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SUMMER INTERNSHIP REPORT ON

DETAILED PROCEDURE

AND

FINANCIAL MODELING

FOR DEVELOPMENT OF A GREEN FIELD WIND POWER

PROJECT

UNDER THE GUIDANCE OF

Mrs Sreelata Nilesh, Senior Fellow, CAMPS, NPTI

&

Mr Rajat Roy, Dy. Manager, Ecoren Energy India Pvt Ltd

At

Ecoren Energy India Pvt Ltd

Submitted by

PARTH BELANI

ROLL NO: 1120812204

MBA (POWER MANAGEMENT)

(Under the Ministry of Power, Govt. of India)

Affiliated to

MAHARSHI DAYANAND UNIVERSITY, ROTHAK

AUGUST 2012


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TRAINING COMPLETION CERTIFICATE


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DECLARATION

I, Parth Belani, Roll no. 1120812204, student of MBA (Power Management) at National

Power Training Institute, Faridabad, hereby declare that the summer training report

programme of the National Power Training Institute, Faridabad hereby declare that the

Summer Training Report entitled –

“DETAILED PROCEDURE AND FINANCIAL MODELING FOR DEVELOPMENT OF A

GREEN FIELD WIND POWER PROJECT”

Is an original work and the same has not been submitted to any other Institute for the award

of any other degree.

A Seminar presentation of the Training Report was made on ……………….. and the

suggestions as approved by the faculty were duly incorporated.

Presentation In charge Signature of the

Candidate (Faculty)

Countersigned

Director/Principal of the Institute


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ACKNOWLEDGEMENT

I express my sincere thanks to Mr Rajat Roy (Business Development Manager), Ecoren

Energy India Private Limited for giving me a great opportunity to work in such an esteem

organization. I am solemnly thankful to Mr Rakesh Patel (Business Analyst), Ecoren Energy

India Private Limited for his guidance and support. I am also thankful to the entire staff of,

Ecoren Energy India Private Limited for sharing their knowledge and assistance.

I feel deep sense of gratitude towards Mr J.S.S. RAO, Principal Director, CAMPS (NPTI),

Mr S. K. Chaudhary, Principal Director, CAMPS, Mrs Indu Maheshwari, Dy. Director,

NPTI and Mrs Manju Mam, Dy. Director, NPTI, Dr Rohit Verma, Dy. Director, NPTI for

arranging my internship at Ecoren Energy India Private Limited. I also take this opportunity

to express my sincere thanks to Mrs Sreelata Nilesh (Senior Fellow), NPTI for being my

internal project guide and providing valuable inputs in the completion of this project.

.


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EXECUTIVE SUMMARY

In April 2012 Indian power sector reached a tremendous milestone of achieving 2,00,000

MW of total installed power capacity. Commencing with a meagre installed capacity of about1360 MW in 1947, the year the country attained independence, India’s power sector grew

substantially over the last six and a half decades, and the installed capacity at the end of June

2012 stands at 2,05,340 MW. However contribution of renewable power is 24,833 MW,

which is only 12.1% of the total installed capacity. Further, the Government of India desires

to significantly improve the country's annual per capita consumption. The government has

not been successful in its efforts to achieve per capita consumption of 1000 units and to

ensure a minimum lifeline consumption of 1 unit per household per day as a merit good by

the year 2012. In order to achieve this scale of supply and ensure sufficient electricity to all at

reasonable rates, it is necessary to explore all possible options of generating and supplying

electricity.

Renewable energy sources can make important contributions to sustainable development.

Currently, their exploitation in commercial markets is low, mainly because of high cost and

technological constraints. Most renewable energy technologies are still at an early stage of

development. However wind power, compared to other renewable energy sources, has lower

costs and improved technology. Development of wind power projects, therefore, is a key to

India’s future economic growth looking at the benefits of wind energy and the energy deficit

the country is facing today. Nevertheless, investors’ lack of interest in wind energy sector is

conspicuous because of lack of procedural understanding of development of wind power

projects.

The need for defining an effective and comprehensive wind power project implementation

methodology for India is imperative. Not only there are growing uncertainties about the

critical as well as sub critical activities of wind power projects implementation, but the

information associated with them is meagre and highly dispersed in nature and is not easily

available. Insufficient information may lead to misleading decisions by project developers

and investor’s. Many wind power project investments are not implemented, not because of

financial, technical, commercial, managerial or regulatory aspects, but merely because of

procedural complexities and inadequate guidelines about them.


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Therefore this study is intended to explicate a generalized methodology for wind power

project implementation. This methodology will act as a source of knowledge for wind energy

power project implementation to the stakeholders of the Indian power sector.

This report includes all the major steps that are required to take for putting in place a wind

power project. It starts with project and financial planning procedure followed by factors that

need to be taken into consideration for selecting a state of preference. The project then guides

about feasibility study, wind resource assessment, site survey, micro-siting, land acquisition,

financial planning & strategy, and power sale options. The project also includes financial

modelling that can help the investor in his decision of whether to accept or reject the project.


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LIST OF ABBREVIATIONS

CDM Clean Development Mechanism

CPV Concentrated Photo Voltaic

CEA Central Electricity Authority

CERC Central Electricity Regulatory Commission

CUF Capacity Utilization Factor

IEGC Indian Electricity Grid Code

KWh Kilo Watt Hour

MNRE Ministry of New and Renewable Energy

MoP Ministry of Power

MW Megawatt

NLDC National Load Despatch Centre

NOC No Objection Certificate

O&M Operation & Maintenance

PLF Plant Load Factor

PPA Power Purchase Agreement

RE Renewable Energy

REC Renewable Energy Certificate

RET Renewable Energy Technology

RPO Renewable Purchase Obligation

SERC State Electricity Regulatory Commission

SHP Small Hydro Plant

SLDC State Load Despatch Centre

SNA State Nodal Agency


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LIST OF TABLES

Table 1 : State wise Wind Power Till 2020 .......................................................................... 17

Table 2 : State Feed-in-Tariffs ............................................................................................. 18

Table 3 : Sharing of CDM Benefits in Different States ........................................................ 23

Table 4 : Reactive Energy Charges ...................................................................................... 23

Table 5 : State wise Banking Regulations ............................................................................ 24

Table 6 : State wise Transmission and Wheeling Charges ................................................... 25

Table 7 : REC Floor and Forbearance Prices of REC ........................................................... 44


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LIST OF FIGURES

Figure 1 : Financial Planning Process .................................................................................. 15

Figure 2 : Wind Power Potential and Installed Capacity ...................................................... 16

Figure 3 : State wise Achievable wind Potential Till 2020 ................................................... 17

Figure 4 : Feed-in-Tariff...................................................................................................... 18

Figure 5: Feasibility Study .................................................................................................. 27

Figure 6 : CDM Timeframe ................................................................................................. 40

Figure 7 : CDM Project Cycle ............................................................................................. 41

Figure 8 : REC Procedure.................................................................................................... 44

Figure 9 : REC Mechanism ................................................................................................. 45

Figure 10 : Hurdles in Financial Closure ............................................................................. 51

Figure 11 : Power Sale Options ........................................................................................... 53

Figure 12 : Parameters of Financial Modelling .................................................................... 59

Figure 13 : Cost Estimate per Project Phase ........................................................................ 60

Figure 14 : Project Cash-flow and Key Indicators................................................................ 62

Figure 15 : Types of Risk in Various Phases of Project........................................................ 63

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Table of Contents

TRAINING COMPLETION CERTIFICATE ................................................................................................ ii

