Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
DETAILED STUDY ON
WIND POWER PROJECT DEVELOPMENT
&
FINANCIAL MODELING
At
Regen Powertech Private Limited
Submitted by
I, Shivam Kumar Harsh, Roll no.12/MBA/80, class roll no-80 3rd year student of MBA
(Power Management) at National Power Training Institute, Faridabad, hereby declare that the
summer training report programme of the National Power Training Institute, Faridabad
Is an original work and the same has not been submitted to any other Institute for the award
A Seminar presentation of the Training Report was made on ……………….. and the
Countersigned
ii
ACKNOWLEDGEMENT
I feel deep sense of gratitude towards Mr J.S.S. RAO, Principal Director, CAMPS (NPTI),
Mr S. K. Chaudhary, Principal Director, CAMPS, Mrs Manju Mam, Director, CAMPS
(NPTI)and Mrs Indu Maheshwari Dy. Director, NPTI, Dr Rohit Verma, Dy. Director,
NPTI for arranging my internship at ReGen Powertech Private Limited. I also take this
opportunity to express my sincere thanks to Mrs Rachna Vats (Senior Fellow), NPTI for
being my internal project guide and providing valuable inputs in the completion of this
project.
.
iii
EXECUTIVE SUMMARY
In 2013 May Indian power sector reached a tremendous milestone of achieving 2,25,000 MW
of total installed power capacity. Commencing with a meagre installed capacity of about
1360 MW in 1947, the year the country attained independence, India’s power sector grew
substantially over the last six and a half decades, and the installed capacity at the end of June
2012 stands at 2,05,340 MW. However contribution of renewable power is 27,541 MW,
which is only 12.2% of the total installed capacity. Further, the Government of India desires
to significantly improve the country's annual per capita consumption. The government has
not been successful in its efforts to achieve per capita consumption of 1000 units and to
ensure a minimum lifeline consumption of 1 unit per household per day as a merit good by
the year 2013. In order to achieve this scale of supply and ensure sufficient electricity to all at
reasonable rates, it is necessary to explore all possible options of generating and supplying
electricity.
The need for defining an effective and comprehensive wind power project implementation
methodology for India is imperative. Not only there are growing uncertainties about the
critical as well as sub critical activities of wind power projects implementation, but the
information associated with them is meagre and highly dispersed in nature and is not easily
available. Insufficient information may lead to misleading decisions by project developers
and investor’s. Many wind power project investments are not implemented, not because of
financial, technical, commercial, managerial or regulatory aspects, but merely because of
procedural complexities and inadequate guidelines about them.
iv
Therefore this study is intended to explicate a generalized methodology for wind power
project implementation. This methodology will act as a source of knowledge for wind energy
power project implementation to the stakeholders of the Indian power sector.
This report includes all the major steps that are required to take for putting in place a wind
power project. It starts with project and financial planning procedure followed by factors that
need to be taken into consideration for selecting a state of preference. The project then guides
about feasibility study, wind resource assessment, site survey, micro-siting, land acquisition,
financial planning & strategy, and power sale options. The project also includes financial
modelling that can help the investor in his decision of whether to accept or reject the project.
v
LIST OF ABBREVIATIONS
vi
LIST OF TABLES
vii
LIST OF FIGURES
viii
Table of Contents
TRAINING COMPLETION CERTIFICATE ..................................................................................................... i
DECLARATION ......................................................................................................................................... ii
ACKNOWLEDGEMENT ............................................................................................................................ iii
EXECUTIVE SUMMARY ........................................................................................................................... iv
LIST OF ABBREVIATIONS ........................................................................................................................ vi
LIST OF TABLES ...................................................................................................................................... vii
LIST OF FIGURES ................................................................................................................................... viii
Table of Contents ................................................................................................................................... ix
CHAPTER 1: INTRODUCTION ................................................................................................................... 1
1.1 About the project .......................................................................................................................... 1
1.2 Problem Statement ....................................................................................................................... 2
1.3 Scope of Project ............................................................................................................................ 2
1.4 Objective of the project ................................................................................................................ 2
1.5 Methodology................................................................................................................................. 3
1.6 About the organisation ................................................................................................................. 3
1.6.1 Critical Assessment of the Organization ................................................................................ 5
CHAPTER 2: LITERATURE REVIEW AND POLICY FRAMEWORK................................................................ 6
2.1 Literature Review .......................................................................................................................... 6
2.2 Policy Framework........................................................................................................................ 11
2.2.1 National Electricity Policy, 2005........................................................................................... 11
2.2.2 National Tariff Policy, 2006 .................................................................................................. 11
2.2.3 Rural Electrification Policy, 2006 ......................................................................................... 12
CHAPTER 3: WPP DEVELOPMENT PROCEDURE .................................................................................... 13
3.1 Introduction - Wind Power Project development procedure ..................................................... 13
3.2 Project and Financial Planning .................................................................................................... 14
3.2.1 Project Planning ................................................................................................................... 14
3.2.2 Financial Planning ................................................................................................................ 14
3.3 Selection of State of preference ................................................................................................. 17
3.3.1 Wind Power Potential and Installed Capacity ...................................................................... 17
3.3.2 Feed-in-Tariffs ...................................................................................................................... 27
3.3.3 Special incentives and facilities by State Governments....................................................... 27
ix
3.3.4 Simplicity of procedures followed in the State .................................................................... 29
3.3.5 Evacuation Infrastructure .................................................................................................... 30
3.3.6 Grid availability .................................................................................................................... 31
3.3.7 Regularity in the receipt of payment ................................................................................... 31
3.3.8 Sharing of CDM Benefits ...................................................................................................... 31
3.3.9 Reactive Energy Charges ...................................................................................................... 32
3.3.10 Banking............................................................................................................................... 33
3.3.11 Transmission and wheeling charges .................................................................................. 34
3.4 Site Identification ........................................................................................................................ 35
3.5 Feasibility Study .......................................................................................................................... 36
3.5.1 Generalized activities for feasibility study of Wind Power Projects: ................................... 37
3.6 Mast Installation, Data Collection and Data Verification............................................................ 41
3.6.1 Permission for Mast Installation and Subsequent Capacity Allocation ............................. 41
3.6.2 Installation of Wind Mast..................................................................................................... 42
3.6.3 Data collection ..................................................................................................................... 43
3.6.4 Validation of Data through CWET ........................................................................................ 43
3.7 Site Survey................................................................................................................................... 44
3.7.1 Soil / Ground Conditions ...................................................................................................... 44
3.7.2 Soil Erosion ........................................................................................................................... 44
3.7.3 Accessibility .......................................................................................................................... 45
3.7.4 Closeness to Grid ................................................................................................................. 45
3.8 Wind Farm Layout ....................................................................................................................... 45
3.8.1 Inter-turbine separation ...................................................................................................... 45
3.8.2 Changes in elevation of area ................................................................................................ 46
3.8.3 Other factors ........................................................................................................................ 47
3.8.4 Layout using software .......................................................................................................... 47
3.9 Land acquisition .......................................................................................................................... 47
3.10 Clean Development Mechanism ............................................................................................... 49
3.10.1 CDM project cycle ............................................................................................................. 50
3.11 Renewable Energy Certificates ................................................................................................. 52
3.11.1 Types of REC ...................................................................................................................... 53
3.11.2 The operational framework for REC mechanism ............................................................... 54
3.12 Detailed Project Report ............................................................................................................ 58
3.12.1 Generation based incentive ............................................................................................... 58
x
3.13 Financing Strategy and Financial Closure ................................................................................. 62
3.13.1 Financing strategy .............................................................................................................. 62
3.13.2 Financial Closure................................................................................................................ 64
3.14 Power Sale options ................................................................................................................... 66
3.15 Physical implementation of the Project .................................................................................... 67
3.15.1 Engineering ........................................................................................................................ 67
3.15.2 Procurement ...................................................................................................................... 68
3.15.3 Construction....................................................................................................................... 68
3.15.4 Testing and Commissioning ............................................................................................... 70
3.15.5 Operation and Maintenance .............................................................................................. 71
CHAPTER 4: FINANCIAL MODELLING .................................................................................................... 72
4.1 Cost estimates ............................................................................................................................. 72
4.2 Development of a project model ............................................................................................... 73
4.3 Analysis of financial indicators .................................................................................................... 74
4.4 Sensitivity Analysis ...................................................................................................................... 75
4.5 Risk analysis ................................................................................................................................ 76
4.5.1 Assessing risk........................................................................................................................ 76
4.5.2 Managing Risk ...................................................................................................................... 77
CHAPTER 5: SUMMARY ......................................................................................................................... 78
5.1 Conclusion ................................................................................................................................... 78
5.2 Recommendations ...................................................................................................................... 80
Bibliography .......................................................................................................................................... 82
ANNEXURES .......................................................................................................................................... 84
xi
xii
CHAPTER 1: INTRODUCTION
Still, India’s goal of ‘energy security’ is far from achieved. India has peak demand power
shortage of 12% and the cost of Fossil fuel is increasing day by day. Also, in National Action
Plan for Climate Change (NAPCC), India has committed to increase its renewable energy
share to 15% by 2020. Development of renewable energy, therefore, is necessary if Indian
economy is to achieve sustainable growth at fast pace in the future.
Nevertheless, increasing the share to renewable energy in India’s energy mix is a difficult
task, renewable energy being far more expensive compared to the conventional energy.
