New Delhi: India is working on a broad financial and policy push to get India’s offshore wind program off the ground after the country’s first tender in off Gujarat drew no bids, two people aware of the developments said. At the center of the government’s plan is a proposal to enhance support for the capital-intensive sector, including raising the ₹7,453 crore viability gap funding (VGF) to make the project attractive for investors.
The ministry of new and renewable energy (MNRE) has asked the World Bank to assess the additional financial requirements and risk-mitigation measures needed to attract private investment, while it is also working with consultancy firm KPMG and seeking inputs from the India-UK Offshore Wind Taskforce, one of the two people said. Launched on Wednesday, the India-UK Offshore Wind Taskforce, along with a representative from Denmark—a pioneering nation in this field—is scheduled to meet next week.
India, the biggest emitter of greenhouse gases after the US and China, plans to leverage scale to bring down offshore energy tariffs by harnessing the enormous wind power potential along its 11,098 km coastline. Even as offshore wind generates higher energy compared to onshore projects, there is a higher capex requirement to set up these projects on the seabed and evacuate electricity.
The renewed focus comes also as land acquisition constraints have slowed down onshore wind expansion, prompting the government to look at offshore projects to diversify capacity addition. However, high upfront costs, complex seabed infrastructure and tariff challenges have so far stalled progress, even as offshore wind is seen as critical to harnessing the country’s estimated potential of 70-gigawatt (GW) along the 11,098-km coastline, and moving towards the ambitious 500 GW non-fossil energy capacity goal by 2030.
For perspective, 70 GW can meet the power needs of nearly 70 million households.
“The VGF currently allocated for offshore may not be adequate. So, it may have to be revised. In Europe, too, the cost of offshore wind power comes around ₹Rs.10 per unit. In order to bring it around ₹5, the government may have to give a higher VGF,” said the person cited above. Viability gap funding is a grant to bridge the gap between a project’s high upfront cost and the revenue the market can sustainably support.
The ministry has engaged the World Bank to prepare a report, which would look at the constraints and the additional financial requirement,” the person added. A tariff of around ₹5 a unit would make offshore wind competitive to other sources of power that are in the range of ₹2-6.
plan shift
After the Union Cabinet approved the VGF in June 2024, renewable energy implementation agency Solar Energy Corp of India (SECI) launched the 500 MW tender for build-own-operate arrangement and 25-year power purchase agreement (PPA) in September 2024, with a prescribed completion timeline of 48 months. The 500 MW offshore wind project was planned to be built in an area of 202 sq km in the Gulf of Khambhat, off the coast of Gujarat.
“No interest was received for the Gujarat tender. Now, the focus has shifted to Tamil Nadu and the next tender will be for Tamil Nadu, also because the coastline there would provide better CUF (capacity utilization factor),” said the second person in the know of the developments.
The person added that Gujarat was the first preference, as the required data for project development was already available for the state. If the consideration to increase the funding takes a concrete shape, the new and renewable energy ministry will have to propose the same to the finance ministry, the person added.
In response to a mailed query, a World Bank Group spokesperson cited the strategic importance of offshore wind for India’s energy needs, but there were complex challenges to get it going.
“Offshore wind can provide clean power while catalyzing domestic manufacturing, port development, and create more and better-skilled jobs,” the spokesperson said. “At the same time, the sector is capital-intensive and complex, requiring coordinated policy, grid planning, and risk mitigation frameworks to unlock private investment. In this context, the World Bank Group has an ongoing dialogue with the MNRE on opportunities for scalable offshore wind market in India.”
Queries mailed to the ministry of new and renewable energy and KPMG remained unanswered until press time.
The plan to increase incentives for offshore wind projects comes at a time when onshore wind projects are facing several issues, including hurdles in land acquisition, right of way and addition of transmission capacity. The new and renewable energy ministry has already set up a taskforce to look into these issues and work out a revival plan to address the problems and re-energize the onshore wind sector, as reported by mint earlier.