DECLARATION .................................................................................................................................. iii

ACKNOWLEDGEMENT ...................................................................................................................... iv

EXECUTIVE SUMMARY ....................................................................................................................... v

LIST OF ABBREVIATIONS ...................................................................................................................vii

LIST OF TABLES ................................................................................................................................ viii

LIST OF FIGURES ................................................................................................................................ix

Table of Contents .............................................................................................................................. x

CHAPTER 1: INTRODUCTION .............................................................................................................. 1

1.1 About the project..................................................................................................................... 11.2 Problem Statement .................................................................................................................. 2

1.3 Scope of Project ....................................................................................................................... 2

1.4 Objective of the project ........................................................................................................... 2

1.5 Methodology ........................................................................................................................... 2

1.6 About the organisation ............................................................................................................ 3

1.6.1 Critical Assessment of the Organization............................................................................. 4

CHAPTER 2: LITERATURE REVIEW AND POLICY FRAMEWORK ............................................................. 5

2.1 Literature Review ..................................................................................................................... 5

2.2 Policy Framework .................................................................................................................. 10

2.2.1 National Electricity Policy, 2005 ...................................................................................... 10

2.2.2 National Tariff Policy, 2006.............................................................................................. 10

2.2.3 Rural Electrification Policy, 2006 ..................................................................................... 11

CHAPTER 3: WPP DEVELOPMENT PROCEDURE ................................................................................ 12

3.1 Introduction - Wind Power Project development procedure .................................................. 12

3.2 Project and Financial Planning................................................................................................ 13

3.2.1 Project Planning .............................................................................................................. 13

3.2.2 Financial Planning ........................................................................................................... 13

3.3 Selection of State of preference ............................................................................................. 16

3.3.1 Wind Power Potential and Installed Capacity .................................................................. 16

3.3.2 Feed-in-Tariffs ................................................................................................................. 17

3.3.3 Special incentives and facilities by State Governments .................................................... 18

3.3.4 Simplicity of procedures followed in the State ................................................................. 20

3.3.5 Evacuation Infrastructure ................................................................................................ 21


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3.3.6 Grid availability ............................................................................................................... 22

3.3.7 Regularity in the receipt of payment ............................................................................... 22

3.3.8 Sharing of CDM Benefits.................................................................................................. 22

3.3.9 Reactive Energy Charges ................................................................................................. 23

3.3.10 Banking ......................................................................................................................... 24

3.3.11 Transmission and wheeling charges............................................................................... 25

3.4 Site Identification ................................................................................................................... 25

3.5 Feasibility Study ..................................................................................................................... 26

3.5.1 Generalized activities for feasibility study of Wind Power Projects: ................................. 27

3.6 Mast Installation, Data Collection and Data Verification ......................................................... 31

3.6.1 Permission for Mast Installation and Subsequent Capacity Allocation ............................ 31

3.6.2 Installation of Wind Mast ................................................................................................ 33

3.6.3 Data collection ................................................................................................................ 33

3.6.4 Validation of Data through CWET .................................................................................... 34

3.7 Site Survey ............................................................................................................................. 34

3.7.1 Soil / Ground Conditions ................................................................................................. 34

3.7.2 Soil Erosion ..................................................................................................................... 34

3.7.3 Accessibility .................................................................................................................... 35

3.7.4 Closeness to Grid ............................................................................................................ 35

3.8 Wind Farm Layout.................................................................................................................. 36

3.8.1 Inter-turbine separation .................................................................................................. 36

3.8.2 Changes in elevation of area ........................................................................................... 37

3.8.3 Other factors ................................................................................................................... 37

3.8.4 Layout using software ..................................................................................................... 37

3.9 Land acquisition ..................................................................................................................... 37

3.10 Clean Development Mechanism ........................................................................................... 403.10.1 CDM project cycle ........................................................................................................ 41

3.11 Renewable Energy Certificates ............................................................................................. 43

3.11.1 Types of REC ................................................................................................................. 44

3.11.2 The operational framework for REC mechanism ............................................................ 44

3.12 Detailed Project Report ........................................................................................................ 47

3.12.1 Contents to be covered in a DPR ................................................................................... 48

3.13 Financing Strategy and Financial Closure .............................................................................. 49

3.13.1 Financing strategy ......................................................................................................... 49


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3.13.2 Financial Closure ........................................................................................................... 50

3.14 Power Sale options .............................................................................................................. 53

3.15 Physical implementation of the Project ................................................................................ 54

3.15.1 Engineering ................................................................................................................... 54

3.15.2 Procurement ................................................................................................................. 55

3.15.3 Construction ................................................................................................................. 55

3.15.4 Testing and Commissioning ........................................................................................... 57

3.15.5 Operation and Maintenance ......................................................................................... 58

CHAPTER 4: FINANCIAL MODELLING ................................................................................................ 59

4.1 Cost estimates ....................................................................................................................... 59

4.2 Development of a project model ........................................................................................... 60

4.3 Analysis of financial indicators ............................................................................................... 61

4.4 Sensitivity Analysis ................................................................................................................. 62

4.5 Risk analysis ........................................................................................................................... 63

4.5.1 Assessing risk .................................................................................................................. 63

4.5.2 Managing Risk ................................................................................................................. 64

CHAPTER 5: SUMMARY.................................................................................................................... 65

5.1 Conclusion ............................................................................................................................. 65

5.2 Recommendations ................................................................................................................. 67

Bibliography .................................................................................................................................... 69

ANNEXURES .................................................................................................................................... 71


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CHAPTER 1: INTRODUCTION

1.1 About the project

In April 2012 Indian power sector crossed a remarkable milestone of crossing 200000 MW of

total installed capacity. On 30th June 2012, the country’s total installed power capacity stood

at an enormous figure of 205340.26 MW, out of which total renewable energy was 24832.68

MW. The share of Wind energy in Renewable energy produced in India is very high at 70%.

Still, India’s goal of ‘energy security’ is far from achieved. India has peak demand power

shortage of 12% and the cost of Fossil fuel is increasing day by day. Also, in National Action

Plan for Climate Change (NAPCC), India has committed to increase its renewable energy

share to 15% by 2020. Development of renewable energy, therefore, is necessary if Indian

economy is to achieve sustainable growth at fast pace in the future.

Nevertheless, increasing the share to renewable energy in India’s energy mix is a difficult

task, renewable energy being far more expensive compared to the conventional energy.

Wind power is less expensive compared to all other potential sources of renewable energy

like solar power. Also, India has huge unexplored wind power potential. The estimated Indianwind energy potential has been assumed by the Ministry of New and Renewable Energy in a

study conducted in the late 90's to be 45000 MW. A more recent study by C-WET, India's

wind energy potential is estimated to be more than 1,00,000 MW at a hub height of 80

metres. Therefore utilising wind potential seems to a one of the most credible way to achieve

India’s energy security.

The development of a wind power project is a complex task because of technical, managerial

and regulatory hurdles. Apart from that, different procedures are followed in different states

for various activities, which play its part in increasing the complexity. Hence this sector is not

attracting large investments. This Report, therefore, is an attempt to guide the investors to

understand the complex procedure of wind power development.


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1.2 Problem Statement

Development of wind power project, which is a necessary task for achieving India’s energy

security, is a complex task. Different tariffs, policies and procedures followed in various

Indian states add to this complexity. Apart from this, benefits like Accelerated Depreciation

(AD) and Generation Based Incentives (GBI) are abandoned. Hence the wind power sector,

compared to conventional energy sources, is less attractive to investors. Therefore there is a

need of a document that can guide the investors to understand the procedure of a WPP

development. This report is an attempt in this direction.