Wind power is less expensive compared to all other potential sources of renewable energy
like solar power. Also, India has huge unexplored wind power potential. The estimated Indian
wind energy potential has been assumed by the Ministry of New and Renewable Energy in a
study conducted in the late 90's to be 45000 MW. A more recent study by C-WET, India's
wind energy potential is estimated to be more than 1,00,000 MW at a hub height of 80
metres. Therefore utilising wind potential seems to a one of the most credible way to achieve
India’s energy security.
The development of a wind power project is a complex task because of technical, managerial
and regulatory hurdles. Apart from that, different procedures are followed in different states
for various activities, which play its part in increasing the complexity. Hence this sector is not
attracting large investments. This Report, therefore, is an attempt to guide the investors to
understand the complex procedure of wind power development.
1
1.2 Problem Statement
Development of wind power project, which is a necessary task for achieving India’s energy
security, is a complex task. Different tariffs, policies and procedures followed in various
Indian states add to this complexity. Apart from this, benefits like Accelerated Depreciation
(AD) and Generation Based Incentives (GBI) are abandoned. Hence the wind power sector,
compared to conventional energy sources, is less attractive to investors. Therefore there is a
need of a document that can guide the investors to understand the procedure of a WPP
development. This report is an attempt in this direction.
2
1.5 Methodology
The project has been prepared by gathering the dispersed information about various
proceedings of wind power project development. The regulations of State Electricity
Regulatory Commissions (SERCs) of states with major wind energy potential have been
studied. These states include Andhra Pradesh, Karnataka, Gujarat, Rajasthan, Madhya
Pradesh, and Maharashtra. The guidelines published by various State Nodal Agencies (SNAs)
for procedures like land acquisition and capacity allocation have been gathered and
understood deeply for making this project useful. Experience of the Business Development
team of Ecoren Energy India Private Limited has added value to this project. All the
information gathered as mentioned above was then studied and put in proper sequence to
understand the flow of the development procedure. Technical books have been studied to add
major important technical issues and their solutions that need to be included in the project.
One of the fastest growing wind energy company, ReGen is making a huge contribution to
meet India’s electricity demand with largest market share in the Independent Power
Producers sector and it is uniquely positioned to capitalize on the growing demand for wind
power energy in India and other geographies.
ReGen is an ISO 9001, ISO 14001 and OHSAS 18001 certified company offering total
"Turnkey Solutions" for wind power projects that includes consultancy, manufacturing,
supply, erection, commissioning, operations and maintenance services of Wind Energy
Converters (WEC).
The Company has entered into a technical license agreement with Vensys Energy AG,
Germany, a globally leading name in WEC design and development. Backed by the expertise
of a global leader, ReGen manufactures technologically advanced Gearless WECs which
reduces transmission loss, offers quick response to wind change and optimizes power
generation.
3
ReGen's innovative technology offers maximum energy production through higher efficiency
and greater reliability. ReGen manufacturers 1.5 MW Class III Wind Turbines with variable
speed and permanent magnet generators. Due to its technology advantage, efficiency of these
Wind Turbines is 5% to 7% higher when compared to Wind Turbines with gear box.
ReGen has installed over 462 wind turbines with an installed capacity of 693 MW and it
expects to augment this capacity with the commissioning of the new plant at Udaipur,
Rajasthan.
With nearly 2300 highly committed employees, ReGen has a pan India presence and it
continues to grow and expand by spreading its footprint to SAARC countries like Sri Lanka
and Bangladesh.
ReGen Powertech is ably and strategically supported by Mauritius based Private Equity funds
namely Indivision India Partners, MCap India Fund Limited, Summit FVCI and domestic
based Private Equity funds namely IDFC Investment Advisors Limited, TVS Shriram Growth
Fund who holds shares in the Company.
4
1.6.1 Critical Assessment of the Organization
Strengths
Core Team of expert professionals.
Integrity & honesty
Openness
Respectfulness
The strength to take on challenges
Constructive self criticism
Self improvement
Personal excellence
Drive for results
Keen commitment
Passion for quality
Excellent work Culture
Knowledge management
Intellectual capital
Reporting performance
Technical expertise
Opportunities
Global shift towards Renewable energy
Liberalising Government perspective towards RE generators
Young and talented workforce of India
More stress on renewable energy
5
CHAPTER 2: LITERATURE REVIEW AND POLICY
FRAMEWORK
“Siting and output prediction for wind energy project planning”, a paper presented by B.H.
Bailey (AWS Sci., Albany, NY) at Power Engineering Society Winter Meeting, focuses on
outlay of wind farms. This paper summarizes and illustrates the steps involved when siting
and planning the design and performance of wind power plants. The topics covered are: site
screening techniques and parameters; wind resource mapping as a siting tool; the role and
design of wind measurement campaigns; optimizing wind plant turbine layout using
advanced modelling tools; predicting a site's long-term wind resource and annual wind plant
production; and due diligence reporting to obtain project financing.
A paper titled “Research of wind power project risk assessment based on Hierarchy-grey
Analytic Method” appeared in an international conference “Mechatronic science, Electric
Engineering and Computer (MEC), 2011”. The paper was presented by Younggui (Sch. of
Bus. Adm., North China Electrical. Power Univ., Baoding, China) et al on August 2011. This
report explains that Global environmental problems have become increasingly prominent.
Wind power as a clean and renewable energy, becomes various countries gradually in the pet
who seeks in the energy alternative process. Wind power in the global range has developed
rapidly, but it should realize that wind power project is also a risk in the process of
development cannot be avoided. This article needle wind power projects characteristic,
Hierarchy-grey Analytic Method is proposed based on the wind project risk assessment
methods. Through carries on the empirical analysis to some wind electricity project to draw
the conclusion. Then carries on the wind electricity project for the enterprise the risk
management to provide the basis.
On April 2008, at Electric Utility Deregulation and Restructuring and Power Technologies,
2008, Author N.R. Ullah (Chalmers University, Goteborg) et al presented a paper titled
6
“Detailed modelling for large scale wind power installations - a real project case study”. This
paper reports on the modelling issues performed related to a feasibility study to investigate
the possibilities to connect the 640 MW off-shore wind power farm, planned for Krieger's
Flak 30 km south of Trelleborg (Sweden), to the E.ON 130 kV sub transmission system. The
aim of the entire study is to answer the question if such a connection is possible, and under
what conditions; it is not meant as a design project. Following a general connection design
discussion, the study comprises three major parts, fault current calculations, load flow
calculations, and dynamic simulations. Concerning the modelling aspects, much effort has
been put on details and scalability for the dynamic simulations.
In June 2010, at Energy Market (EEM), 2010, 7th International Conference on the European
a paper titled “Economic evaluation of wind generation projects in electricity markets” was
Mr Pereira A.J.C., Inst. Super. de Eng. de Coimbra, Inst. Politec. De Coimbra, Coimbra,
Portugal. In this paper the author explained the electricity markets. He evaluated economic
evaluation of WPPs in electricity markets. He explains that investments in new generation,
especially in renewables, grew up in several countries contributing to change the generation
mix. Among these new technologies, wind power became an important source in the sense
that the share in installed capacity is large in countries as Germany, Denmark, Spain and
Portugal namely considering the prices paid to the generated power. These subsidizing
schemes are in several cases responsible for a large amount of the final end user costs
meaning that in the future new ways of integrating this power in the grid have to be adopted.
This means that for investors it is important to evaluate from an economic point of view the
interest of new wind power projects admitting changes in current tariff schemes. For
regulatory agencies it is also important to investigate the impact of changes in current
schemes. This paper details an approach to characterize this type of investments in terms of
the Net Present Value, NPV, and the Internal Return Rate, IRR, so that more sounded
investment and policy decisions are adopted.
7
for this, analyses the risk factors including natural disaster risks, technology risks, economic
risks, and policy risks in four aspects, then construct a fuzzy comprehensive evaluation
model, and use the model in a wind power project on risk assessment, which verifies the
feasibility and effectiveness of the evaluation model.
Author J.I. Munoz et al presented a paper at PowerTech in Bucharest, in June 2009 which
was titled “Risk assessment of wind power generation project investments based on real
options”. This paper presents a decision-making tool for investment in a wind energy plant
using a real options approach. In the first part of the work, the volatilities of market prices
and wind regimes are obtained from geometric Brownian motion with mean reversion (GBM-
MR) and Weibull models, respectively. From these and other values, such as investment and
maintenance costs, the net present value (NPV) curve (made up of different values of NPV in
different periods) of the investment is calculated, as well as its average volatility. In the
second part, a real options valuation method is applied to calculate the value of the option to
invest. The volatility of the NPV curve reflecting different periods is inserted into a trinomial
investment option valuation tree. In this way, it's possible to calculate the probabilities of
investing right now, deferring the investment, or not investing at all. This powerful decision
tool allows wind energy investors to decide whether to invest in many different scenarios.
Several realistic case studies are presented to illustrate the decision-making method.
8
load delivery point interruption cost and operating cost of generating units. The energy
extracted from the wind farm in normal operation condition is considered to replace the
energy from fossil-fuelled conventional units. In addition, composite system reliability
analysis in the presence of wind power is carried out to evaluate total costs associated with
curtailed energy at different load points as well as generation of generating units in
contingency conditions. System reliability analysis related to large-scale wind farms, along
with operating cost and transmission losses analysis, can assist policy makers to prioritise
wind farm projects based on the total benefits of wind power including reliability benefits and
savings in fossil-fuelled energy sources.