India currently has about 55 GW of installed onshore wind power capacity and the government aims to achieve a cumulative wind capacity of 100 GW by 2030.
Challenges galore
Offshore wind projects witness higher quality wind and more efficient energy conversion due to the absence of obstructions at sea. However, it is way more capital intensive than onshore wind projects and the cost of power from these projects would also be very high compared to other renewable sources of power, which has so far rendered the sector non-viable and a non-starter in India.
Given that offshore wind farms need to be set up on the seabed, the technology and infrastructure involved is more complex, and such projects also require higher gestation periods.
The government had first notified the ‘National Offshore Wind Energy Policy’ in October 2015 and released a strategy paper in 2023. However, projects have failed to take off, given the high investments and lack of financial viability.
In the Union budget for FY25, the government had announced viability funding for setting up 1 GW of offshore wind capacity, initially off the coasts of Gujarat and Tamil Nadu.
India ranks fourth in onshore wind installed capacity, after China, the US and Germany.
Nudge and support
Experts have suggested that given the higher cost and gestation period of these critical projects, there would be a requirement for more incentives and regulatory relaxations to attract private investment.
Bhupinder Singh Bhalla, former secretary in the new and renewable energy ministry, said timelines were key, “Along with higher VGF, there is also a requirement for flexible regulations and timelines. Globally there have been instances of offshore wind projects requiring up to 7-10 years for completion. So, the benchmarks should be set as per global standards specific to this space, rather than other domestic renewable projects.”
He also underlined the need for long-term visibility and scale for the developers to invest. “Government should come up with a trajectory of 10-20 GW of projects, which would show there is a larger play for these big global developers,” Bhalla said. “Also, there is a lack of resourceful land parcels for onshore wind projects which enhances the requirement for offshore projects, as we proceed beyond 2030.”
Offshore wind has been a success story in China and Europe, with countries such as Denmark, Norway, the Netherlands, and the UK among the first movers. China leads offshore wind capacity globally with 41 GW of installed capacity, of the global capacity of nearly 81 GW.
Top global offshore wind power developers include Denmark-based Orsted, Sweden-based Vattenfall, Germany’s RWE Renewables and Sweden-headquartered Iberdola. In India, state-run energy majors NTPC and ONGC have joined hands to venture into this space.
These countries initially supported setting up of offshore wind projects through incentives including subsidies. The UK continues to provide subsidies to these projects.
Duttatreya Das, energy analyst for Asia at Ember, a global think tank focused on energy transition, said that these top countries had faced the same issues as India in terms of high cost. “However, the need to meet climate targets and lack of solar power in some of the European countries made them move towards offshore wind and these countries support these projects through various incentives,” Das said.
A report by Ember, released in November last year, noted that transmission infrastructure presents a challenge to this sector. “It is a chicken-and-egg dilemma: there is always the risk of one element being completed early and left waiting for the other. Encouragingly, the government has already initiated grid planning for prospective zones through India’s central transmission utility (CTU), Power Grid… However, with brewing bottlenecks in the availability of HVDC (high voltage direct current) equipment and transformers globally, adhering to timelines will be critical,” the report said.
It said initiatives such as financial incentives, local supply chain and accelerating transmission capacity would help patient capital to flow into the sector.
MP Ramesh, former executive director with the National Institute for Wind Energy, a research & development institute under the ministry of new and renewable energy, said there is a need to first showcase that these projects are doable and would be viable in the long term, and the government should ensure that the first project is developed.
“The public-private partnership model can also be considered for this. Offshore wind projects require large investments, including the hiring for large vessels for transportation of equipment to the offshore site location and setting up of port infrastructure,” Ramesh said. “So, without significant support these projects would not take off. But there is an acute requirement to demonstrate that these projects can be done, we also start with a pilot project with government support.”
Bhalla noted that India’s journey to the ambitious 500 GW non-fossil target and net-zero carbon emission would require diversity in energy sources and offshore wind would be a key component.