1.3 Scope of Project

This project is an attempt to be guideline to the cumbersome procedure of setting up a wind

power project. It deals with all the technical, economic and regulatory issues related to WPP

development. The differences in policies/procedures followed in different states in the

permission of wind resource assessment, land acquisition, feed-in-tariffs etc. are also covered

in this report so that it can be useful to understand the diversities in various states with regard

to wind power. This report also covers financial modelling of a wind power project which can

be a guideline for checking financial viability of a WPP.

1.4 Objective of the project

Wind power development is a riskier investment compared to the investments in conventional

sources of energy. In India, diversities in policies/procedures in different states make it even

more risky and hence unattractive. The objective of the project is to guide the investors in

understanding the procedure of development of wind power project. The intension is to

persuade investments in the wind power sector by making the understanding of WPP

development procedure simpler. By making the WPP development attractive by developing

more understandable, the project is intended to contribute in India’s pursuit of energy

security.

1.5 Methodology

The project has been prepared by gathering the dispersed information about various

proceedings of wind power project development. The regulations of State Electricity


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Regulatory Commissions (SERCs) of states with major wind energy potential have been

studied. These states include Andhra Pradesh, Karnataka, Gujarat, Rajasthan, Madhya

Pradesh, and Maharashtra. The guidelines published by various State Nodal Agencies (SNAs)

for procedures like land acquisition and capacity allocation have been gathered and

understood deeply for making this project useful. Experience of the Business Development

team of Ecoren Energy India Private Limited has added value to this project. All the

information gathered as mentioned above was then studied and put in proper sequence to

understand the flow of the development procedure. Technical books have been studied to add

major important technical issues and their solutions that need to be included in the project.

1.6 About the organisationLaunched in September, 2010, ECOREN ENERGY has been set up by a group of private

investors with the help of number of prominent Indian banks, and insurance companies.

Ecoren Energy India Private Limited is a renewable Independent Power Producer (IPP)

focused on development, owning and operating wind power projects across India. The

company is currently focusing on the states of Andhra Pradesh, Karnataka, Maharashtra,

Rajasthan, Madhya Pradesh and Gujarat for development of wind power projects. Ecoren is

led by visionary management with the objective of creating green and sustainable business

models and promoting renewable energy. Ecoren’s Vision is to demonstrate responsible

leadership in mainstreaming renewable sector in the energy space by innovation, cost-

effectiveness and profitable growth. Ecoren’s team comprised of talented and experience

individuals across the domains of Project management & execution, Regulatory, Technical,

Finance, Business Development and Wind Resource Assessment.


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The ECOREN Factor

Ecoren is distinctive in how it balances stakeholder value, with social responsibility to make

the world a better place and to do so profitably. The organisation keeps this philosophy in the

core of its values, and wants to achieve this with a sense of pride, ownership and long-term

commitment in all of its projects from start to finish.

1.6.1 Critical Assessment of the Organization

Strengths

Core Team of expert professionals.

Excellent work Culture

Knowledge management

Intellectual capital

Reporting performance

Technical expertise

Weaknesses

Relatively new organization

Small Workforce

Opportunities

Global shift towards Renewable energy

Liberalising Government perspective towards RE generators

Young and talented workforce of India

More stress on renewable energy

Threats

High degree of openness may lead to information leakage

Capture of efficient windy sites by older and bigger players in the wind power sector


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CHAPTER 2: LITERATURE REVIEW AND POLICY

FRAMEWORK

2.1 Literature Review

Literature has been prepared by authors all around the world explaining whole procedure

wind power project development or a part of the mighty procedure. The papers/journals

reviewed before preparation of this report, and a brief about them is explained here.

“Siting and output prediction for wind energy project planning”, a paper presented by B.H.

Bailey (AWS Sci., Albany, NY) at Power Engineering Society Winter Meeting, focuses on

outlay of wind farms. This paper summarizes and illustrates the steps involved when siting

and planning the design and performance of wind power plants. The topics covered are: site

screening techniques and parameters; wind resource mapping as a siting tool; the role and

design of wind measurement campaigns; optimizing wind plant turbine layout using

advanced modelling tools; predicting a site's long-term wind resource and annual wind plant

production; and due diligence reporting to obtain project financing.

A paper titled “Research of wind power project risk assessment based on Hierarchy-grey

Analytic Method” appeared in an international conference “Mechatronic science, Electric

Engineering and Computer (MEC), 2011”. The paper was presented by Younggui (Sch. of

Bus. Adm., North China Electrical. Power Univ., Baoding, China) et al on August 2011. This

report explains that Global environmental problems have become increasingly prominent.

Wind power as a clean and renewable energy, becomes various countries gradually in the pet

who seeks in the energy alternative process. Wind power in the global range has developed

rapidly, but it should realize that wind power project is also a risk in the process of

development cannot be avoided. This article needle wind power projects characteristic,Hierarchy-grey Analytic Method is proposed based on the wind project risk assessment

methods. Through carries on the empirical analysis to some wind electricity project to draw

the conclusion. Then carries on the wind electricity project for the enterprise the risk

management to provide the basis.

On April 2008, at Electric Utility Deregulation and Restructuring and Power Technologies,

2008, Author N.R. Ullah (Chalmers University, Goteborg) et al presented a paper titled

“Detailed modelling for large scale wind power installations - a real projec t case study”. This


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paper reports on the modelling issues performed related to a feasibility study to investigate

the possibilities to connect the 640 MW off-shore wind power farm, planned for Krieger's

Flak 30 km south of Trelleborg (Sweden), to the E.ON 130 kV sub transmission system. The

aim of the entire study is to answer the question if such a connection is possible, and under

what conditions; it is not meant as a design project. Following a general connection design

discussion, the study comprises three major parts, fault current calculations, load flow

calculations, and dynamic simulations. Concerning the modelling aspects, much effort has

been put on details and scalability for the dynamic simulations.

In June 2010, at Energy Market (EEM), 2010, 7th International Conference on the European

a paper titled “Economic evaluation of wind generation projects in electricity markets” was

Mr Pereira A.J.C., Inst. Super. de Eng. de Coimbra, Inst. Politec. De Coimbra, Coimbra,

Portugal. In this paper the author explained the electricity markets. He evaluated economic

evaluation of WPPs in electricity markets. He explains that investments in new generation,

especially in renewables, grew up in several countries contributing to change the generation

mix. Among these new technologies, wind power became an important source in the sense

that the share in installed capacity is large in countries as Germany, Denmark, Spain and

Portugal namely considering the prices paid to the generated power. These subsidizing

schemes are in several cases responsible for a large amount of the final end user costsmeaning that in the future new ways of integrating this power in the grid have to be adopted.

This means that for investors it is important to evaluate from an economic point of view the

interest of new wind power projects admitting changes in current tariff schemes. For

regulatory agencies it is also important to investigate the impact of changes in current

schemes. This paper details an approach to characterize this type of investments in terms of

the Net Present Value, NPV, and the Internal Return Rate, IRR, so that more sounded

investment and policy decisions are adopted.

In August 2010, in the conference of Emergency Management and Management Sciences

(ICEMMS), Author Chongming Liu (North China Electrical Power University, Beijing,

China) et al presented a paper titled “Risk analysis and assessment of wind power project”. In

this report he explains that Wind power is a kind of renewable clean energy source, which

has a very important significance for energy conservation and social efficiency. But now,

wind power development has not yet formed a complete system, and there are different kinds

of risks exist in wind power project development process. This paper conduct a detailed study

for this, analyses the risk factors including natural disaster risks, technology risks, economic

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risks, and policy risks in four aspects, then construct a fuzzy comprehensive evaluation

model, and use the model in a wind power project on risk assessment, which verifies the

feasibility and effectiveness of the evaluation model.