Author Guangjie Wang (Sch. of Manage., Wuhan Univ. of Technol., Wuhan), at Wireless
Communications, Networking and Mobile Computing, 2008, presented a paper titled
“Technical-Economic Analysis of Wind Energy Projects in China” in Oct 2008. In this paper
he explains that the renewable energy consumption has been increased rapidly with high
economic growth in China. As one of the most promising renewable energy resource, wind
energy has become a major part of the plans for sustainable development. The technical-
economic analysis of the project reveals that the revenue from certified emission reductions
(CERs) of clean development mechanism (CDM) project can increase the profitability of the
project but it doesn't play a decisive role. The sensitivity analysis of single parameter shows
that investment, electricity price and production are the key parameters influencing the
effectiveness of projects. The status of wind energy projects in China is elaborated and the
four approaches of developing wind energy projects are proposed.
Author Martinez-Cesena (Electrical Energy & Power Syst. Group, Univ. of Manchester,
Manchester, UK) et al presented a paper titled “Wind Power Projects Planning Considering
Real Options for the Wind Resource Assessment” on January 2012. The paper explains that
Investments in wind power projects (WPPs) have increased in the last few years. This trend is
partially due to the availability of support schemes, which increase the economic
attractiveness of WPPs. Alternatively, the value of WPPs can be enhanced by improving
available techniques used for their planning and design. After reviewing WPP literature, it
was concluded that available tools for the planning and design of WPP could be improved by
addressing the uncertainty of the wind resource assessment (WRA), and this source of
uncertainty could be used to enhance the value of WPPs with real options (ROs) theory. ROs
theory is known for its potential to increase the expected worth of projects by exploiting the
value of flexibility within the projects' investment decisions and designs. Nevertheless, ROs
9
literature has to be extended to properly address the design of WPPs. Based on the gaps in
ROs theory and WPPs planning, this paper proposes a methodology that relies on ROs theory
to incorporate WRA uncertainty in the planning and design process of WPPs. The
methodology is illustrated with a small case study and its potential to increase the value of
WPPs under different conditions is analysed for a wide range of case studies. The results
illustrate the circumstances and assumptions that can improve and weaken the effectiveness
of the methodology. It is concluded that the application of the proposed ROs methodology
results in increased value for WPPs in most scenarios.
10
2.2 Policy Framework
5.12.1
This clause highlights the fact that there is an urgent need to promote generation of electricity
based on Non-conventional sources of energy as they are environment friendly. For this
purpose, efforts are to be made to reduce the capital cost of projects. Cost of energy can also
be reduced by promoting competition within such projects. At the same time, adequate
promotional measures would also have to be taken for development of technologies and a
sustained growth of these sources.
5.12.2
This clause restates what is mentioned In Electricity Act 2003 under section 86(1) (e) and
basically talks about to promote co-generation and generation of electricity from renewable
sources the state commissions are required to fix a percentage of renewable energy out of
total consumption of electricity in the area of distribution licensee.
a) In continuation to provisions of section 86(1) (e) of Electricity Act 2003, The clause
states that the procurement by distribution companies shall be done at preferential
tariffs determined by the Appropriate Commission as it will take some time before non-
11
conventional technologies can compete with conventional sources in terms of cost of
electricity.
d) In the Amendment in Tariff Policy the Ministry of Power has directed the State
Electricity Regulators to fix a percentage of energy purchase from solar power under
the RPOs. The solar power purchase obligation for States may start with 0.25% in
Phase I (by 2013) and go up to 3% by 2022 This will be complemented by solar
specific Renewable Energy Certificate (REC) mechanism to allow solar power
generation companies to sell certificates to the utilities to meet their solar power
purchase obligations.
This clause states that non-conventional energy sources such as solar, wind, biomass, small
hydro, geo-thermal; tidal etc. along with conventional sources can be appropriately and
optimally utilized to make available reliable supply of electricity to each and every
household.
8.9 This clause highlights the fact that State Governments will have to create Institutions for
back-up services and technical support to systems based on non-conventional sources of
energy. Such services would be provided on cost basis so as to make the arrangements
sustainable.
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CHAPTER 3: WPP DEVELOPMENT PROCEDURE
The above mentioned tasks are the sub procedures of the wind power project development.
They are explained here in this chapter.
13
3.2 Project and Financial Planning
Financial structure
Policy guidelines
Central govt. policy: MNRE
State govt. policy: SNA
List of constraints & assumption
Professional assistance
Technical planning
Permitting planning
Energy market analysis (who will buy the power)
Regulatory compliance
Legal aspects
Schedule flexibility
14
Decide when you will need it (cash flow)
Decide where it will come from (financial planning)
Wind power projects, like all renewable energy projects, have a strong financial component
which determines profitability or other goals, which incentives are used and how, who takes
risks and earns rewards, how the development budget is controlled, and what has to be done
to qualify for the intended financing.
Financial planning for WPP, like other RE power projects, comprises of following
parameters:
1) General project information
a. Rated capacity
b. PLF or CUF
c. Inflation
d. Start year
e. Project lifetime
2) Revenues - cash inflows
a. Ancillary products or benefits (like CDM, RECs etc.)
b. Cost recovery- Depreciation
c. Cost recovery- tax credits
d. Grants & incentives
e. Power purchase agreement or other sales agreement
3) Costs - cash outflow
a. Equipment cost including installation & site preparation
b. Balance of system(BOS) costs including all non-equipment Capital costs- such as
interconnection & civil works
c. Developer soft costs, such as developer planning, environmental studies licensing
& permitting & negotiation of PPA
d. loan interest
e. Recurrent costs, such as equipment replacement
f. Operation & maintenance
g. Site owner rent or royalties
h. Property tax
i. Project insurance
15
j. Income tax on revenue
16
3.3 Selection of State of preference
The selection of the state of preference is the next task after the planning procedure has been
completed. Following major factors are taken into consideration for selection of a state.
Developers give different weightages to these factors depending upon their own strengths and
weaknesses.
17
Figure 2 : Wind Power Potential and Installed Capacity
18
Andhra Pradesh, Gujarat and Karnataka seem to be the most lucrative states as far as the
potential and installed capacity of the wind power is concerned, since these states have large
portion of their wind resource unutilised. Maharashtra and Rajasthan too have huge untapped
potential. In Tamil Nadu, On the other hand, almost all the windy sites have been already
occupied. Still, with advancement in the technology it is becoming viable to set up WPPs in
the less windy sites. State wise achievable wind potential till 2020 is given below.
Assam 53 112
Bihar - 144
Chhattisgarh 23 314
Diu Damn - 4
Haryana - 93
Himachal Pradesh 20 64
Jharkhand - 91
Lakshadweep 16 16
Manipur 7 56
Meghalaya 44 82
19
MP 920 2931
Nagaland 3 16
Pondicherry - 120
Sikkim 98 98
West Bengal 22 22
The Centre for Wind Energy Technology (C-WET) published the Indian Wind Atlas in 2010,
showing large areas with annual average wind power densities of more than 200 Watts/m2 at
50 meter above ground level (MAGL). This is considered to be a benchmark criterion for
establishing wind farms in India as per CWET and the MNRE.
The potential sites have been classified according to annual mean wind power density
ranging from 200 W/m2 to 500 W/m2. Most of the potential assessed sites have an annual
mean wind power density between 200-250 W/m2 at 50 MAGL. The Wind Atlas has
projected Indian wind power installable potential (name plate rating) as 49,130 MW at 2%
land availability and 50 MAGL.
With the improvement in technology and increase in the hub height of the wind turbine it has
become possible to generate more electricity than assumed in earlier estimates. Based on the
resource assessment carried out by C-WET, wind speeds in India are in the low to moderate
range except in some pockets like coastal southern Tamil Nadu and the Rann of Katch
(Gujarat).
As understood from the below shown map Karnataka, Andhra Pradesh, Maharashtra and
Gujarat have highest wind energy potential. However most of it is still untapped.
20
Maharashtra has a potential to grow at least 2 times of the current installed capacity, while
same figure for Rajasthan is around 1.5 times.
On the other hand Tamil Nadu is the only state which has tapped its full potential at 50 m due
to advancement in technology; however the installed capacity can be raised further to a level
of 14 GW.
Total 28068.45
Total 18,500
21
13th PLAN PROGRAMME 13TH PLAN TENTATIVE PROGRAMME
FOR GRID INTERACTIVE RENEWABLE POWER (in MW)
Wind Power 11,000
Total 30,500
Installed Installed
capacity as capacity
State Estimated on as %age
Potential 31.02.2013 of
(MW) (MW) potential
Andhra Pradesh 5394 435 3.95%
Gujarat 10609 3093 24.89%
Karnataka 8591 2113 21.56%
Kerala 790 35 4.43%
Madhya Pradesh 920 386 35.87%
Maharashtra 5439 2976 47.07%
Rajasthan 5005 2355 36.56%
Tamil Nadu 5374 7154 123.06%
Others 7008 4 0.06%
Total 49130 18551 37.75%
Source - CWET
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1.1 RENEWABLE AND WIND ENERGY SCENARIO –
WORLD
Across world, the renewable energy is continuously growing strongly in all end-use sectors –
power, heat and transport all across the world and is supplying approximately 16% of global
final energy consumption. The renewable energy sector is counting on traditional biomass,
hydropower, wind, solar, geothermal, modern biomass, and bio fuels.
