India : Textile Cos Tapping The Wind For More Energy

Wind power is back in favour. In 2002-03 and 2001-02, the country added 241 MW and 288 MW of installed capacity of wind power, against 172 MW and 143 MW in the previous two years. At the beginning of the current year, the installed capacity is 1,869.2 MW. By all accounts, the boom will continue this year too.

Leading wind turbine manufacturers say their order books are full.
Suzlon, the market leader, has orders for 71 turbines, each of 1.25 MW capacity. This time, unlike the mid-1990s, wind energy is sought for more reasons than just for the depreciation benefits. A combination of several factors accounts for the current demand. Grid power is getting costlier. In Tamil Nadu (which has 53 per cent of wind power capacity), power cost has gone up from Rs 3.30 per unit to Rs 3.65 in the last one year. Last year, the State added 133 MW— against 45 MW in the previous year—
accounting for 55 per cent of the capacity added in the whole country.

Second, with interest rates dropping, borrowing is cheaper. Third, the phasing out of the `80-HHC benefits' has driven exporters to seek tax shields — wind mills enjoy a first-year depreciation of 80 per cent. Four, more efficient, larger capacity machines have now entered the market, with lower maintenance costs and higher output. Finally, wind turbines have just been included among the items eligible for the 5 per cent concessional funding, out of the `Textile Upgradation Fund'.

Textile companies can borrow for windmill installation, at 6 per cent! According to the Indian Wind Power Association, a number of Tiruppur-based units are showing interest.At Rs 5 crore per MW for set-up and Rs 5 lakh per MW per year for operations, wind power makes economic sense, says industry. Each MW can
produce some 25-30 lakh units per year, the variable cost per unit works out to around 25 paise per unit. Says Mr V. Jagannathan, Senior Vice-President, Madras Cements, "After the initial few years of installation, the cost of generation is very, very attractive". On site agriculture, funds from wasteland development schemes and carbon credits, make wind power even more economical.

A reason to believe the boom will sustain is the evolution of a unique structure for implementing wind power projects. Entities have sprung up which, for a fee, liase between the financiers and the buyers, assuming complete responsibility for project implementation and all the risks associated with running the wind farms, including poor generation.

For example, Ashok Leyland Finance has promoted Alfin Wind Energy, for this purpose. Says Mr C.M. Sambasivam, Head - Operations of Alfin, "We even guarantee the IRR to the funding institution".

However, the country is still some way from realising the full
potential of wind energy. The Ministry of Non-Conventional Energy Sources has identified 208 potential (windy) sites, but development is concentrated only in a few of them.According to Mr Tulsi Tanti, Chairman and Managing Director of the Rs 600-crore Suzlon Developers, there are still policy irritants in many States. In Tamil Nadu, where third party sales of power is disallowed, the electricity board pays only Rs 2.70 per unit, against Rs 3.25 in Karnataka. Again, the power purchase agreement is only for five years— there is uncertainty over the period beyond. Mr Tanti calls for 20-year PPAs.

Also, in the State, a developer is not allowed to put up a substation and grid lines, lack of which dampens investors' interest. In many other states, land acquisition is an issue. "Remove these irritants, then you will see the real boom", says Mr Tanti.