Author J.I. Munoz et al presented a paper at PowerTech in Bucharest, in June 2009 which

was titled “Risk assessment of wind power generation project investments based on real

options”. This paper presents a decision-making tool for investment in a wind energy plant

using a real options approach. In the first part of the work, the volatilities of market prices

and wind regimes are obtained from geometric Brownian motion with mean reversion (GBM-

MR) and Weibull models, respectively. From these and other values, such as investment and

maintenance costs, the net present value (NPV) curve (made up of different values of NPV in

different periods) of the investment is calculated, as well as its average volatility. In the

second part, a real options valuation method is applied to calculate the value of the option to

invest. The volatility of the NPV curve reflecting different periods is inserted into a trinomial

investment option valuation tree. In this way, it's possible to calculate the probabilities of

investing right now, deferring the investment, or not investing at all. This powerful decision

tool allows wind energy investors to decide whether to invest in many different scenarios.

Several realistic case studies are presented to illustrate the decision-making method.

In September 2011, Consolidated Energy Consultants Limited (CECL) prepared a report

titled “Assessment of investment climate for wind power development in India” for Indian

Renewable Energy Development Agency (IREDA). This document explained indicated seven

key states in India where wind power potential is considerable. CECL explained Government

policy/guidelines, regulations by respective SERCs, guidelines from respective SNAs and

wind resource assessment in all key states. The report also included perception of investors

and financing/profitability. Based on these above mentioned factors, the ranking is given to

states. In the end, the report indicates constraints and barriers which are impediments in the

path of investments in wind power projects in India.

Author Salehi-Dobakhshari (Electrical Engineering department, Sharif University of

Technology, Tehran, Iran) et al presented a paper titled “Integration of large-scale wind farm

projects including system reliability analysis” at Renewable power generation, IET on

January 2011. His study intends to develop a comprehensive procedure for evaluating

locational value of a wind farm project incorporating reduction in transmission system losses,

load delivery point interruption cost and operating cost of generating units. The energy


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extracted from the wind farm in normal operation condition is considered to replace the

energy from fossil-fuelled conventional units. In addition, composite system reliability

analysis in the presence of wind power is carried out to evaluate total costs associated with

curtailed energy at different load points as well as generation of generating units in

contingency conditions. System reliability analysis related to large-scale wind farms, along

with operating cost and transmission losses analysis, can assist policy makers to prioritise

wind farm projects based on the total benefits of wind power including reliability benefits and

savings in fossil-fuelled energy sources.

Author Guangjie Wang (Sch. of Manage., Wuhan Univ. of Technol., Wuhan), at Wireless

Communications, Networking and Mobile Computing, 2008, presented a paper titled

“Technical-Economic Analysis of Wind Energy Projects in China” in Oct 2008. In this paper

he explains that the renewable energy consumption has been increased rapidly with high

economic growth in China. As one of the most promising renewable energy resource, wind

energy has become a major part of the plans for sustainable development. The technical-

economic analysis of the project reveals that the revenue from certified emission reductions

(CERs) of clean development mechanism (CDM) project can increase the profitability of the

project but it doesn't play a decisive role. The sensitivity analysis of single parameter shows

that investment, electricity price and production are the key parameters influencing theeffectiveness of projects. The status of wind energy projects in China is elaborated and the

four approaches of developing wind energy projects are proposed.

Author Martinez-Cesena (Electrical Energy & Power Syst. Group, Univ. of Manchester,

Manchester, UK) et al presented a paper titled “Wind Power Projects Planning Considering

Real Options for the Wind Resource Assessment” on January 2012. The paper explains that

Investments in wind power projects (WPPs) have increased in the last few years. This trend is

partially due to the availability of support schemes, which increase the economic

attractiveness of WPPs. Alternatively, the value of WPPs can be enhanced by improving

available techniques used for their planning and design. After reviewing WPP literature, it

was concluded that available tools for the planning and design of WPP could be improved by

addressing the uncertainty of the wind resource assessment (WRA), and this source of

uncertainty could be used to enhance the value of WPPs with real options (ROs) theory. ROs

theory is known for its potential to increase the expected worth of projects by exploiting the

value of flexibility within the projects' investment decisions and designs. Nevertheless, ROs

literature has to be extended to properly address the design of WPPs. Based on the gaps in


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ROs theory and WPPs planning, this paper proposes a methodology that relies on ROs theory

to incorporate WRA uncertainty in the planning and design process of WPPs. The

methodology is illustrated with a small case study and its potential to increase the value of

WPPs under different conditions is analysed for a wide range of case studies. The results

illustrate the circumstances and assumptions that can improve and weaken the effectiveness

of the methodology. It is concluded that the application of the proposed ROs methodology

results in increased value for WPPs in most scenarios.


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2.2 Policy Framework

2.2.1 National Electricity Policy, 2005

Clause 5.2.20: Non – Conventional Energy Sources

This clause talks about harnessing fully feasible potential of non – conventional energy

resources mainly small hydro, wind and bio-mass to create additional power generation. It

also talks that suitable promotional measures will be taken to encourage private sector

participation.

Clause 5.12: Cogeneration and Non-Conventional Energy Sources

5.12.1

This clause highlights the fact that there is an urgent need to promote generation of electricity

based on Non-conventional sources of energy as they are environment friendly. For this

purpose, efforts are to be made to reduce the capital cost of projects. Cost of energy can also

be reduced by promoting competition within such projects. At the same time, adequate

promotional measures would also have to be taken for development of technologies and a

sustained growth of these sources.

5.12.2

This clause restates what is mentioned In Electricity Act 2003 under section 86(1) (e) and

basically talks about to promote co-generation and generation of electricity from renewablesources the state commissions are required to fix a percentage of renewable energy out of

total consumption of electricity in the area of distribution licensee.

Clause 5.6: Technology Development and R&D

This clause highlights the fact that special efforts are needed for research, development,

demonstration and commercialization of non-conventional energy systems. Such systems

would need to meet international standards, specifications and performance parameters.

2.2.2 National Tariff Policy, 2006

Clause 6.4: Non-conventional sources of energy generation including Co-generation:

a) In continuation to provisions of section 86(1) (e) of Electricity Act 2003, The clause

states that the procurement by distribution companies shall be done at preferential

tariffs determined by the Appropriate Commission as it will take some time before non-

conventional technologies can compete with conventional sources in terms of cost of

electricity.


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b) Procurement by Distribution Licensees for future requirements shall be done, as far as

possible, through competitive bidding process under Section 63 of the Electricity Act

within suppliers offering energy from same type of non-conventional sources.

c) The Central Commission should lay down guidelines for pricing non-firm power,

especially from non – conventional sources, to be followed in cases where such

procurement is not through competitive bidding.

d) In the Amendment in Tariff Policy the Ministry of Power has directed the State

Electricity Regulators to fix a percentage of energy purchase from solar power under

the RPOs. The solar power purchase obligation for States may start with 0.25% in

Phase I (by 2013) and go up to 3% by 2022 This will be complemented by solar

specific Renewable Energy Certificate (REC) mechanism to allow solar power

generation companies to sell certificates to the utilities to meet their solar power

purchase obligations.

