Excise Duty Exemption for Wind Turbine Components: Will the move enable fast paced growth for wind sector?

Since the availability of fossil fuels and natural gas are fast depleting, it is now quintessential to look out for alternative options in order to ensure energy security for future generations. The best way to do so is to harness non conventional sources of energy like, solar, wind, small hydro etc.. The National Democratic Alliance government has pushed renewable energy to top of its energy security agenda and is looking forward to provide cheap green power to the consumers. The government is aiming to quadruple India’s renewable power capacity to 175 GW by 2022 and various measures are being taken by the government to achieve the aforesaid target. This ambitious target includes 100 GW of capacity addition through solar, 60 GW through wind and remaining 15 GW through other renewable sources of energy. In recent policy development government has exempted parts and components used in wind operated electricity generators (WOEG) like tower, rotor and blades from excise duty, a move aimed to promote wind turbine installation vis-à-vis clean energy.

Wind Power in India: A Know How

Wind Power has long history in India. The development of wind power in India began in 1990s and have significantly increased in past few years. In year 2002-03 the cumulative installed capacity of wind in India was around 0.19 GW which has significantly increased to 19.051 GW in the year 2012-13 and will be approximately 24.5 GW by the end of year 2015.

Wind Power Capacity Addition in India-eninconperspectives.com

Excise Duty Exemption: How will it help the Sector?

The exemption of excise duty, as per industry experts is a long-awaited measure and will improve the finances of wind energy farms, but the question which arises is whether this move will really help Indian Wind sector? Let us get into cost economics of a wind power plant. The installation cost of wind power project often referred to as capital cost or CAPEX includes cost incurred in setting up of wind turbine generators comprising mainly of tower, nacelle, blades etc. and it could be up to 60-64% of the total capital cost depending on the site specifications and variations in hub height.

Cost Breakdown of Wind Turbine-eninconperspectives.com

But, Indian Wind Sector is dominated by domestic players like Suzlon and Inox Wind. These companies are providing WTGs at cheap price as compared to international OEMs. In order to understand cost matrix the Wind Turbine Manufacturers (WTMs) have been divided under three categories according to their price bands. Band I caters to WTMs like Inox Wind, Band II caters WTMs like Gamesa and Suzlon and Band III caters to WTMs like GE, Alstom and Siemens.

Price Band of Different WTMs-eninconperspectives.com

With the acute need of electrification and higher energy production in the country, wind energy is going to provide an increasingly significant share of renewables based capacity, and these kind of initiatives will further help to revive the sector by enhancing competition amongst the players. Regulatory and Policy framework plays a vital role in the development of the sector and it is evident from the fact that the wind sector was hit adversely after 2012 when GBI (Generation Based Incentive) and Accelerated Depreciation (AD) scheme were rolled back. However, the wind sector again picked up in 2013 when GBI was reinstated along with introduction of low cost financing. AD scheme was reinstated in 2014 and technological improvements were seen by domestic and global players like GE, Gamesa, Suzlon, Wind World, Inox Wind etc.

Therefore, it can be said so that these kind of National Policy Supports are paving way for the brighter future of wind sector in India and will help the sector to attain the required pace in the near future.

*The views expressed in this article are solely those of enincon perspectives and do not necessarily represent those of Enincon LLP.

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