This growth was driven primarily by China, which accounted for approximately 40 % of
global capacity additions in 2011, up from 4.4% in 2005. China added around 18 GW of new
wind capacity, and cemented its place as the leading wind market with a total of 62 GW
installed as of the end of the year 2011.
China installed another 107.9 MW of offshore wind in 2011, bringing its total to 258.4 MW,
third in the world after the UK and Denmark.
The United States added just over 7 GW in 2011 bringing total wind power capacity to 47
GW, a mere 1.2 % increase over 2010.
Germany maintained the lead in Europe with a total of 29.06 GW operating at the end of
2011; nevertheless, the annual addition of 1.8 GW represented a 19% reduction in new
capacity relative to 2009.
Spain again led Europe in new installations, adding nearly 1 GW for a total of more than 21
GW, making it the world’s third largest market for new wind. Despite having less capacity in
operation than Germany did, Spain produced more electricity with wind in 2010, due largely
to high winds in Spain and to more-advanced turbines.
23
India was also one of the top markets in 2011, adding more than 3 GW to reach nearly 16
GW of capacity and maintaining its fifth-place ranking for total capacity
Rest of the
39.852 26.441 32.143
World
24
(Source: Renewable 2012: Global status report& C-WET)
25
Table 3 : State wise Wind Power Till 2020
[Source: CRIS analysis based on registered projects and pipeline of developers in various
states.
Feasibility Study
Feasibility study is a preliminary study that is done to determine a project‘s viability through
identifying potential return on investment as well as any fatal flow in the project if any. The
results of the study are used to determine whether to proceed with the project or not. It
provides a structured method that focuses on problems, identifies objectives, evaluates
alternatives, and aids in the selection of the best solution.
Feasibility
Feasibility Tasks: Technical Commercial
Site
Study
inspection Viability Viability
Wind resource review
Investigation
Figure of interconnection opportunities
6: Feasibility Study
Selection of suitable process and technology
26
Capacity fixation on the basis of project
Capital cost study
Profitability analysis
Fatal flaws review
Grant research and application development
Investigation of site access
3.3.2 Feed-in-Tariffs
A feed-in tariff (FiT), also known as feed-in law, advanced renewable tariff or preferential
tariff is another important factor that affects the developers’ decision of selecting a state for
setting up of WPPs. FiT is a policy mechanism designed to encourage the adoption of
renewable energy sources and to help accelerate the transition toward grid parity for such
projects. The Feed-in-Tariffs declared by the SERCs of the key states are shown below.
Table 4 : State Feed-in-Tariffs
Tariff Period
States Tariff rate (Rs/Unit)
(Years)
Gujarat 4.15 25
Wind zone – I 5.81
Wind zone – II 5.05
Maharashtra 13
Wind zone – III 4.31
Wind zone – IV 3.88
Jaisalmer, Jodhpur and Balmer 5.46
Rajasthan 20
Other districts 5.73
Madhya
5.92 25
Pradesh
Karnataka 3.7 10
Tamil Nadu 3.51 20
Andhra Pradesh 4.70 10
Figure 7 : Feed-in-Tariff
27
3.3.3 Special incentives and facilities by State Governments
Some state governments have declared special incentive or facilities to attract the wind / RE
developers which are explained here. The developers should study these incentives before
arriving to a decision of finalising the state of preference.
Government of Karnataka:
(From Karnataka Renewable Energy Policy 2009-14)
Green Energy Fund: Green Energy Fund shall be established to facilitate financing for
RE projects.
Consent from Departments & Statutory Clearances: KREDL shall obtain consent &
statutory clearances from concerned state departments for sites developed by them. In
case of private land KREDL shall assist the developers in this regard.
Allotment Committee: A committee under Chairmanship of Additional Chief
Secretary/Principle Secretary, Energy Department will consider allotment of capacity to
entrepreneurs.
Settlements: Transactions shall be settled on monthly basis. Interest at the rate of State
Bank of India short term prime lending rate shall be payable for delayed payment beyond
a month.
Exemption from Demand Cut: Exemption of demand cut to the extent of 50% of
installed capacity assigned for captive use purpose, will be allowed.
Financial Incentives: Entry tax & other incentives shall be available to RE generation in
accordance with Industrial Policy 2009-10.
Letter of Credit: Facility of LOC shall be provided by the ESCOMS to developer and its
cost will be reimbursed to ESCOMs from Green Energy Fund.
Award Scheme: RE projects successfully commissioned during the original agreement
period will be awarded with a certificate with appreciation by the Govt. and a cash
incentive from Green Energy Fund.
28
Exemption from Open Access Charges: Nonconventional Energy based power
generation shall be exempted from Open Access charges.
Projects will be eligible for all benefits available to new industries under the Industrial
Promotion Policy 2004.
However one discouraging factor for WPP owners included in the state wind policy is that
the 3rd party purchaser of wind energy will be allowed the facility of reduction in contract
demand.
Government of Maharashtra:
(From NCE Policy 2008)
Evacuation Arrangement: To be constructed with the approval of Transco/Discom by
the developer at his cost. 50% of the approved expenditure to be reimbursed out of Green
Energy Fund.
Approach Road: To be constructed by MEDA out of Green Energy Fund. Repairs or
strengthening of existing roads to be done by developer at his cost.
Encouragement to Co-operative Sector: 11% of total share capital of the project shall
be paid from Green Energy Fund for projects set up by co-operative institutions.
Letter of Credit: The DISCOM shall provide the facility of LOC to the developer & the
cost involved to be reimbursed to the DISCOM out of Green Energy Fund.
Octroi / Entry Tax: Taxes actually paid shall be reimbursed by MEDA out of Green
Energy Fund.
Eligibility for Sanction
It is obligatory to sell 50% of electricity to the Distribution Company under a long
term agreement at the rate determined by MERC. Remaining 50% shall be sold within
the State.
Benefits under the policy shall be available to only such projects for which
infrastructure approval is accorded by the Govt.
Government of Rajasthan:
(From NCE Policy dated 25.10.2004 as amended vide letters dated 10.03.05, 16.07.05,
24.02.06, 30.11.06, 19.01.07 & 27.03.2008)
29
Merit Order Despatch Not applicable to Wind Power Project
Exemption from Electricity Duty: Energy sold to a 3rd party will be exempted from
payment of ED @50% for a period of 7 years from COD.
Relocation of project: Re-location of project, if justified shall be permitted without any
additional charge.
Gujarat: Voltage level for evacuation shall be 66 kV and above. Govt. Policy (Amendment-
1) 2007 dated 07.01.2009 provides that owner will bear the entire cost up to 100 km; beyond
this limit GETCO will construct at its cost. Approved capital cost includes 38 lakhs per MW
towards cost of transmission line from project site to grid sub-station.
Karnataka and Madhya Pradesh: Cost to be borne by the developer. The capital costs
specified by the respective SERCs are inclusive of the power evacuation infrastructure.
30
Maharashtra: Cost to be borne by the developer. Capital Cost of Project/MW is inclusive of
cost of power evacuation infrastructure up to interconnection point. Capital cost is linked to
price indexation formula.
Tamil Nadu: To be borne by the Licensee if entire energy is sold to the Distribution
Licensee. For captive consumption and third party sale, cost will have to be borne by the
Developer but the work will be executed by the Licensee.
31
3.3.8 Sharing of CDM Benefits
The Clean Development Mechanism (CDM) is a project-based mechanism that allows public
or private entities to invest in greenhouse gas (GHG) mitigating activities in developing
countries and earn abatement credits, which can then be applied against their own GHG
emissions or sold in the open market. For wind power producers, CDM benefits may become
a source of revenue which can improve their project IRR by 1-1.5% and can make the project
financially viable. CERC and different SERCs have declared sharing of the CDM benefits
differently between the DISCOMs and the Developers. The WPP developers should examine
the sharing of CDM benefits and its impact on the revenue in various states before arriving to
a conclusion of finalising the state of preference.
The regulations regarding sharing of CDM benefits between the developers and the
distribution licensees in different states are explained in the following table.
32
Maharashtra 25 paisa/Kvarh with 5% escalation per year
Rajasthan 5.75 paisa/Kvarh escalating 25 paise per year
M.P. 27 paisa /Kvarh
Tamil Nadu 25 paise/Kvarh upto 10% and double beyond
A.P. 10 paise/Kvarh upto10% and 25 paise above10
Reactive power consumption of wind turbine generators is high, especially during Start-up.
Sometimes the reactive power consumption during start up is equivalent to the kW power
rating of the turbine. This reactive power has traditionally always been imported from the
grid. Although Wind turbine generators now-a-days are commonly fitted with reactive
compensation systems of various ratings, there is requirement of reactive power consumption
from the grid during start-ups and for voltage control. Hence, the reactive power charges
applicable in the various states should be considered by the developer. The Reactive Energy
charges in in various states are indicated in the following table.
3.3.10 Banking
Power banking is like cash banking whereby wind power producers feed in the electricity
generated by their wind mills to the state grid and then draw that power for captive use within
the period specified by the Appropriate Commission. Despite the development of latest
technology in the wind energy sector it is still not possible to declare the exact wind power
generation. Hence, to help the wind power generators and attract investment, some states
have come up with the provision of banking of wind power. The banking charges are
applicable as decided by the Appropriate Commission. In Banking, only the transactions of
energy take place; there is no transaction of currency. Banking regulations in key states are
explained in the following table.
33
Allowed only for 6 months from April to September and October to March.
Rajasthan Banking is not permitted from December to February. Surplus energy is
paid at 60% of large industrial tariff.
