Wind energy awaits favourable currents
n a few weeks from now, the Global Wind Energy Council, a representative body of the wind power industry, will come out with its assessment of the industry’s performance in 2012 and the issues confronting it. It had forecast a 13 per cent growth in installed capacity in 2012. The statistics when they are released will show whether this was achieved or the forecast was optimistic. For 2013, the council has forecast a marginal drop in installed capacity.
The reasons for the uncertainty over wind capacity additions are many. Europe’s economic woes continue; demand growth is slow, non-existent or negative in most of the OECD, so demand for new power generation of any kind is slim; China has been the main driver of growth for the last five years and now it has stopped; the Chinese market is not expected to show significant growth until after 2015; Brazil, India, Canada and Mexico are dynamic markets, but cannot yet make up for the lack of growth in the traditional markets in Europe, the US and China.
WINDS OF CHANGE
India added more than 3,000 MW of wind power capacity in calendar 2011, a record for the industry in the country. But, the industry should be happy if it adds even half that in 2012. Apart from the high cost of finance, there are two specific reasons for the poor performance. One, the generation based incentive — 50 paise a unit of electricity generated — that was given to wind power projects has been withdrawn, or not yet been extended. Two, an accelerated depreciation — under which project developers could write off 80 per cent of the project value in the first year as depreciation thus reducing tax payout — has also been withdrawn. The industry would ideally like to have both the benefits restored, if not at least one. The Government has been making all the right noises, but has little to show as proof of its intention.
Therein lies the problem for the wind power industry, or the renewable energy sector as a whole. Its fortunes are tied in a large measure to the policy support that the government provides. For long, the wind energy sector has been battling image issues — that it is not a reliable source of electricity and that it is expensive. The proponents of renewable energy have been striving hard to make Green power part of the mainstream of the energy debate. They are convinced that it is, so too are the regulators, but then issues remain.
Despite this, the wind power sector is at the crossroads — sceptics say that it has been there for quite some time — and unless the Government acts fast, it will face a lot of turbulence. The industry players are themselves to blame for the fact that the two main fiscal policy instruments — generation-based incentive (GBI) and accelerated depreciation — are not available to them. The more aggressive among them felt that the GBI alone was enough and hence the industry was a divided house.
This is also a reflection of the changing dynamics within the industry. The old order is changing. Recent entrants into the sector, who, are more aggressive, are increasingly calling the shots. The ones who are more nimble and aggressive, ones who bring in the latest technology and constantly listen to what the customers want and adapt quickly to the way of doing business in India, will emerge market leaders.