Saturday, February 11, 2012, Sustain2green.com

Jami Hossain - Chief Mentor & Co-founder of Windforce, He is Currently on the National Council of Indian Wind Power Association, Governing Council of Indian Wind Energy Association and Treasurer of World Wind Energy Association

Do you think time has come when RE power in India could compete with conventional power without Govt support?

The answer to this question cannot be very simple ‘yes’ and ‘no’. We must understand why we need government support. Is it because RE Power is costly with respect to conventional power such as coal? If we delve deeper into the issue, we will find that in the long-term cost and price are functions of governmental policies on various fronts.

For example in any country if the import duty on iron ore is less, we may have cheaper wind turbines getting manufactured. Similarly, if government was to impose a certain charge or tax on mining or extraction of different materials from the surface of Earth, coal will become costlier and then if there is a further charge due to pollution and environmental hazards created by combustion of coal, the power generated from it will be still costlier and then RE power will become more competitive. These policies have to be driven by certain environmental and societal rationality, which is not the case today.

Coming to the question, the government support comes in two forms 1) in the form of policy and regulatory frameworks, which create an enabling environment for RE projects to come up, and 2) In the form of tax benefits and subsidies etc.  Support of the first kind will undoubtedly needed on an ongoing basis. The second kind of support directly to a private sector beneficiary is sometimes difficult to manage. However, fiscal support in the form of taxation policy or interest subsidy etc., which can be managed, should be made available to RE power.

At the same time, in the case of grid connected RE power, restrictive practices and charges such as cross-subsidy charge imposed on third party sale of electricity, open access charges, banking and wheeling charges etc. should be done away with. Government should come in to meet the cost of setting up and operating transmission systems and such costs, as far as RE power is concerned, should neither be loaded on utilities nor on the RE power generators.  Such support will be needed till the entire electricity sector starts to function under a sound environmental and societal rationality.

In India, when we talk of government support to RE power, we should also keep in mind that over the last sixty years, the government has not only consistently supported conventional power such as Mega/ultra/super sized coal based power plants, large hydro projects and nuclear projects but also has completely sponsored and facilitated development such projects.

This has lead to physical and organizational infrastructure as well as a mindset that on the one hand minimizes barriers to conventional power and on the other hand imposes barriers on RE power.  An example is the power grid, which emanates from large centralized power plants and so called central generating stations and is meant to transmit power from these stations but the RE power is generated in a geographically distributed and dispersed manner. There is sparse power evacuation infrastructure to tap distributed generation. This creates a great disadvantage for RE power.

The other aspect is the mindset that the electric power that utilities can manage is only the power from large coal, hydro and nuclear power plants and this mindset is so overwhelming that a twisted sense of rationality prevails among the policy makers and policy making bodies which prevents mainstreaming of RE power.

Till there is a level playing field not only in terms of costs and prices but also in the form of organizational and physical infrastructure and the mindset, government support will be needed.

Regulators are currently contemplating to take away accelerated depreciation benefits for wind projects, what do you think will be impact of such action on wind energy growth?

Unfortunately, the move to do away with accelerated depreciation is again coming from this twisted sense of rationality. If today we have 17000 MW of wind power connected to the grid, it is almost entirely due to accelerated depreciation. The policymaker is of the opinion that end of accelerated depreciation will bring in IPPs.

However, the ground reality is different and the space left by accelerated depreciation investors cannot be filled in by IPPs. The move will harm the industry that according to some estimates employs 100,000 people.  Given the fact that there is a vast potential for wind power in the country and that options of capacity addition for the country are limited, the government should not only allow accelerated depreciation to continue but also come up with policies that remove barriers to investments in RE power.

There has been reluctance shown by investors to fund REC based projects, how do you think what Govt could do to alleviate risks for investors for such projects?

The REC based projects are being set up on the premise that it will be possible to sell these certificates to entities that need to meet their RPO requirements. The investors can take this mechanism seriously only if the meeting of RPO requirements is made legally binding and if strong penalties are imposed for non-compliance.

Is there any impact of European economic situation on wind projects in India as well as globally?

There can be a short-term impact on investments due to European economic situation. We need to understand that the flight of the capital can take place because the problem is more in the mind of the investor as a risk perception rather than actually a real problem on the ground. This risk perception can be addressed by strengthening and improving upon investment enabling environment in the country. At the end of the day “capital” has to be invested and if the risks are minimized, it can flow to the projects. Therefore, the European crisis can also be looked at as an opportunity by countries like India and China. In the long-term since the economic growth is stagnating in developed countries, developing countries like India that are also democratic and have a robust legal system will become attractive to the investors.

Though MW scale projects are seeing growth, however small wind projects are still not successful in India. What are the reasons and how such a market could be developed?

Small wind projects may remain small in terms of the total capacity installed. For example today the worldwide capacity of small wind turbines is limited to under 400 MW as against 240000 MW installed in case grid connected wind power. At the same time it must be said that there is great requirement for such wind turbines in niche markets and it is more a question of getting over the market barriers than anything else.  In India itself rural domestic, irrigation, niche applications could present a market size of the order of a few gigawatts.

 Link to the Interview: http://www.sustain2green.com/2012/02/interview-with-jami-hossain-who-is.html