Permitted for a period of a financial year at 2% charge. Consumption of
banked energy is subject to approval of Discom. Surplus energy at the end
M.P.
of banking period to be procured by the Discom as per the decision of the
MPERC.
Permitted for 12 months at 2@ charge. Energy banked beyond the
prescribed time will be utilised and paid for by the Karnataka Power
Karnataka
Transmission Co. Ltd/Distribution Licensee concerned at tariff applicable as
per KERC norms.
Tamil Nadu Allowed for 1 year at 5% banking charge.
A.P. Not allowed. Surplus power is paid at 75% of lowest bid tariff.
34
Table 8 : State wise Transmission and Wheeling Charges
There must be evidence of significant wind speed. Wind power density should be
greater than or equal to 200 watt/m2.
Locations like hills, ridges, plateaus, mountains etc. are preferred as these sites have
more wind speeds compared to their surrounding locations.
35
The available area should be taken into consideration. Generally 15-25 acre/MW of
land is required, but this may vary depending upon the micro-siting.
Wind direction and wind shear – The sites with constant speeds and directions are
more effective for wind power production and hence has plants at such sites have
higher PLFs.
Land cover pattern should be studies as it affects wind speeds at various heights.
Accessibility – The heavy transportation vehicles should be able to reach to the
location of the proposed WPP at reasonable cost of road construction and
transportation.
Land ownership (Private/revenue/forest) also is an important factor to be considered.
Additional forest/environment clearances are required for occupying a forest land. On
the other hand, the developer may face problems like non-convicibility of owners in
occupation of private land.
Prior commitments of the land – The developer needs ensure that the proposed land is
not already committed to any other WPP developer.
Sites approved by C-WET must be given preference as the technical and regulatory
work to occupy such sites reduces compared to other sites.
There must be reasonable access to electrical transmission.
The terrain must be favourable to construction.
Apart from these several other factors need to be taken into consideration like - Cost
of land, rehabilitation issues, scope for future expansion, labour and skills availability,
minimum impact on labours etc.
36
checked in the feasibility study. After studying the outcomes of the feasibility study the
owner choses whether to proceed further with the project or not.
Site inspection
Wind resource review
Investigation of interconnection opportunities
Selection of suitable process and technology
Capacity fixation on the basis of project
Capital cost study
Profitability analysis
Fatal flaws review
Grant research and application development
Investigation of site access
B. Technology selection
37
Various wind energy technologies are available for generating power. However each
technology has its own merits & demerits. Therefore the project viability depends on the
selection of appropriate technology.
Various technological choices have to be made for the following:
Size and capacity of the turbines
Hub height
Rated and cut-in wind speeds
Vertical or Horizontal axes
Active and passive yaw
Type of rotor controls
Airfoil nomenclature
Tip-speed ratio
Pitch control and stall control
Rotor diameter
Rotor solidity
Betz limit
Number of blades
Blade composition
Type of generator
Type of hub
Type of towers
Type of drive trains
C. Preliminary design
Preliminary design includes engineering the project‘s details, including equipments locations,
wiring, control systems, roads and foundations. The design of the scheme should be
completed at a level adequate for costing and a bill of quantities to be determined. Hence, the
design should be adequate for tendering purposes, and would include general arrangement
and layout drawings. Prominent aspects of the works can be categorized into:
Civil works
Generating equipment
Grid inter-connection design
38
Optimum system capacity
Size & layout of structures & equipment
If possible, the designers will therefore need to work closely with the machinery suppliers, so
that specific equipment parameters can be considered as the basis of the design.
D. Grid connectivity
Check for an appropriate connection point near site
Conversations with those who have an understanding of the system in the area where you
propose to connect your project and contact local utility or Discom. It provides following
information:
i. Understanding the transmission & distribution system
ii. Power line capacity
iii. Substation capacity
iv. Existing protection scheme of power system
v. Conductor size
vi. Cost estimates for transmission upgrades
Next step is to approach transmission utility , with an application, which includes the
following:
i. Feasibility study
ii. System impact study
iii. Facility study
iv. Interconnection agreement
The final step is executing the agreements and constructing the additional infrastructure
needed to get your energy on the grid.
39
The Indian Wildlife (Protection) Act (1972), The Air (Prevention and Control of Pollution)
Act (1981) and The Environment (Protection) Act (1986). The responsible body for this is
Central Pollution Control Board (CPCB). Wind-power generation has very low emissions on
a life cycle basis, but has a number of environmental effects that may limit its potential. The
following is required before the project implementation.
Land use analysis- Helps in assessing the changes in land use pattern for setting up wind
energy stations
Air pollution
Hydrological assessment
40
Displacement of Habitat due to project implementation
Proximity to populated area
Worker health & safety issues
Local population deprived of use of their domestic fuel (Biomass)
Improved Power Availability situation for the local population
Adequate Direct & Indirect employment opportunities to Rural Local population
G. Economic viability
The purpose of an economic analysis is to demonstrate that the proposed project achieves
optimum utilization of resources and is of sufficient economic merit to justify an investment
in it. The analysis is therefore first made in the planning stage of the project, before any
financial arrangements are discussed or entered into. The financing agencies will generally
wish to see and approve the results of the analysis prior to making a commitment on
financing the whole or part of the project. Economic analysis is always comparative. Sound
economic evaluation of the proposed project during pre-feasibility and feasibility analysis is a
fundamental requirement, particularly when the project requires a bank‘s assistance and
financial commitment. The economic viability of the project is tested by financial modelling,
which is explained in Chapter 4 of this report.
After finalising the site for the mast installation, the developer of a Wind Power Project has
to take permission for installation of mast. A Land Option Agreement gives the developer the
first right to develop the land for a wind farm. It should precedent the erection of masts to
ensure that the data remains with the owner of the mast. It generally includes the following
The right of first refusal to develop the land for renewable
Details of the wind resource measurement agreement
Detail of data use if no turbine is installed.
Different procedures are followed in different states for obtaining the permission for mast
41
installation. First of all, the developer has to contact the State Nodal Agency for the
permission for installation of a mast. The SNA issues the permit if the land is either private
or revenue land. If the site for mast installation falls into forest land, the permission from
forest department is also required. The procedure that needs to be followed in different states
is explained below.
Maharashtra:
No permission is required from MEDA for mast installation. Permission from forest
department is needed if the proposed mast location is in the forest land (fees of Rs 1
lakh/mast).
The data collected is then registered with CWET. CWET examines and approves the
data.
MEDA, based on approval from CWET, certifies that the area within 10 Km radius from
the mast is windy.
42
An application, along with the MEDA certificate has to be submitted in forest
department for land diversion.
MEDA allots the land on Capacity Allocation basis.
Gujarat:
Mast installation is to be done directly after the purchase of the land and no
permission is required from GEDA. CWET and GEDA are only need to be informed
about installation of mast.
Approval from forest department is required if the proposed location for mast
installation is in the forest land for which the fees are Rs 1 Lakh/mast.
43
Roughness of terrain (obstacles presence like nearby trees, buildings etc.)
Wind turbine generators require very solid foundations to secure that large structure in high
wind conditions. Therefore soil conditions must be assessed to determine the stability of the
ground. The location, type and cost of the foundation are largely determined by ground
conditions.
With proper construction techniques, and good maintenance, a well-designed wind farm
should have no impact on soil erosion. Control of these issues is relatively well understood
and a part of good practice in the civil construction industry. On-site inspection of the soil
and ground conditions is used not just for the design of roads and foundations but also in the
44
development of the environmental management plan for the project which will implement the
techniques appropriate to the site for the control of soil erosion and maintenance of surface
and ground water quality.
Where possible all removed soil is used on site. Run off is diverted away from disturbed soil
and controlled using artificial barrier or existing vegetation.
Physical characteristics of the land are checked to ensure suitability for the wind farm
development. For example, the located site should not be morass, a water body or a rocky
surface.
The wind farm cannot be located in a tribal land, a wildlife sanctuary or a national park
according to the land acquisition laws and hence the ownership of the land also has to be
known. However this may have been checked by the developer while applying for the mast
installation.
3.7.3 Accessibility
Accessibility to wind farm site is important for construction and for the on-going operation
and maintenance of the wind farm. Construction access is usually more problematic because
of the large vehicles and loads that need to be brought onto site. The turbines are brought
onto site in large sections and erected using very large cranes. Local roads need to be
sufficient to allow the delivery of the turbine components and construction equipment.
During the life of the wind farm the access tracks to each wind turbine, established during the
initial construction, would be maintained and are sufficient for the service vehicles.
Steep gradients and unstable surfaces are generally avoided because of the added cost of
cutting suitable gradients and stabilising loose surfaces.
Suitable grid connection is vital for a wind farm. Because the large amount of electricity has
to be transmitted from the wind farm’s switchyard to the existing electricity grid, the cost of
overhead transmission line increases with increase in the distance. This increases the capital
cost, which ultimately affects the economic feasibility of the project. Unfortunately, the
windy sites are many times distant from the existing grid, and hence despite increase in the
45
cost, sometimes it is better to move further away from the power line, despite the increased
cost simply because the more distant site is so much more productive.
The main determinant of separation distance is wind speed and turbulence. A wind turbine
generator necessarily removes some of the energy from the wind and causes turbulence. So
downwind there is an area where it is not economic to place another wind turbine generator.