2.2.3 Rural Electrification Policy, 2006

Clause 1.3:

This clause states that non-conventional energy sources such as solar, wind, biomass, small

hydro, geo-thermal; tidal etc. along with conventional sources can be appropriately and

optimally utilized to make available reliable supply of electricity to each and every

household.

Clause 3: Approach to Rural electrification:

3.3 Decentralized distributed generation facilities together with local distribution network

may be based either on conventional or non-conventional methods of electricity generation

whichever is more suitable and economical. Non-conventional sources of energy could be

utilized even where grid connectivity exists provided it is found to be cost effective.

Clause 8: Policy Provisions for Permitting Stand Alone Systems for Rural Areas

8.9 This clause highlights the fact that State Governments will have to create Institutions for

back-up services and technical support to systems based on non-conventional sources of

energy. Such services would be provided on cost basis so as to make the arrangements

sustainable.


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CHAPTER 3: WPP DEVELOPMENT PROCEDURE

3.1 Introduction - Wind Power Project development

procedure

The detailed procedure for setting up a wind power project is explained here. It consists of

following steps.

1. Project and Financial planning

2.

Selection of state of preference

3. Site identification

4.

Feasibility study5. Wind mast installation, data collection and data verification

6. site survey

7.

wind farm layout

8. Land acquisition

9. CDM related procedures

10. REC related procedures

11. DPR preparation

12.

Financial strategy and financial closure

13. Decision regarding power sale options

14. Physical implementation of the project

The above mentioned tasks are the sub procedures of the wind power project development.

They are explained here in this chapter.


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3.2 Project and Financial Planning

3.2.1 Project Planning

The key to a successful project is in the planning. Project planning is done to increase the

likelihood that a project will be implemented efficiently, effectively and successfully. It

involves working out what one wants to do and how is one going to do it. Creating a project

plan is the first thing one should do when undertaking any kind of project.

In case of wind power projects, the overall project plan may be comprised of several points:

Business goal

Project scopes

Financial structure

Policy guidelines

Central govt. policy: MNRE

State govt. policy: SNA

List of constraints & assumption

Professional assistance

Technical planning

Permitting planning

Energy market analysis (who will buy the power)

Regulatory compliance

Legal aspects

Ease & cost of maintenance

Meeting the expectation & goals of stakeholders

Long term outlook & expansion opportunities

Gantt chart preparation

Schedule flexibility

3.2.2 Financial Planning

It includes three major decisions:

Decide how much you need (budgeting decisions)

Decide when you will need it (cash flow)

Decide where it will come from (financial planning)


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Wind power projects, like all renewable energy projects, have a strong financial component

which determines profitability or other goals, which incentives are used and how, who takes

risks and earns rewards, how the development budget is controlled, and what has to be done

to qualify for the intended financing.

Financial planning for WPP, like other RE power projects, comprises of following

parameters:

1) General project information

a.

Rated capacity

b. PLF or CUF

c.

Inflation

d. Start year

e. Project lifetime

2)

Revenues - cash inflows

a. Ancillary products or benefits (like CDM, RECs etc.)

b.

Cost recovery- Depreciation

c. Cost recovery- tax credits

d.

Grants & incentivese. Power purchase agreement or other sales agreement

3) Costs - cash outflow

a. Equipment cost including installation & site preparation

b. Balance of system(BOS) costs including all non-equipment Capital costs- such as

interconnection & civil works

c. Developer soft costs, such as developer planning, environmental studies licensing

& permitting & negotiation of PPA

d. loan interest

e. Recurrent costs, such as equipment replacement

f. Operation & maintenance

g. Site owner rent or royalties

h. Property tax

i.

Project insurance

j. Income tax on revenue


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4) Financing costs – debt & equity

a.

Loan debt

b. Debt percentage (the percentage of capital costs being covered by a loan)

c. Loan interest rate & term

d.

Equity

e. Equity financing fees

f.

Initial working capital

g. Debt financing fees

h. Discount rate

i. Scenario analysis

Figure 1 : Financial Planning Process


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3.3 Selection of State of preference

The selection of the state of preference is the next task after the planning procedure has been

completed. Following major factors are taken into consideration for selection of a state.

Developers give different weightages to these factors depending upon their own strengths and

weaknesses.

3.3.1 Wind Power Potential and Installed Capacity

Wind availability is the first major factor taken into consideration by the developer to select

the state for developing a wind power project. Out of the total wind power potential, the

unutilised part is what attracts the developer for setting up the WPP. The total wind energy

potential in India has been estimated at 49130 MW out of which more than 14000 MW has

been utilised by various developers. The state wise wind power potential and installed

capacities as on 31.12.2011 are shown below in the table.

Figure 2 : Wind Power Potential and Installed Capacity

(Source: MNRE & Directory Indian Windpower 2011)

Andhra Pradesh, Gujarat and Karnataka seem to be the most lucrative states as far as the

potential and installed capacity of the wind power is concerned, since these states have large

portion of their wind resource unutilised. Maharashtra and Rajasthan too have huge untapped

potential. In Tamil Nadu, On the other hand, almost all the windy sites have been already

occupied. Still, with advancement in the technology it is becoming viable to set up WPPs in

the less windy sites. State wise achievable wind potential till 2020 is given below.

5394

10609

8591

790 920

5439 5005 5374

7008

213

2641 1852

35 330

2560 1830

6613

40

20004000

6000

8000

10000

12000

Estimated Potential (MW) Installed capacity as on 31.12.2011 (MW)


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Table 1 : State wise Wind Power Till 2020

State Incremental (MW) Re-powering (MW)

Andhra Pradesh 7000-8000

Gujarat 6000-7000

Karnataka 5000 1000

Madhya Pradesh 3000-3500

Maharashtra 6000-7000

Rajasthan 4000-5000

Tamil Nadu 7000-8000 1500

Orissa 500

Chhattisgarh 500

Jharkhand 500

Total 39000-43000 2500

Figure 3 : State wise Achievable wind Potential Till 2020

[Source: CRIS analysis based on registered projects and pipeline of developers in various

states]

3.3.2 Feed-in-Tariffs

A feed-in tariff (FiT), also known as feed-in law, advanced renewable tariff or preferential

tariff is another important factor that affects the developers’ decision of selecting a state for

setting up of WPPs. FiT is a policy mechanism designed to encourage the adoption of

renewable energy sources and to help accelerate the transition toward grid parity for such

projects. The Feed-in-Tariffs declared by the SERCs of the key states are shown below.


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Table 2 : State Feed-in-Tariffs

States Tariff rate (Rs/Unit)Tariff Period

(Years)

Gujarat 3.56 25

Maharashtra

Wind zone – I 5.67

13Wind zone – II 4.93

Wind zone – III 4.2

Wind zone – IV 3.78

RajasthanJaisalmer, Jodhpur and Balmer 4.46

20Other districts 4.69

Madhya

Pradesh4.35 25

Karnataka 3.7 10

Tamil Nadu 3.39 20

Andhra Pradesh 3.5 10

Figure 4 : Feed-in-Tariff

3.3.3 Special incentives and facilities by State GovernmentsSome state governments have declared special incentive or facilities to attract the wind / RE

developers which are explained here. The developers should study these incentives before

arriving to a decision of finalising the state of preference.

Government of Karnataka:

(From Karnataka Renewable Energy Policy 2009-14)

Green Energy Fund: Green Energy Fund shall be established to facilitate financing for

RE projects.

Consent from Departments & Statutory Clearances: KREDL shall obtain consent &

statutory clearances from concerned state departments for sites developed by them. In

case of private land KREDL shall assist the developers in this regard.

