Wind in favour: Renewed investor interest seen in wind energy sector

By: | Updated: November 12, 2014 1:27 AM

The sluggish wind energy sector has started getting some tailwinds. With the Narendra Modi led government...

The sluggish wind energy sector has started getting some tailwinds. With the Narendra Modi led government aiming to drive the country towards energy sufficiency, there is renewed interests from global and domestic investors in funding wind power projects.

The first nine months (January-September) of 2014 saw transactions worth more than R5,000 crore in the domestic wind energy space. Global investors such as Goldman Sachs, Asian Development Bank (ADB), GE Energy Financial Services, Deutsche Investitions-und Entwicklungsgesellschaft (DEG) and Proparco have bet their funds on Indian wind projects.

Data compiled by Mercom Capital Group shows the funds have flowed into the country via venture capital financing, overseas bond sale and project financing.

The-Way-it-blows

“Investments into wind energy are set to grow in India anywhere between 15 and 20% in the next two-three years. Grid connected wind and solar farms, EPC (engineering, procurement, construction) for these sectors and off grid solutions are the most attractive for investors. Government has set the target of generating 30,000 MW in five years”, said Sumant Sinha, chairman and chief executive officer of ReNew Power, a renewable energy company.

Equity investments in Sinha’s ReNew Power, founded in 2011, have $390 million (about R2,200 crore) after investments from Asian Development Bank (ADB), GEF SACEF India and Goldman Sachs.

In 2013 full year, says Mercom Capital Group, a global clean energy communications and consulting firm, the Indian wind energy space saw transactions worth more than R6,000 crore. Last year, companies such as ReNew Wind Power, NSL Renewable Power and Green Infra received venture capital financing, while others firms such as Continuum Wind Energy and Orange Jaisalmer Wind Energy got their project financed by domestic and international agencies (see table).

The bonds launched by the wind firms have also seen a good response. In 2014, Greenko Group issued five-year overseas bonds to mop up about R3,300 crore.
The funds were raised by its international arm Greenko Dutch BV and guaranteed by the parent, shows data from Mercom  Capital. In 2013, Suzlon Energy Limited raised about R3,533 crore via bond issues.

“The cost of renewables is becoming very competitive with conventional power, and more so when you factor in market pricing for conventional fuel. And if you take a step further and factor in the externalities of the environmental damage and health issues it causes, then renewables is by far the most preferable source of energy in the long run. If everything goes according to expectations then during 2014-15 wind capacity addition is likely to cross 3,500 MW”, said Sinha.

Industry watchers are of the view that the government has the power to create markets and policies that accelerate the development and deployment of clean energy technology. Clear and predictable policy support, which is now being provided by the new government, is vital in propelling investor interest in this sector.

A package of fiscal and financial incentives is available for the wind sector in India, which includes concessions such as 80% accelerated depreciation, concessional custom duty on specified items, excise duty exemption, sales tax exemption and income tax exemption for 10 years, among others. In addition, State Electricity Regulatory Commissions (SERCs) are determining preferential tariffs for electricity generated from renewable sources. The Indian Renewable Energy Development Agency (IREDA) provides loan for setting up wind power projects, said a senior official at ministry of new and renewable energy (MNRE).

India has an installed wind energy capacity of 21,141.36 MW as on March 31, 2014. In wind power installed capacity, India is ranked fifth in the world after the USA, China, Germany and Spain.

The potential is far from exhausted. The Indian Wind Energy Association has estimated that with the current level of technology, the on-shore potential for electricity generation from wind is a massive 102 GW.

The potential for wind power generation for grid interaction has been estimated at about 48,500 MW, counting sites having wind power density greater than 200 watts per square metre at 50 m hub-height with 1% land availability in potential areas for setting up wind farms @12 ha/MW, the ministry has calculated.

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