency (IREDA) is the premier finance agency

of the government of India that provides loans for renewable energy projects, particularly

for demonstration and private sector projects.

Wind resource assessment

The government set up the Centre for Wind Energy technology (C-Wet) to map wind

energy potentials The C-WET has set up more than 1,000 wind monitoring and wind

mapping centers across 25 states Wind mapping at 50 meters (C-WET) and 60-80 meters

height (private companies).

Why go for CDM?

CDM is supposed to be Win-Win condition in India. The project developer gets CER

for reducing GHG and meet Kyoto target in cost effective manner. CDM helps them toget financed from banks or financial institutions that encourage private sector

involvement in global GHG reductions. Some further benefits to participate in CDM can

be seen as:

Financial coordination

The foremost important aspect here which IREDA cannot control is the span of Return of

Investment for the business to reach the destined Break-Even point. Thus, in such a case,

the CDM comes into picture and thereby the projects on deployment are subjected to

financial aids that are covered in CDM. Thus, the CDM makes the business a very high

profit making prospect which was earlier a very long span of investment which

discouraged the projects in India. Thus, CDM has certainly accelerated and promoted the

Wind Power Projects in India.


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As a source of Foreign Currency

There are many Forms of Foreign Capital Flowing into India such as banking and NRI

deposits. CDM funded Wind Power Projects are one of them which is another attractive

opportunity. The various Forms of Foreign Capital Flowing into India has helped to bring

in huge amounts of Foreign Direct Investment (FDI) into the country, which in its turn

has given a major boost to the Indian economy and is profitable proposition for the

country.

Employment

As the wind energy market grows in India, it will create employment through

manufacture, component supply, wind farm development, installation and also the

indirect employment.

CO2 Reduction

The most important benefit of wind power generation is the reduction in the level of

Carbon dioxide into the environment. CO2 is responsible for GHG effects and distorts the

climate. CDM encourage the project participant for investing in wind power projects and

in this way it helps in CO2 reduction from global environment.

Development

Through CDM, India has been supported to run on a sustainable development track

without compromising their ability to meet future GHG reduction commitments while

annex 1 countries are able to meet their commitments at a lower cost.


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Conclusion

The Kyoto Protocols efforts to mitigate climate change have resulted in an international

carbon market in India that has grown tremendously since the entry into force of the

Protocol in 2005. A very wide category of renewable energy projects mainly wind energy

projects, are launched under CDM.

The clean development mechanism has contributed to the deployment of wind projects in

India. The arguments presented here, shows the growth of wind power projects after

CDM came into picture. The above graph and figures shows that there is very vast

potential of CO2 mitigation through wind energy. India has about 48 MW wind potential

and CDM could help to achieve the maximum utilization of wind potential as compared

to the current diffusion trend if supportive policies are introduced. The CDM has

potential to attract investors for deployment of wind power projects in India. Thus all in

all with out CDM aid such growth of wind energy in India is not possible.


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Reference:

http://business.mapsofindia.com

http://www.wikipedia.com

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CDM: cheering wind projects in india