The surrounding unaffected wind will impart some of its wind energy to this slow and
turbulent wind and the turbulence will be dampened and the wind speed will come back that
of the surrounding wind. We normally will wait until it comes back to about 98 to 99% of the
original power level before placing another machine downwind. The volume of air that is
affected is determined by the diameter of rotor. So separation distances can be expressed in
multiples of the rotor diameter.
The rule of thumb used for a downwind separation of wind turbine generators of between 5D
and 7D (Where D stands for the rotor diameter). The influence of a wind turbine generator
across the wind is nowhere near as great and could place a wind turbine as close as 1D apart
across the wind. However the wind does not come from only one direction, so we cannot do
this in reality.
46
Layout issues involve more than inter turbine separation. In most cases, the development of a
wind farm layout will be much more complex. Again several factors will come into play to
varying degrees according to site conditions.
For example, a ridgeline that spans across the prevailing wind direction may result in a line
(or lines) of wind turbine generators following the contours of the ridge. In undulating areas,
there is no point placing a turbine behind a small hill (where wind speeds will be significantly
lower) simply because you have reached an appropriate inter turbine separation distance if
moving another few meters can significantly increase the wind energy.
Leases should be carefully developed so that they clearly address issues important to the
project developer and landowner at the time the lease starts as well as years later during
project operations. In many cases, the people who originally negotiate a lease will not be
47
involved later in the operating period of the project, so it is important that any understanding
between the parties be properly addressed in the written lease to prevent future
misunderstandings.
A well-executed lease is an important part of the project development process. Before the
purchase and installation of wind turbines it should be ensured that the lease provides clear,
unimpeded rights for use of the land over the long term.
48
Other land issues that may be applicable:
a) Securing a right to purchase or lease land within a prescribed future timeframe
through an Option to Purchase or Lease.
b) Obtaining a right to match the terms of purchase or lease to a third party
through Right of First Refusal.
c) Ascertaining the restrictions on an owner's right to use property by means of
covenants on land
d) Possessing a secure legal right to develop the land by ensuring title to the
land.
e) Conducting land surveys if title is uncertain, to preclude title-related
questions, or if the value of the project is sufficient to justify undertaking a peremptory
survey.
f) Understanding the various land-related permits and approvals that will be
required (including land use permitting, conditional use permitting, environmental
permitting, building and electrical codes), paying particular attention to the length of time
needed to obtain the necessary permits.
g) Determining whether or not present zoning and land use permits the intended
use, taking into account the difficulty of obtaining zoning exceptions.
h) Addressing subsurface mineral rights.
i) Addressing water rights (including surface mineral)
As explained earlier, a Land Option Agreement, which precedes the erection of the mast,
gives the developer the first right to develop the land for a wind farm.
The Land Lease Agreement is the next step. It is much more detailed and should be
carefully reviewed by a qualified lawyer or expert. The land lease includes:
a) Length of lease
b) Royalty percentage with minimum or floor payment (preferred over flat fee or rent)
c) Extension options
d) Purchase agreement or Standard Offer Contract
e) Agreement not to conflict with normal activity on land without compensation
f) Arrangement for the installation to be part of land deed in case of transferal
g) Agreement by the developer to
49
minimize impact
compensate damages
assume liability
h) Access to land provisions
i) Decommissioning
j) Interconnection sites, depth of electrical wires
CDM benefit under Kyoto Protocol has been availed by many WPPs in India. Ministry of
Environment and Forest (MoEF) is the Nodal Agency and a National CDM Authority
(NCDMA) has been established. There are quite a few agencies with foreign tie-up available
to assist in –
Registration and Certification by MoEF and UNFCCC
Trading of CER’s in market
Under the present conditions the net benefit available under long term contract is
about Rs. 0.50 per kWh after meeting all expenses at several stages. IPP Owners with foreign
tie-up are likely to do trading at higher rate.
There is however some reservation regarding availability of this benefit beyond 2012.
50
Figure 9 : CDM Timeframe
I. Project Design
51
This step involves developing a Project Design Document (PDD), which is a standard format
describing how the activity intends to fulfil the pre-requisites for registration as a CDM
project. The PDD consists of a general description of the project, its proposed baseline
methodology, a timeline and crediting period, a monitoring methodology, calculation of GHG
emissions by source and stakeholder comments. The host country Designated National
Authority (DNA) must issue statements on the PDD indicating that the government of the
host country participates voluntarily in the proposed activity and that the project assists the
host country in achieving sustainable development.
Once a project activity has been validated by a DOE a validation report is forwarded to the
Executive Board (EB) for registration as a CDM project. The registration of a project will be
final within eight weeks after the date of receipt by the EB unless at least three members of
the EB request a review of the project activity.
III. Monitoring
Once the project is operational the emissions that occur from the activity must be monitored.
This is done according to the monitoring plan submitted and approved in the PDD, which
indicates the method used for measuring emissions from the project and how data relevant for
these calculations will be collected and archived. The information on emission reductions
must be included in a monitoring report estimating the amount of CERs generated and
submitted to a DOE for verification.
Verification is the independent review of the monitoring report submitted by the project
participants. A DOE different to that involved in the validation process carries out
verification (a list of DOEs can be downloaded from the UNFCCC website). The DOE must
ensure that the CERs have been generated according to the guidelines and conditions agreed
52
upon during the validation of the project. A verification report is then produced. The same
DOE that verified the project also certifies the CERs generated by the activity.
Certification is the written assurance from the DOE that the project achieved the stated level
of emission reductions and that these reductions were real, measurable and additional. The
certification report constitutes a request to the EB for issuance of CERs. Unless a project
participant or at least three members of the EB request a review within fifteen days the EB
will instruct the CDM registry to issue the CERs.
Under this mechanism, the cost of electricity generation from renewable energy sources is
classified as cost of electricity generation equivalent to convention energy sources and the cost
of environmental attributes. These environmental attributes can be exchanged in the form of
RECs. Hence, the RE generator can either sell the energy at preferential tariff specified by
the ERC; or it can sell the power at normal tariff and sell the RECs on power exchanges.
53
The distribution licensee at price not exceeding average pooled cost of power
purchase (APCPP) of the distribution licensee for last year
Any other licensee or to an open access consumer at mutually agreed price, or
through Power Exchange.
Captive RE Generators are also eligible for REC if such generators are:
Not availing promotional Wheeling
Not availing promotional Banking
Not getting any electricity tax/duty exemption from the state.
Forbearance
Floor Price in
Type of REC Price
(Rs./REC)
(Rs./REC)
Solar REC 9300 13400
54
Figure 12 : REC Mechanism
55
Maharashtra 7.75 0.25
Manipur (JERC) 4.75 0.25
Mizoram (JERC) 6.75 0.25
Meghalaya 0.6 0.4
Nagaland 7.75 0.25
Orissa 5.35 0.15
Punjab 2.83 0.07
Rajasthan 7.1
Tamil Nadu 8.95 0.05
Tripura 0.9 0.1
Uttar Pradesh 5 1
Uttarakhand 4.5 0.025
West Bengal 3.75 0.25
Step 1 - Accreditation:
The proposed REC mechanism requires a procedure for accrediting generation plants which
are eligible to receive RECs. Accreditation is done to assess and establish eligibility of
renewable energy plants to receive RECs. The process of accreditation is largely one time
activity where in plants are validated on its renewable nature and other pre-requisites to be
eligible for issuance of REC. The State Nodal Agency appointed by the State Electricity
Regulatory Commission (SERC) shall be responsible for Accreditation. Accreditation process
involves processing of application, verification of projects, transfer of information, creation
and operation of accounts etc. The process of accreditation of eligible renewable energy
projects would also involve verification of Applications (projects) and sites and hence the
accreditation agencies at state level would need to have adequate monitoring capability.
Step 2 - Registration
Every eligible entity shall apply for registration at central level. Only one central agency at
national level will be authorized to recognize attributes from renewable generation to avoid
double counting. Registration will result in creation of an account for all the entities
participating in the mechanism.
56
Step-4 Issuance of REC by REC registry
The eligible entity shall receive a certificate for a specified quantity of electricity generated
and injected into the grid. One REC will be issued for each 1 MWh of electricity generated
from renewable energy plants. RECs will be created as electronic records in a register
(because electronic documents are easier to track than paper documents). The issued
certificates will be credited to the registered account of the plant operator/owner.
57
3.12 Detailed Project Report
Detailed Project Report involves producing a comprehensive document that can be used as a
basis for investment decision making, approval of plans and designs, project planning, and
implementation scheduling for all types of infrastructure projects. Preparation of detailed
project report is further step in firming up the proposal. When an investment proposal is to be
approved on the basis of functional report and the proposal is a major proposal, it would be
necessary to prepare a detailed project report to firm up the proposal for the capital cost as
well as for the various facilities. It includes...
Project description
Examination of technological parameters
Description of the technology to be used
Broad technical specification
Evaluation of the existing resources
Schedule plan
Layouts and flow diagrams
Hence these reports are to be made before investment is made into project. Thus formulation
of investment is based on the studies made. These can be considered as pre-investment
decision. Detailed project report is not prepared only for the investment decision-making
approval, but also for execution of the project and for preparation of further plan. General
format for preparation of detailed project report (DPR) as prescribed by Indian renewable
energy development authority (IREDA):
58
Technical specifications of various components involved
Estimation of annual energy output
Environment impact/protection activities
Socio-economic impact in the region due to project implementation
Project cost estimates and tariff
Estimated electrical works
Estimated Civil works, Foundations
Project implementation Schedule
Drawing and designs, Site map and project layout
CDM benefits
Financial analysis
Conclusions
Annexure
Overall Plant layout
Land clearances
Grid connectivity approval
MOU/letter of willingness for PPA
In-principal approval, if applicable
Single line diagram
Switchyard layout
Plant control system configuration
Objectives:
The following are the main objectives of the scheme:
(i) Generation of electricity from grid connected wind power projects through Generation
Based Incentives.
