India's windmills - hit by climate change

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  India's windmills - hit by climate change

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Read more on - Polity | Economy | Schemes | S&T | Environment

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• The story: In the year 2020, a bountiful monsoon saved the day. Rainfall in the June-to-September southeast monsoon period—at 109% of the long-period average—was above the 50-year mean for the second year in a row. But the wind energy sector suffered in 2020.
• Wind energy: The monsoon usually brings along with it wind speeds that range between 23 kilometres and 29 kilometres per hour, giving boost to the turbines that harness this force of nature, to generate electricity. In the 2020 rains, the average wind speed was just 20-27 kmph, the slowest on record. Since two-thirds of wind energy in India is generated during the four months ending September, the average capacity utilization factor (CUF) of wind turbines declined. (CUF is a measure of efficiency that indicates the extent to which installed capacity is deployed) At the end of the financial year in March 2021, CUF was 17% compared with 20% in the previous two years.
• Wind speed and business: Even a slight variation in wind speeds has a significant impact on the wind energy sector. It has now transitioned from a feed-in tariff regime (in which fixed prices are paid to renewable power producers for each unit of electricity produced and fed into the grid), to tariff-based competitive auctions. Wind power tariffs have tumbled to a record Rs.2.43 per kilowatt hour. So risk profile in wind sector investment has significantly changed. To remain competitive, use of 2 MW plus turbines (to maximise output) and aggressive assumption on capacity utilisation factor means a bad wind season will be really bad.
• What experts feel: Climate change is happening, and wind patterns are changing. hese are cyclical changes that are happening globally and in India also—be it wind speeds or solar irradiance. But it cannot be set as a standard, as it may average out over a period of time. 

1. In this flip-flop, what is at stake is India’s renewable energy transition and its global climate obligations. Under the Paris agreement on climate change adopted in 2015 and signed in 2016, India pledged that by 2030, 40% of its installed power production capacity would come from solar, wind, biomass and hydropower. The consequent reduction in carbon emissions would be up to 35%.
2. As part of the plan, the central government set a target of building 175 gigawatts (GW) of renewable energy capacity by 2022, including 60 GW of wind power. 
3. At the end of March 2021, India had the capacity to produce 38.78 GW of wind power. Capacity addition had already slowed due to the pandemic and procedural red tape, with the monsoon winds throwing down another challenge.
4. For the slow wind speeds during the last monsoon, experts are blaming climate change catalysed by global warming and erratic rainfall patterns. The irony is that alternative forms of energy such as wind power were supposed to lower global warming, caused by the burning of fossil fuels.

• Climate volatility: Research suggests that based on long-term data, the wind potential has declined by 10-12%, with the decline most prominent in the northern and western parts of the country. If climate change continues, and one of its effects is the warming of the Indian Ocean, one might expect a further decline in wind potential, but with the volatility in global climate patterns, there may be a return of the wind potential to earlier higher levels, as part of ‘reverting to the mean’.
• Impact on business: Investors in green energy projects haven’t missed the trend, which is visible across Gujarat, Maharashtra, Madhya Pradesh, Chhattisgarh, and Goa, apart from the southern states. 

1. Wind turbine makers like Denmark-based Vestas Wind Systems A/S have even introduced a new turbine targeted at low- and ultra-low wind speed conditions.
2. Climate change is a factor for low wind speed. Last year, intense heat waves during May and June over central India were missing, which drive up wind speed. Even in 2021, as the pre-monsoon activities started, the temperature is seen subsiding over Telangana, Madhya Pradesh, Chhattisgarh and interior parts of Maharashtra.
3. Weather-prediction firm Skymet has projected a normal June-to-September monsoon for 2021, with the rainfall likely to be 103% of the 50-year average.
4. Only if temperatures rise again, will we see a higher wind speed.

• Economy's constraints: India’s clean energy developers are already being squeezed by curtailed power procurement, delayed payments and tariff shopping by distribution companies (Discoms), and difficulties in procuring land and connectivity. Wind-speed deceleration, if it emerges as a trend, may force upward prices of power at project auctions. If lower wind patterns become a trend, the bidding prices for PPAs (power purchase agreements) may change. 
1. At play is a projected investment requirement of around $80 billion by 2022 and $300 billion till 2030 across India’s clean energy space. 
2. The space has attracted investment of Rs.4.7 trillion over the past six years, and it is estimated to generate a Rs.1 trillion investment opportunity yearly until 2030.
3. Wind energy is a key constituent of achieving India's low carbon goals.
• When in doubt, seek the coast: India is exploring plans to harness the wind power potential along its 7,600 km coastline. It already has the world’s fourth largest wind power generation capacity with a mature industry ecosystem, and an estimated wind power potential of 302 GW at 100 metres above ground level. That potential has already drawn the world’s biggest sovereign wealth funds and private equity investors to bet on India. But the Indian green energy deal space is still abuzz. The latest case being ReNew Power’s proposed merger with Nasdaq-listed special purpose vehicle RMG Acquisition Corp at an enterprise value of around $8 billion. Greenko recently raised $940 million for refinancing through its latest dollar bond sale, and Actis plans to invest $850 million in India to build two green energy platforms, including one that will focus on setting up grid-connected solar and wind power parks.
• Summary: Firms may need to follow a portfolio approach to wind assets. Wind will vary from site to site, and year to year and the only way to mitigate this risk may be to own a portfolio that is across the country.

Read more on - Polity | Economy | Schemes | S&T | Environment

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