Indian Cabinet Approves Viability Gap Funding Scheme for Offshore Wind Energy Projects

The Indian cabinet approved the  Viability Gap Funding (VGF) scheme for 1 GW offshore wind energy projects in Gujarat and Tamil Nadu. The projects have an investment value of around USD 893 million (INR 7453 crore). The two projects, 500 MW each in Gujarat and Tamil Nadu, received around USD 821 million in installation and commissioning. Furthermore, the projects also received an additional grant of USD 71 million (INR 600 crore) for upgrading two ports to meet logistics requirements for offshore wind energy projects.

The Union Budget 2024 also announced the VGF scheme for offshore wind projects. The VGF scheme is a cornerstone of the National Offshore Wind Energy Policy. It is a major step towards harnessing our exclusive economic zone's vast offshore wind energy potential.  The government's support through VGF will significantly reduce the cost of power from offshore wind projects in India, making them viable for DISCOMs to purchase. 

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This, in turn, will pave the way for private developers to establish these projects, while the infrastructure will be constructed by Power Grid Corporation of India Ltd. (PGCIL). The Ministry of New and Renewable Energy, as the nodal ministry, will ensure the successful implementation of this scheme, marking a new era in our energy transition journey.

Construction of offshore wind energy projects and their operations also require specific port infrastructure, which can handle storage and movement of heavy and dimensioned equipment. Under the scheme, two ports in India will be supported by the Ministry of Ports, Shipping, and Waterways to meet the requirements of offshore wind development.

Offshore wind is a renewable energy source that offers several advantages over onshore wind and solar projects, such as higher adequacy and reliability, lower storage requirements, and higher employment potential. The government recently invited bids to set up offshore wind projects in Tamil Nadu.

The development of the offshore wind sector will lead to economy-wide benefits by attracting investments, developing indigenous manufacturing capabilities, creating employment opportunities across the value chain, and developing technology for offshore wind in the country. This will also contribute towards achieving India’s energy transition targets.

The successful commissioning of 1 GW offshore wind projects will produce renewable electricity of about 3.72 billion units annually, resulting in an annual reduction of 2.98 million tons of CO2 equivalent emissions for 25 years. Further, this scheme will kick-start offshore wind energy development in India and lead to the creation of the required ecosystem in the country to supplement its ocean-based economic activities. This ecosystem will support the development of an initial 37 GW of offshore wind energy at an investment of about INR 4,50,000 crore.

National Offshore Wind Energy Policy: A Brief Overview

India’s National Offshore Wind Energy Policy was notified in October 2015 to harness the vast potential of offshore wind resources along its 7,600-kilometer coastline. Here are the key points:

Objective

The policy aims to explore and promote the deployment of offshore wind farms within India’s Exclusive Economic Zone (EEZ). It encourages investment in energy infrastructure and spatial planning for maritime renewable energy resources.

Nodal Ministry

The Ministry of New and Renewable Energy (MNRE) is the nodal ministry for offshore wind development. It collaborates with other government entities to monitor and facilitate offshore wind energy projects in India.

Resource Assessment

The National Institute of Wind Energy (NIWE) in Chennai conducts resource assessments, surveys, and studies within the EEZ. Initial assessments suggest significant potential—36 GW off the coast of Gujarat and 35 GW off Tamil Nadu.

Read: SSE Consortium Selected for an Offshore Wind Project in Netherlands

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