59
(ii) To encourage IPPs, registered companies, NGOs, Trusts, academic and research
institutions, SNAs etc. who will not avail of accelerated depreciation under the IT Act for
making investments in wind power projects.
(iii) To encourage actual energy generation rather than capacity addition only, resulting in
optimum utilization of wind resource.
(iv) To augment flow of power to the grid that would add to grid stabilization.
Eligibility:
The GBI scheme would be applicable only for those power producers who do not avail of the
accelerated/enhanced depreciation benefits under the Income Tax Act.
The power producers who avail of the benefits of the scheme will be required to furnish
documentary proof to this effect.
The scheme will be applicable only for those independent power producers having minimum
installed capacity of 5 MW and whose capacities are commissioned for sale of power to the
grid after the announcement of the scheme.
The scheme will not be applicable to those who set up capacities for captive consumption,
third party sale, merchant plants etc.
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The generation based incentive approved for a grid interactive wind power generation project
may be available for a maximum period of ten years from the date of approval and regular
power generation from that project, provided the utility continues to purchase power from
that grid interactive wind power project.
The incentive will be released by IREDA to the eligible wind power project developers on
half yearly basis, on receipt of grid synchronization letter and certified information about the
net electricity fed to the grid from the wind power project during the period of claim. The
concerned utility will provide such information to the project developer periodically.
The IREDA shall provide GBI for wind power projects after its commissioning
subject to meeting the guidelines and eligibility conditions. However, the response of the
incentives to this paradigm and based on the response , the component of scheme will be
reviewed when projects aggregating to 49 MW which are estimated to generate about 0.9
billions units of electricity are registered by IREDA.
1. Eligibility
1.1 All existing registered companies, IPPS, NGOs, Trusts, Financial institutions, academic
and research institutions, SNAs, central and state power generation companies and
public/private sector wind power project developers who have set up or propose to set up a
registered company in India will be eligible for consideration of generation based incentive
provided they sell the power to the grid.
1.2 The GBI scheme would be applicable only for those power producers who do not avail of
the accelerated/enhanced depreciation benefits under the Income Tax Act. The power
producers who avail of the benefits of the scheme will be required to furnish documentary
proof to this effect.
1.3 The scheme will be applicable only for those independent power producers having
minimum installed capacity of 5 MW and whose capacities are commissioned for sale of
power to the grid after the announcement of the scheme.
1.4 The scheme will not be applicable to those who set up capacities for captive consumption,
third party sale, merchant plants etc.
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2. Eligible Projects
2.1 Grid interactive wind Power Generation projects of a minimum installed capacity of five
MW will be eligible for generation based incentive.
2.2 Any project developer, who ful fills the procedural requirements and the guidelines
specified by the Ministry, will be eligible for consideration of generation based incentive.
2.3 The GBI would be available only for projects commissioned i.e. synchronized to the grid
and certified by the concerned Utility after announcement of the scheme.
2.4 The GBI would not be available for wind power projects set up for captive use and third
party sale.
2.5 This incentive is over and above the rates approved by the State Regulatory Commissions
or the rates at which the power purchase agreement are signed with utilities.
i) Project financing
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It refers to financing structures wherein the lender has recourse only or primarily to the
assets of the project and depends on the cash flows of the project for repayment.
ii) Corporate financing
It involves the use of internal company capital to finance a project directly, or the use of
internal company assets as collateral to obtain a loan from a bank or other lender. The
main implication is that the financing of the project is based on the risk profile of the
company as a whole, and not of the particular project.
iii) Lease financing
It involves the supplier of an asset financing the use and possibly also the eventual
purchase of the asset, on behalf of the project sponsor. Assets which are typically leased
include land, buildings, and specialized equipment. A lease may be combined with a
contract for operation and maintenance of the asset.
Sources of finance
The Project can be financed by one or combination of more than one of the following:
i. Equity financing
ii. Debt financing
iii. CDM project financing
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3.13.2 Financial Closure
It is a legally binding commitment of equity holders & debt financiers to provide or mobilize
funding for the full cost of the project. It is a pre-requisite to project closure & post
implementation review. It ensures proper disposition of all project assets and helps in
comparison against budgeted cost. Project development covers a range of activities that are
required to realize a financial closure of the project. It encompasses the assessment of the
technical feasibility and economic viability, preparation of contracts with suppliers of
equipment and services and with purchasers of the produced energy, acquisition of land,
acquisition of various permits and detailed engineering of the project. All of these elements
have to be completed successfully in order to come to an investment decision. This phase
already may require significant investments, typically in the order of several percentage of
the total project cost. A project developer will hence assess the investment climate and weigh
each of the risk factors in order to have a maximum chance of reaching financial closure.
Typically the following risk factors will be assessed:
i. What is the average lead time for this type of project
ii. Will it be possible to get a permit and a good power purchase agreement (PPA)
iii. Will there be a financial support scheme when the project is ready for financial closure
iv. Will the project be bankable after all, and under what conditions and what can be done
to improve these conditions from the equity perspective
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[Source: KfW Development Bank. (2005). Financing Renewable Energy. Frankfurt: KfW
Bankengruppe]
An investor may be willing to take some risk as he will benefit from any upswings in project
returns, but lenders are much more risk averse and will demand for several securities that
ensure the payment of debt and interest. This is being translated in the financial parameters
that lenders apply, such as debt term, interest rate, and debt service coverage ratio. At the
stage of financial closure, the risk assessment will concern the remaining phases of the
project cycle only.
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3.14 Power Sale options
There are two way of electricity sale for an RE generator in India, either through REC route
or at preferential tariff.
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Exchange between Floor Price and Forbearance price determine by Central agency. Hence
there are following options to sale electricity under this route:
Sale in open access at mutually agreed price not above APPC
Sale through power exchange at market determined price.
3.15.1 Engineering
It involves decisions regarding the following after detailed technical studies
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3.15.2 Procurement
Procurement is the acquisition of goods or commodities by a company, organization,
institution, or a person. This simply means the purchase of goods from suppliers at the lowest
possible cost. The best way to do this is to let the suppliers compete with each other so that
the expenses of the buyer are kept at a minimum.
Procurement cycle for renewable energy power project consists of following steps:
Information gathering: If the potential developer does not already have an established
relationship with suppliers of needed products and services (P/S), it is necessary to
search for suppliers who can satisfy the requirements.
Supplier contact: When one or more suitable suppliers have been identified, requests for
quotation, requests for proposals, requests for information or requests for tender may be
advertised, or direct contact may be made with the suppliers.
Background review: References for product/service quality are consulted, and any
requirements for follow-up services including installation, maintenance, and warranty are
investigated. Samples of the P/S being considered may be examined or trials undertaken.
Negotiation: Negotiations are undertaken, and price, availability, and customization
possibilities are established. Delivery schedules are negotiated, and a contract to acquire
the P/S is completed.
Fulfilment: Supplier preparation, expediting, shipment, delivery, and payment for the P/S
are completed, based on contract terms. Installation and training may also be included.
Consumption, maintenance, and disposal: During this phase, the company evaluates the
performance of the P/S and any accompanying service support, as they are consumed.
Renewal: When the P/S has been consumed and/or disposed of, the contract expires, or
the product or service is to be re-ordered, company experience with the P/S is reviewed.
If the P/S is to be re-ordered, the company determines whether to consider other
suppliers or to continue with the same supplier.
3.15.3 Construction
The construction phase of a project is typically the most expensive. Therefore, it makes sense
to ensure that a number of details have been finalized prior to embarking on this project
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component. The following is a list of issues that should have been completed prior to
construction phase:
1) Finalize Costs (with fixed price agreements where possible
2) Obtaining all the necessary clearances and approvals
3) Financing
Construction Considerations
Depending on the size of the project, owner may choose to do much of the work himself or
have the project done under contract. In either case, be well prepared both technically and
legally to undertake the work. There are a number of factors to consider when beginning
construction of a RE power project:
1) Construction Timing- The time of year for project construction can influence the pace
and quality of work.
2) Materials Supply
3) Construction Permits & Inspections
4) Work Scheduling
5) Project Management
i. Civil work
a) Road and drainage
b) Wind turbine foundation
c) Met mast foundation
d) Building housing electrical switchgear, SCADA central equipment and possible
spares and maintenance facilities
ii. Electrical works
a) Equipment at the point of connection, whether owned by the wind farm owner or by
electricity network operator
b) Underground cable network and/or overhead lines, forming radial feeder circuits to
string of wind turbine
c) Electrical switchgear for protection and disconnection of feeder circuits
d) Transformer and switchgear associated with individual turbine (although this is now
commonly located within the turbine and is supplied by the turbine supplier)
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e) Reactive compensation equipments, if necessary
f) Earth(grounding) electrodes and systems
g) SCADA system
Central computer
Signal cables to each turbine and met mast
Wind speed and other meteorological transducer on met masts
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Steps for testing & commissioning:
1) Obtain design drawings and specifications and to be thoroughly acquainted with the
design intent
2) Check manufacturer‘s operating instructions and statutory requirements
3) Physically inspect the installation and equipment to determine variations from designs
and/or specifications.