Allotment Committee: A committee under Chairmanship of Additional Chief

Secretary/Principle Secretary, Energy Department will consider allotment of capacity to

entrepreneurs.


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Settlements: Transactions shall be settled on monthly basis. Interest at the rate of State

Bank of India short term prime lending rate shall be payable for delayed payment beyond

a month.

Exemption from Demand Cut: Exemption of demand cut to the extent of 50% ofinstalled capacity assigned for captive use purpose, will be allowed.

Financial Incentives: Entry tax & other incentives shall be available to RE generation in

accordance with Industrial Policy 2009-10.

Letter of Credit: Facility of LOC shall be provided by the ESCOMS to developer and its

cost will be reimbursed to ESCOMs from Green Energy Fund.

Award Scheme: RE projects successfully commissioned during the original agreement

period will be awarded with a certificate with appreciation by the Govt. and a cash

incentive from Green Energy Fund.

Government of Madhya Pradesh:

(Notification No.6591-F18-10-XIII-93 dated 17.10.2006 as amended vide order No. F18-10-

XIII-93 dated 12.05.2008)

Green Energy Fund: will be created for facilitation of power generation through non-

conventional energy sources.

Exemption from Open Access Charges: Nonconventional Energy based power

generation shall be exempted from Open Access charges.

Projects will be eligible for all benefits available to new industries under the Industrial

Promotion Policy 2004.

However one discouraging factor for WPP owners included in the state wind policy is that

the 3rd party purchaser of wind energy will be allowed the facility of reduction in contract

demand.

Government of Maharashtra:

(From NCE Policy 2008)

Evacuation Arrangement: To be constructed with the approval of Transco/Discom by

the developer at his cost. 50% of the approved expenditure to be reimbursed out of Green

Energy Fund.


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Approach Road: To be constructed by MEDA out of Green Energy Fund. Repairs or

strengthening of existing roads to be done by developer at his cost.

Encouragement to Co-operative Sector: 11% of total share capital of the project shall

be paid from Green Energy Fund for projects set up by co-operative institutions. Letter of Credit: The DISCOM shall provide the facility of LOC to the developer & the

cost involved to be reimbursed to the DISCOM out of Green Energy Fund.

Octroi / Entry Tax: Taxes actually paid shall be reimbursed by MEDA out of Green

Energy Fund.

Eligibility for Sanction

It is obligatory to sell 50% of electricity to the Distribution Company under a long

term agreement at the rate determined by MERC. Remaining 50% shall be sold within

the State.

Benefits under the policy shall be available to only such projects for which

infrastructure approval is accorded by the Govt.

Government of Rajasthan:

(From NCE Policy dated 25.10.2004 as amended vide letters dated 10.03.05, 16.07.05,

24.02.06, 30.11.06, 19.01.07 & 27.03.2008)

Merit Order Despatch Not applicable to Wind Power Project

Exemption from Electricity Duty: Energy sold to a 3rd party will be exempted from

payment of ED @50% for a period of 7 years from COD.

Relocation of project: Re-location of project, if justified shall be permitted without any

additional charge.

3.3.4 Simplicity of procedures followed in the State

Proactive and simplified procedure ensures smooth and timely completion of the project. The

index for attitude of the State agency gets reflected in quantum of capacity addition. Higher

capacity additions obviously indicate that investor faces least problems. Though this factor is

of primary consideration to the developer yet it is also relevant to IPP owners particularly

after completion of the project and routine O&M.


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The procedures required to be followed in different states at various stages (mast installation,

land acquisition, issue and redemption of REC etc.) of development of a WPP is explained in

the relevant topics of this report.

3.3.5 Evacuation Infrastructure

The evacuation infrastructure development for wind power project is very costly and time

consuming since the WPPs are generally in the remote sites where the grid connectivity is

usually not readily available. Whether this infrastructure has to be developed by the grid

utility or by the developer is a major factor for developer in his decision of selecting a state

for WPP development. Various states have different policies for the evacuation infrastructure

development which are explained here.

Andhra Pradesh: Cost to be borne by the developer.

Gujarat: Voltage level for evacuation shall be 66 kV and above. Govt. Policy (Amendment-

1) 2007 dated 07.01.2009 provides that owner will bear the entire cost up to 100 km; beyond

this limit GETCO will construct at its cost. Approved capital cost includes 38 lakhs per MW

towards cost of transmission line from project site to grid sub-station.

Karnataka and Madhya Pradesh: Cost to be borne by the developer. The capital costs

specified by the respective SERCs are inclusive of the power evacuation infrastructure.

Maharashtra: Cost to be borne by the developer. Capital Cost of Project/MW is inclusive of

cost of power evacuation infrastructure up to interconnection point. Capital cost is linked to

price indexation formula.

Rajasthan: A sum of Rs.2.00 Lakhs per MW is payable to RVPN as connectivity charges.

RVPN to develop evacuation system from Pooling Sub-station to Grid Substation. If

evacuation system is constructed by developer beyond pooling substation, Commission may

determine transmission tariff on case to case basis.

Tamil Nadu: To be borne by the Licensee if entire energy is sold to the Distribution

Licensee. For captive consumption and third party sale, cost will have to be borne by the

Developer but the work will be executed by the Licensee.


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3.3.6 Grid availability

This is a major problem primarily faced by WPP developers. Obtaining sanction and/or

commissioning of the project gets adversely affected due to non-availability of evacuation

facility. None of the states have so far made medium and long term plan to meet the demandof Wind Power Sector. The short term solution as offered by them is proving to be in-

adequate because of higher growth rate now being observed. Even after commissioning of the

project, particularly in Tamil Nadu, the wind farm feeders are occasionally switched off

during high generation period which badly affects the investors. Therefore the WPPs must

consider the Grid availability conditions in the state in their decision of selecting a state for

WPP. Grid availability conditions are comparatively better in Andhra Pradesh, Gujarat and

Rajasthan.

3.3.7 Regularity in the receipt of payment

This is an important factor that IPP owners and Bankers would consider to ensure financial

viability of the project. The financial health of almost all State utilities is in bad shape.

Comparative ranking of the states carried out by Consolidated Energy Consultants Limited

(CECL) based on the general experience of IPP owners regarding timely receipt of payment

shows that Rajasthan, Gujarat and Karnataka are better compared to other states as far as

regularity in payment from the DISCOMs is concerned.

3.3.8 Sharing of CDM Benefits

The Clean Development Mechanism (CDM) is a project-based mechanism that allows public

or private entities to invest in greenhouse gas (GHG) mitigating activities in developing

countries and earn abatement credits, which can then be applied against their own GHG

emissions or sold in the open market. For wind power producers, CDM benefits may become

a source of revenue which can improve their project IRR by 1-1.5% and can make the project

financially viable. CERC and different SERCs have declared sharing of the CDM benefits

differently between the DISCOMs and the Developers. The WPP developers should examine

the sharing of CDM benefits and its impact on the revenue in various states before arriving to

a conclusion of finalising the state of preference.


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The regulations regarding sharing of CDM benefits between the developers and the

distribution licensees in different states are explained in the following table.

Table 3 : Sharing of CDM Benefits in Different States

State Sharing of CDM benefits

CERC

regulation, 2009

100% to developers in the 1st year, reducing 10% every year till the

sharing becomes 50:50 between developer and beneficiary.

Gujarat As per CERC regulation

Maharashtra As per CERC regulation

Rajasthan75% to developer, 25% to Distribution licensee. Share of the licensee

shall be fully passed on to consumers.

