The Ministry of New and Renewable Energy’s (MNRE) draft policy¹ for repowering old wind power plants is a step in the right direction to increase wind power generation in the country. This can potentially kickstart investments worth Rs 40,000 crore (including the cost of acquiring and dismantling old plants) over 3-5 years, nearly 3x the average annual wind power capex seen in the past 4 fiscals.

Says Ankit Hakhu, Director, CRISIL Ratings “This may lead to replacement of ~5 GW of old windmills with new wind power plants with 2x more generation ability. Their viability looks good because such projects can generate double-digit returns at tariffs of ~Rs 4 per unit for the incremental capacity. Such a tariff can attract C&I customers through open access, because their average power purchase cost today is Rs 4-5 per unit (net of cross subsidy and transmission charges).”

Wind power capacity additions began in India over two decades ago, driven by government’s supportive policies of accelerated depreciation and feed-in tariff, and availability of sites with high generation potential.

Total installed capacity nearly tripled from ~13 gigawatt (GW) in 2010 to ~34 GW till March 2018. But most of these entailed windmills with hub height less than 100 metres, and narrower turbines of less than 1.5 megawatt (MW) capacity. They generate less per unit of capex compared with newer technologies.

After 2018, wind capacity additions slowed to ~42 GW as of December 2022. One of the key reasons for this slowdown has been shortage of wind sites with high generation potential leading to higher capital cost per unit of generation compared with solar projects. That meant wind projects needed higher tariffs, which discoms were chary of.

New windmills can operate at hub heights over 150 metres and generate more electricity per unit of machine capex using turbines of over 3 MW capacity. This can leverage high-generation-potential sites that now have the older generation turbines. For instance, a new 3 MW windmill with a plant load factor (PLF) of 34-36% can potentially generate 200% more electricity versus a 1 MW old machine at the same site with a PLF of 22-24%.

Says Varun Marwaha, Associate Director, CRISIL Ratings “The draft repowering policy paves the way for over 5 GW² repowering investments, especially in Gujarat and Tamil Nadu. The policy provides clarity on extending eligibility of older machines from 1 GW to 2 GW to be repowered, on sale of incremental generation under open access route to C&I customers, and aggregation of projects (helping pool contiguous land parcels/ projects).”

Capital expenditure per MW will be higher for repowering than greenfield projects because developers acquiring old wind sites would likely pay a premium and also incur dismantling expenses of Rs 80 lakh to Rs 1 crore per MW.

While generation will increase by 200 – 300%, the projects may still need higher tariffs (~Rs 4 per unit) than the recently discovered bids of ~Rs 3 per unit to generate double-digit returns.

Commercial and industrial (C&I) customers will find Rs 4 per unit tariffs lucrative compared with grid tariffs of Rs 7-8 per unit in Gujarat and Tamil Nadu. Developers could prefer repowering than setting up greenfield solar or wind capacity because the risks would be lower given the proven generation track record of existing wind sites. Additionally, evacuation infrastructure would already exist, including right-of-way and feeders at grid substations.

The pace of adoption and success will depend on the speed at which the policy is implemented, the clarity offered, and approvals granted by state discoms and regulators. That is because repowered projects would typically be linked to state electricity grids and will also have to service the remaining life of their extant power purchase agreements. Additionally, approvals from other stakeholders such as current lenders will also have to be taken.

¹ National Repowering Policy for wind power projects dated October 17, 2022
² Projects having less than 1 MW machines in states of Tamil Nadu and Gujarat have been considered since these sites have oldest machines and better generation potential. Hence repowering here is expected to provide most amount of incremental generation per unit capex