4) Check individual components, e.g. key switches, control equipment, circuit breaker
status, and etc. for proper position and settings for completeness of installation.
5) Check inclusion of manufacturer‘s typical equipment testing data or factors before T&C
of particular equipment.
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CHAPTER 4: FINANCIAL MODELLING
72
v. Owner’s
vi. Contingency costs
c. Annual costs
i. Loan cost – (interest and principal repayment)
ii. O&M cost
iii. Land lease & resource rental (if applicable)
iv. Property taxes
v. Insurance premium
vi. General & administrative costs
Contingencies- A contingency allowance should be included to account for
unforeseen annual expenses. Generally, the contingency allowance is calculated
based on an estimate percentage of all other annual costs.
Figure: Expense estimate per project
phase
Source:http://nwcommunityenergy.org/project-design-management/cost-management
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assumption needs to be clearly identified so that investors can assess whether the
assumption is reasonable.
II. Calculations – the input variables are combined in a number of calculations,
including tax, depreciation/amortisation, loan balance and interest payments, and
revenue and operating costs.
III. Outputs – in general, the outputs of a financial model will include:
Cash flow statement
Profit and loss
Balance sheet; and
Key financial indicators such as debt and interest ratios, debt service coverage
ratio, NPV and IRR
Benefit-cost ratio (BCR) - It is the ratio between discounted total benefits and costs.
Net present value (NPV) - The NPV of an investment proposal may be defined as the
sum of the present values of all the cash inflows less the sum of present values of all the
cash outflows associated with a proposal.
Internal rate of return (IRR) - The IRR of a proposal is defined as the discount rate
which produces a zero NPV i.e., the IRR is the discount rate which will equate the
present value of cash inflows with the present value of cash outflows. The IRR is also
known as Marginal Rate of Return or Time Adjusted Rate of Return. Like the NPV,
the IRR is also based on the discounting techniques.
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Payback period- The payback period is defined as the number of years required for
the proposals cumulating cash inflows to be equal to its cash outflows.
Debt service coverage ratio (DSCR) - The DSCR is the total net operating income
divided by the debt service.
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management, since many of the key sensitivities can be contractually hedged to reduce the
risk to the lender. For example, key supply and purchase contracts may be fixed by volume
and price.
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construction and operation phase risks. At either stage, risk assessment is generally
undertaken through the steps described below.
Risk Identification
Risk Matrix
Quantitative Risk Assessment
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CHAPTER 5: SUMMARY
5.1 Conclusion
Wind energy is becoming very important in the energy mix of the country. This trend will
accelerate in the coming years due to reasons of India’s pursuit of energy security, issues
related to climate change, new technologies like bigger capacity turbines, and gradual
depletion of fossil fuels and their price volatility. Globally, wind energy, along with other
renewable energy technologies, is the new investment destination. This sector has continued
to show robust growth world over, which is evident in the acceleration in investment flows
into the sector.
One of the biggest barriers in the accelerated development of the wind energy is the lack of
basic understanding and knowledge about the complex procedure of project development.
The discrepancies in the procedures followed in different states of India add to these
difficulties. This study has tried to give an overview of project development cycle for wind
power project implementation.
Initially, the report guides the investors and developers in project and financial planning. The
aspects that the managers should take into consideration while project planning are indicated
which can help the managers to comprehensively plan the project so as to minimise the
difficulties in the later parts of the project. The report then guides the managers to three major
decisions regarding financial planning.
A major task for the investor / developer is the decision regarding finalising the state in which
he wants to set up WPP in. The project thoroughly covers all the major factors that the
developer must not miss while taking this important decision. These major factors – wind
power potential & installed capacity, Feed-in-Tariffs, incentives offered to WPPs, evacuation
infrastructure, grid connectivity, regularity in receipt of payment, sharing of CDM benefits,
reactive energy charges, banking, and transmission and wheeling charges – are explained in
brief in the report to guide the WPP developers to select the state which would be best for the
company to increase profitability and reduce complexities.
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The report than elaborates the issues related to site identification. It guides the developer to
select the site which can maximise the future profits by maximizing the Capacity Utilisation
Factor and restricting the capital costs.
The report also guides the developers in their approach to check the feasibility study of the
project. The developers are directed towards both, technical and commercial viability and as
well as other factors like environmental and social impact assessment.
Wind resource assessment on the site is a time consuming and expensive activity in WPP
development. There is no standardised procedure followed in all the states. The procedures
followed in all key states for mast installation, data collection and data verification has been
explained briefly in the report.
Wind power projects fail if the site isn’t suitable for development of the project. Soil
conditions, soil erosion, accessibility and closeness to grid must be checked before finalising
the site for WPP development. The report guides the developer about all these aspects of a
good site.
To maximise the output, a wind farm be designed in such a way so as to optimise the
available wind resource. This is ensured by preparing a most suitable layout for a wind farm.
The layout of the turbines should be prepared in such a way that the wind is not obstructed
into its way towards the turbines. The project guides the developers in preparation of best
possible wind farm layout and maximization of CUF.
Land acquisition is a major and one of the most crucial activities in the development of any
power project. If issues related to land acquisition are not dealt with properly, they can cause
serious damage to the profitability of the project. Hence, in this report, due importance is
given to the land acquisition related issues that the developers may face. Also the land
acquisition policies of the key states have been explain in brief.
The developer must not miss any opportunity to reap the benefits attached with renewable
energy generation. Clean Development Mechanism and Renewable Energy Certificates have
become important tools to make the renewable power projects financially viable. The project,
therefore elaborates these two new concepts. The procedures to get the project approved for
these mechanisms and cultivate the benefits have been explained in this project.
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Wind power projects and highly capital intensive projects that require substantial debt portion
in their financial structure. Detailed project report is asked for by the Banks and financial
institutions before approving loans. This report provides guidelines to the investors for
preparation of the DPR.
WPP, like all other capital intensive projects, should have the financial strategy so as to
maximise the profits and minimise the risk. This project gives guidelines to the managers to
optimise benefits by working out best possible financial strategy. He project also guides the
investors to get the financial closure done.
The revenues comes from sell of power, and hence the investor should choose the best
possible option for sale of power. The power can be sold through REC or non-REC route.
The benefits and constraints attached to both of these routes have been elaborated in the
report.
Taking into consideration the great range and variety of activities, it is quite clear that a
project steered in the right direction can be implemented with ease. It is hoped that this study
will help shorten the lead-time for wind power projects and will help Indian wind power
sector to accelerate from its current pace and help the country to achieve energy security.
5.2 Recommendations
From the detailed study of the project it can be understood that there is too much diversity in
various states with regard to feed in tariff, land acquisition, wind resource assessment etc.
Hence, the panning and feasibility study becomes cumbersome for the developer. For
example, financial feasibly has to be conducted using different FiTs for different states.
Because of completely different procedures/policies for land acquisition and WRA in
different states, prior experience of doing these activities in one state may not be helpful in
doing same activity in another state. Hence, these procedures should be standardised.
The transfer of forest land is more time consuming. There should be better coordination
between MNRE and MOEF.
As per CERC guidelines, the metering point for WPPs should be at wind-farm location and
hence the cost of grid connectivity should be borne by State utility, because this cost is not
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included in project cost for determination of tariff. Even though, the cost of grid
interconnection has to be borne by the developers in many states. Sometimes, this makes the
project financially unviable for the developer. Therefore, either the cost of grid
interconnection should be invariably borne by the state utility or such costs should be taken
into consideration while computing the tariff.
Because of low returns investors don’t find it attractive to invest in the wind energy sector.
The Generation Based Incentives which are discontinued since 1 April 2012 should be
restarted. The GBI should also be increased from above set 0.5 Rs/unit.
The investment in WPP development is also found riskier because of irregularity in payment
by the discoms to the generators. SERCs play a stricter role to make sure that all payments
are regularly made.
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Bibliography
82
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energy/wind-basics-know-your-land/know-your-land]
20. Kishore, V.; Renewable Energy Engineering and Technology. New Delhi: TERI.
21. Tetra Tech EC & Nixon Peabody LLP. (2008). Wind Energy Siting Handbook.
Washington.
22. Paul Gardner, A. G. Wind Energy- The facts.
23. UNEP. Environmental Due Diligence of Renewable Energy Projects.
24. Project legal documentation. (n.d.). Retrieved July 12, 2010, from RETScreen:
http://www.retscreen.net/ang/project_legal_documentation.php
25. Meike Soker, E. V. (2007). Renewable Energy and the Clean Development
Mechanism: Potential, Barriers and Ways forward. Wuppertal: Federal Ministry for the
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26. AHEC, IIT Roorkee. (2008). Standards/Manuals/guidelines for Small Hydro
Development.
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ANNEXURES
ANNEXURE 1: Table: State wise potential and installed capacity of wind power
Installed Installed
capacity as capacity
State Estimated on as %age
Potential 31.02.2013 of
(MW) (MW) potential
Andhra Pradesh 5394 435 3.95%
Gujarat 10609 3093 24.89%
Karnataka 8591 2113 21.56%
Kerala 790 35 4.43%
Madhya Pradesh 920 386 35.87%
Maharashtra 5439 2976 47.07%
Rajasthan 5005 2355 36.56%
Tamil Nadu 5374 7154 123.06%
Others 7008 4 0.06%
Total 49130 18551 37.75%
Source - CWET
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