The Ministry of New and Renewable Energy (MNRE) finally published India’s first draft tender document for seabed leasing for offshore wind energy projects in November 2022. The release of the document has subsequently been deferred to the end of March 2024. The scope of work under the tender envisages a number of offshore wind power developers leasing sea-bed areas through international competitive bidding to produce the equivalent of 4GW of offshore wind power projects off the coast of Tamil Nadu and Gujarat. There will be grid connectivity and long-term open access and access to the grid under a general network access framework. Lastly, the energy generated from the offshore wind power projects will either be consumed in captive mode or sold to third parties under an open access framework or through a merchant sale or power exchange. The MNRE estimates that some 43GW of offshore wind energy potential exists off the coasts of Tamil Nadu and Gujarat and recent reports estimated that India’s market for offshore wind power will reach 8GW by 2035. This is based on an assessment of project pipelines, long-term targets and current policies.
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The MNRE, in its strategy paper, sets out three models for the development of offshore energy projects in Tamil Nadu and Gujarat. Model A, the viability gap funding (VGF) framework, will be followed for demarcated offshore wind zones for which the MNRE or the National Institute of Wind Energy (NIWE) have carried out or propose to carry out detailed studies or surveys. The MNRE, through its implementing agencies, will come up with bids for the procurement of offshore wind power capacity. Necessary central financial assistance in the form of the VGF will be available to achieve a predetermined power tariff. Model B is a non-VGF framework, but will grant exclusivity over the seabed during the study or survey period. It applies to sites identified by the NIWE. Proposed offshore wind sites demarcated within identified zones will be allocated for a fixed period on a lease basis through single-stage, two-envelope bidding. Project development shall be carried out by the prospective developer without any central financial assistance (CFA). The power generated from such projects shall be used for captive consumption under an open access mechanism, sold to any entity through a bilateral power purchase agreement or sold through power exchanges.
The government may also call for bids for the procurement of power for distribution companies (Discoms) on the basis of a tariff after two years. Benefits such as the provision of power evacuation infrastructure from the offshore pooling delivery point, waivers of transmission charges and renewable energy credits shall apply.
Model C is also a non-VGF framework, but will not grant exclusivity over the seabed during the study or survey period. The developer may identify any offshore wind site within the exclusive economic zone excluding the sites considered under models A and B, and carry out studies and surveys. The government will come up with bids for project development or allocation of the seabed. The bidding may employ any one of the following methods.
Bidding may be made on the lease or allocation fee or through revenue sharing in the case of projects for captive consumption, third party sale or sale through exchange under the open access mechanism. Tariff-based competitive bidding may be used for power procurement by Discoms, the government or state governments. The government may designate any central or state government agency to bid on its behalf, in which case the concerned agency will assure the power offtake from the proposed offshore wind project. The developer conducting the study or survey of respective sites may also submit the proposal for project development and allocation of offshore sites under this model. In this case, site specific bidding will be conducted with a right of first refusal to such developer.
However, project development shall be carried out by the prospective developer in this zone without any CFA. Benefits such as the provision of power evacuation infrastructure from the offshore connecting point, waivers of transmission charges, renewable energy credits with multipliers and carbon credit benefits as determined by the central or state governments from time to time shall apply.
From the perspective of green power availability, the government has introduced the Electricity (Promoting Renewable Energy Through Green Energy Open Access) Rules, 2022, as amended. These give retail consumers greater access to green power. These steps are significant first steps in India’s efforts to set up offshore wind projects.
Prashanth Sabeshan is a partner at Dentons Link Legal.
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