Role of Public Policies & Financing Techniques in Promoting Wind Energy

Presentation by –
Swapnil Gore
MS in Energy Technologies
Stony Brook University, NY
swapnil.energy9@gmail.com

Sector Overview
 Wind Power commercialized in 83 countries
 Top 5 - China, US, Germany, Spain & India
 Total installed capacity – 198 GW
 Overall investment in wind power sector in 2010- $96bn


Wind Energy Generation- Brief
 Broad Classification: Onshore
& Offshore
Onshore:
 Capital Costs: 1 to 1.5 million
USD/MW
 Capacity Factor: 20% to 35%
 Trends: High capacity units
 Largest Operating Project:
Roscoe Wind Farm in Texas
with a capacity of 781.5 MW
 Largest Turbine: Enercon E126, 6
MW capacity

‘Three-bladed, upwind, variable-speed,
pitch-regulated turbines currently
dominate the industry’

Project Details Considered
 Country Name: Windland
 Current installed Wind Power: 45 MW
 Wind Power Generation Target: 6500 MW by 2020 viz. 10% of total
electricity consumption
 Emission Factor considered: 0.933

Wind Farm specifications:
 Project Capacity: 25 MW
 Lifetime: 20 years
 Capital Cost: $28.55 million ($ 1.142 million/MW)
 Turbine Used: Vestas V47 – 55m, 32 units of 660 kW
 Capacity Factor Derived: 27.4%
 O&M costs: 3% of initial
 CER generation: 56,132/yr
 FIT announced- 5.2 US cents (base tariff of 3.2 cents + Production
premium of 2 cents)
 Energy Resource- Wind speed of 8.0 m/s at 55m is considered

Development Barriers


Policy Formulation Strategy


Policy Model
 Resource Assessment
 Soft loans (1.5 %)  Technical Assistance
 Publicly Backed Guarantees  Single Window clearance*
 Accelerated Depreciation Option*  Strengthening Grid
 Exemption from Import duty* Infrastructure
 CDM benefits  Mandatory RPS*
 Strong PPA
 Standards & Testing
 SEZ formations*
FiT Premium*  Informational systems
(Competitive bidding approach proposed)  Human Resource
Development

Renewable Energy Asset Financing

Key funding Sources
Capital Markets (Domestic & International)
Sectoral Public Private partnership (Like the GET-FiT programme by Deutsche Bank; the South African Wind Energy Programme
in collaboration with GEF & UNDP for premium pricing model)
Concessional & development finance (National banks, Government Energy Finance Institutions, Multilateral/Bilateral FIs)
Public Funding Sources (like GEF, UNDP, WB) swapnil.energy9@gmail.com

*Elaborated
 FiT Premium: This premium pricing mechanism may be introduced by competitive bidding approach (with
$0.02 being the maximum price) for most cost effective fund utilization

 Accelerated Depreciation option: Wind power developers availing the accelerated depreciation would get
only 50% of FiT premium

 Mandatory RPS scheme for 8 years with annual increase of 1.25% up to 10% by 2020, would help in
achieving the target of 6500 MW.

 Import Duty exemption: Projects established in the first 2 years would only be eligible for this benefit,
from 3rd year domestic material obligation would be introduced to boost wind equipment manufacturing.
(Approach followed in China & India)

 SEZ formation: Establishing Special economic zones in high wind resource regions to provide lands on long
term lease to wind project developers or manufacturers, also they would get the benefits given to other
industries

 Single Window Clearance Mechanism: All licensing and project related approvals to be done by a single
government agency (resolves the issue of uncoordinated authorities & the delay due to it)


ReTScreen Analysis Models
Model 1:
Commercial loan (10
%) with no other
financial assistance

IRR: -2.8%
YPCF: Not in lifetime
NPV: $ - 12,081,827
B-C Ratio: -0.55


Analysis Models…contd.
Model 2:
Soft Loan (1.5 %) with
no other financial
assistance

IRR: 2.4%
YPCF: 17.5
NPV: $ - 7,138,871
B-C Ratio: 0.08


Analysis Models…contd.
Model 3:
On implementation of the
Policy Model
Soft Loan (1.5 %)
FiT premium ($0.02/kWh)

IRR: 15.1%
YPCF: 7.6
NPV: $ 39,489
B-C Ratio: 1.01


Attractive Model
Model 4:
Policy Model inclusions
Soft Loan (1.5 %)
FiT premium ($0.02/kWh)

Additional Financial
Assistance 0f $12 million
Sources- Funds raised after
cutting down fossil fuel
subsidies; Financial
Assistance from Multilateral
& Bilateral FIs and other
philanthropic bodies; Carbon
Tax
FiT being the most accepted
approach to attract
investments, these funds
would be given as additional IRR: 21.8% YPCF: 5 NPV: $ 3,628,669 B-C Ratio: 1.47
FiT premium of $0.01/kWh

Roadmap
for overall Wind sector development of Windland


Other Innovative Development Measures
 Establishing wind zones in country with variable FiT corresponding to WPD
 HVDC transmission system to be established for Onshore & offshore projects
 Training and awareness workshops. Inclusion of wind technology concepts in school
curriculum to attract interest of youth.
 A single window clearance for all project approval & licensing processes, and to be made
online for increased transparency & tracking
 Encourage R&D in top national technical education institutions, declaring grants for each new
patent registration
 Deployment building integrated solar-wind hybrid OR mini stand-alone wind power systems,
beneficial for unelectrified areas. Net Metering option.
 Progressive Incentive policies & subsidy programs. Moving from commonly-used Inverted
Block Tariff (IBT) to Volume Differentiated Tariff (VDT) structures, where the lowest price for
the lowest block is only available to the poor, can help to improve the targeting of electricity
subsidies.
 PBGs for risk sharing


Thank You
Presentation by –
Swapnil Gore
MS in Energy Technologies
Stony Brook University, NY

“It can shape mountains. It can move oceans.
Now the wind can even heat up your toaster”

Annexures: ReTScreen Analysis


Role of Public Policies & Financing Techniques in Promoting Wind Energy

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