M.P. As per CERC regulation

Karnataka As per CERC regulation

Tamil Nadu 100% 1st year, reducing 10% yearly up to 50:50

A.P. 90% to developer and 10% to beneficiaries.

3.3.9 Reactive Energy Charges

Table 4 : Reactive Energy Charges

State Reactive Energy Charges

GujaratUpto 10% reactive power consumption - 10 paisa/Kvarh

Above 10% reactive power consumption - 25paisa/kvarh above 10%

Maharashtra 25 paisa/Kvarh with 5% escalation per year

Rajasthan 5.75 paisa/Kvarh escalating 25 paise per year

M.P. 27 paisa /Kvarh

Tamil Nadu 25 paise/Kvarh upto 10% and double beyond

A.P. 10 paise/Kvarh upto10% and 25 paise above10

Reactive power consumption of wind turbine generators is high, especially during Start-up.

Sometimes the reactive power consumption during start up is equivalent to the kW power

rating of the turbine. This reactive power has traditionally always been imported from the

grid. Although Wind turbine generators now-a-days are commonly fitted with reactive

compensation systems of various ratings, there is requirement of reactive power consumptionfrom the grid during start-ups and for voltage control. Hence, the reactive power charges


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applicable in the various states should be considered by the developer. The Reactive Energy

charges in in various states are indicated in the following table.

3.3.10 Banking

Power banking is like cash banking whereby wind power producers feed in the electricity

generated by their wind mills to the state grid and then draw that power for captive use within

the period specified by the Appropriate Commission. Despite the development of latest

technology in the wind energy sector it is still not possible to declare the exact wind power

generation. Hence, to help the wind power generators and attract investment, some states

have come up with the provision of banking of wind power. The banking charges are

applicable as decided by the Appropriate Commission. In Banking, only the transactions of

energy take place; there is no transaction of currency. Banking regulations in key states are

explained in the following table.

Table 5 : State wise Banking Regulations

State Banking Regulations

Gujarat Only for captive use. Allowed for one month.

Maharashtra

Allowed for a year (only for captive). Surplus energy is limited to 10% of

injected to grid up to 31st march and purchased by state at lowest Tod slab

rate of HT.

Rajasthan

Allowed only for 6 months from April to September and October to March.

Banking is not permitted from December to February. Surplus energy is

paid at 60% of large industrial tariff.

M.P.

Permitted for a period of a financial year at 2% charge. Consumption of

banked energy is subject to approval of Discom. Surplus energy at the end

of banking period to be procured by the Discom as per the decision of the

MPERC.

Karnataka

Permitted for 12 months at 2@ charge. Energy banked beyond the

prescribed time will be utilised and paid for by the Karnataka Power

Transmission Co. Ltd/Distribution Licensee concerned at tariff applicable as

per KERC norms.

Tamil Nadu Allowed for 1 year at 5% banking charge.

A.P. Not allowed. Surplus power is paid at 75% of lowest bid tariff.


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3.3.11 Transmission and wheeling charges

Transmission and Wheeling charges, specified by SERCs of the key states, as a percentage of

the total energy transmitted are given in the following table. The losses assumed for

computation of the transmission and wheeling charges should also be taken intoconsideration.

Table 6 : State wise Transmission and Wheeling Charges

State Transmission and wheeling charges

Gujarat

1) For 66KV and above - charges and losses are those applicable to open

access consumers

2)

For below 66KV - charges are those applicable to open access consumers;

considering

i)

For more than one WEGs - Losses at 10% and shared in the ratio of

4:6 between transmission and distribution

ii) For one WEG - losses at 7% and shared in the ratio of 4:3 between

transmission and distribution.

Maharashtra

Transmission losses 4.85% and wheeling losses 0 to 9% according to the

voltage level.

Transmission charges - Rs 126.86/KW/month (long term), Rs 31.72/KW/month

(short term).

Wheeling charges - Rs 0 to 245/kw/month according to voltage level.

Rajasthan

Transmission loss - from 4.4 to 8% at different voltage levels

Transmission charges - Rs 76/kw/month

Wheeling charges 5.5 paise/kwh

M.P. 2% of the energy injected

Karnataka 5% and Rs. 1.15/kwh for third party sale

Tamil Nadu 5% of energy injected

A.P. 5% of energy injected

3.4 Site Identification

After finalising the state to develop a WPP the next task is to select the best possible sites forinstallation of WPP. Following factors should be taken into consideration for selection of site.


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There must be evidence of significant wind speed. Wind power density should be

greater than or equal to 200 watt/m2.

Locations like hills, ridges, plateaus, mountains etc. are preferred as these sites have

more wind speeds compared to their surrounding locations. The available area should be taken into consideration. Generally 15-25 acre/MW of

land is required, but this may vary depending upon the micro-siting.

Wind direction and wind shear – The sites with constant speeds and directions are

more effective for wind power production and hence has plants at such sites have

higher PLFs.

Land cover pattern should be studies as it affects wind speeds at various heights.

Accessibility – The heavy transportation vehicles should be able to reach to thelocation of the proposed WPP at reasonable cost of road construction and

transportation.

Land ownership (Private/revenue/forest) also is an important factor to be considered.

Additional forest/environment clearances are required for occupying a forest land. On

the other hand, the developer may face problems like non-convicibility of owners in

occupation of private land.

Prior commitments of the land – The developer needs ensure that the proposed land is

not already committed to any other WPP developer.

Sites approved by C-WET must be given preference as the technical and regulatory

work to occupy such sites reduces compared to other sites.

There must be reasonable access to electrical transmission.

The terrain must be favourable to construction.

Apart from these several other factors need to be taken into consideration like - Cost

of land, rehabilitation issues, scope for future expansion, labour and skills availability,

minimum impact on labours etc.

3.5 Feasibility Study

Feasibility study is a preliminary study that is done to determine a project‘s viability through

identifying potential return on investment as well as any fatal flow in the project if any. The

results of the study are used to determine whether to proceed with the project or not. It

provides a structured method that focuses on problems, identifies objectives, evaluates


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alternatives, and aids in the selection of the best solution. It also describes current market

situations, explores outcomes, and assesses the range of costs and benefits associated with the

recommended action. In short, the technical and commercial viability of the project is

checked in the feasibility study. After studying the outcomes of the feasibility study the

owner choses whether to proceed further with the project or not.

Feasibility Tasks:

Site inspection

Wind resource review

Investigation of interconnection opportunities

Selection of suitable process and technology

Capacity fixation on the basis of project

Capital cost study Profitability analysis

Fatal flaws review

Grant research and application development

Investigation of site access

3.5.1 Generalized activities for feasibility study of Wind Power Projects:

A. Wind Resource Assessment

The first consideration in choosing a site is the wind availability. It is the most important

factor affecting the viability of the project. To determine whether to have a project or not, it is

necessary to conduct a resource assessment. Professional resource assessment is necessary to

raise debt financing, necessary approvals/ clearances before proceeding further. In some

cases, technology providers may be able to help in identifying options, the best location or

technology to be used.

Feasibility

Study

Commercial

Viability

Technical

Viability

Figure 5: Feasibility Study


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B. Technology selection

Various wind energy technologies are available for generating power. However each

technology has its own merits & demerits. Therefore the project viability depends on the

selection of appropriate technology.

Various technological choices have to be made for the following:

Size and capacity of the turbines

Hub height

Rated and cut-in wind speeds

Vertical or Horizontal axes

Active and passive yaw

Type of rotor controls Airfoil nomenclature

Tip-speed ratio

Pitch control and stall control

Rotor diameter

Rotor solidity

Betz limit

Number of blades Blade composition

Type of generator

Type of hub

Type of towers

Type of drive trains

C.

Preliminary design Preliminary design includes engineering the project‘s details, including equipments locations,

wiring, control systems, roads and foundations. The design of the scheme should be

completed at a level adequate for costing and a bill of quantities to be determined. Hence, the

design should be adequate for tendering purposes, and would include general arrangement

and layout drawings. Prominent aspects of the works can be categorized into:

Civil works

Generating equipment

Grid inter-connection design


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Optimum system capacity

Size & layout of structures & equipment

If possible, the designers will therefore need to work closely with the machinery suppliers, so

that specific equipment parameters can be considered as the basis of the design.

D. Grid connectivity

Check for an appropriate connection point near site

Conversations with those who have an understanding of the system in the area where you

propose to connect your project and contact local utility or Discom. It provides following

information:

i.

Understanding the transmission & distribution systemii.

Power line capacity

iii. Substation capacity

iv. Existing protection scheme of power system

v. Conductor size

vi.

Cost estimates for transmission upgrades

Next step is to approach transmission utility , with an application, which includes the

following:i. Feasibility study

ii. System impact study

iii.

Facility study

iv.

Interconnection agreement

The final step is executing the agreements and constructing the additional infrastructure

needed to get your energy on the grid.

E. Environmental impact Assessment

An environmental impact assessment (EIA) is an assessment of the possible impact — positive

or negative — that a proposed project may have on the environment, together consisting of the

natural, social and economic aspects. The purpose of the assessment is to ensure that decision

makers consider the ensuing environmental impacts when deciding whether to proceed with a

project. The Ministry of Environment and Forests of India have been in a great effort in

Environmental Impact Assessment in India. The main laws in nation are Water Act (1974),

The Indian Wildlife (Protection) Act (1972), The Air (Prevention and Control of Pollution)


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Act (1981) and The Environment (Protection) Act (1986). The responsible body for this is

Central Pollution Control Board (CPCB). Wind-power generation has very low emissions on

a life cycle basis, but has a number of environmental effects that may limit its potential. The

following is required before the project implementation.

Land use analysis- Helps in assessing the changes in land use pattern for setting up wind

energy stations

Air pollution

Impact on flora & fauna

Visual impact assessment

Noise impact assessment

Hydrological assessment

Impact on communication signal

On-site contamination & hazardous material issue

Waste water management practices

Depletion of water resources

Economic effects on local economy (e.g. creation of jobs)

Mitigating measures- ways in which any adverse environmental impact may be

minimized

F. Social impact assessment

Social impact assessment includes the processes of analysing, monitoring and managing the

intended and unintended social consequences, both positive and negative, of planned

interventions (policies, programs, plans, projects) and any social change processes invoked

by those interventions. Its primary purpose is to bring about a more sustainable and equitable

biophysical and human environment. SIA is often carried out as part of, or in addition to,

Environmental Impact Assessment, but it has not yet been as widely adopted as EIA in

formal planning systems, often playing a minor role in combined environmental and social

assessments. The Social Impact Assessment is analysed taking into account the effects of the

RE power project implementation on the population around the site region under various

aspects such as:

Displacement of Habitat due to project implementation


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Proximity to populated area

Worker health & safety issues

Local population deprived of use of their domestic fuel (Biomass)

Improved Power Availability situation for the local population Adequate Direct & Indirect employment opportunities to Rural Local population

G. Economic viability

The purpose of an economic analysis is to demonstrate that the proposed project achieves

optimum utilization of resources and is of sufficient economic merit to justify an investment

in it. The analysis is therefore first made in the planning stage of the project, before any

financial arrangements are discussed or entered into. The financing agencies will generally

wish to see and approve the results of the analysis prior to making a commitment on

financing the whole or part of the project. Economic analysis is always comparative. Sound

economic evaluation of the proposed project during pre-feasibility and feasibility analysis is a

fundamental requirement, particularly when the project requires a bank‘s assistance and

financial commitment. The economic viability of the project is tested by financial modelling,

which is explained in Chapter 4 of this report.

3.6 Mast Installation, Data Collection and Data

Verification

3.6.1 Permission for Mast Installation and Subsequent Capacity

Allocation

After finalising the site for the mast installation, the developer of a Wind Power Project has

to take permission for installation of mast. A Land Option Agreement gives the developer the

first right to develop the land for a wind farm. It should precedent the erection of masts to

ensure that the data remains with the owner of the mast. It generally includes the following

The right of first refusal to develop the land for renewable

Details of the wind resource measurement agreement

Detail of data use if no turbine is installed.

Different procedures are followed in different states for obtaining the permission for mast

installation. First of all, the developer has to contact the State Nodal Agency for the

permission for installation of a mast. The SNA issues the permit if the land is either private


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or revenue land. If the site for mast installation falls into forest land, the permission from

forest department is also required. The procedure that needs to be followed in different states

is explained below.

Andhra Pradesh, Rajasthan and Orissa

If the site is within the radius specified by the corresponding SNA (25 Km in Orissa)

from the CWET mast, land is directly allotted on the Capacity Allotment basis, i.e.in

terms of MW as per asked by the developer.

Otherwise, application for land allotment for Wind Resource Assessment has to be

submitted by the developer to the SNA. The area within the radius specified by the SNA

(AP and Orissa - 5 km, Rajasthan – 10 Km) from the proposed mast location will be

blocked for 2 years for wind resource assessment.

An application in the forest department is required for land allocation if mast location is

in forest land. A fee of 1 lac per mast has to be paid to the forest department. This is

applicable in all the states.

Only the owner’s consent is required if the proposed mast location is in the private land.

Approval for capacity allocation is sought from the SNA after the wind resource

assessment is done.

Karnataka and Madhya Pradesh

In Karnataka and Madhya Pradesh, site for the mast installation is indicated and applied

for permission to SNA. The SNA gives permission directly on capacity allotment basis.

Maharashtra:

No permission is required from MEDA for mast installation. Permission from forest

department is needed if the proposed mast location is in the forest land (fees of Rs 1

lakh/mast).

The data collected is then registered with CWET. CWET examines and approves the

data.

MEDA, based on approval from CWET, certifies that the area within 10 Km radius from

the mast is windy.

An application, along with the MEDA certificate has to be submitted in forest

department for land diversion.


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MEDA allots the land on Capacity Allocation basis.

Gujarat:

Mast installation is to be done directly after the purchase of the land and no permission isrequired from GEDA. CWET and GEDA are only need to be informed about installation

of mast.

Approval from forest department is required if the proposed location for mast installation

is in the forest land for which the fees are Rs 1 Lakh/mast.

3.6.2 Installation of Wind Mast

Wind Mast installation is started after the permission has been received from the SNA/forest

department.

Experienced teams, skilled at installing wind monitoring met masts and equipment to the

highest standards are required for the Wind Mast Installation. Generally, consultants who

have core competency in the mast installation are hired. The consultants also provide wind

monitoring product for the specific application and install instrumentation.

3.6.3 Data collection

MNRE published guidelines for wind data measurement on 20.06.2008. The

following basic parameters are needed to be collected with the installed masts, for

minimum 12 months.

Wind speed (measure by anemometer)

Wind direction (measure by wind vane)

Wind shear - Increase in wind speed at greater height above ground

Wind speed distribution

Temperature (measure by temperature sensor)

Vertical wind speed (optional)

Change in temperature with height (optional)

Barometric pressure (optional)

Roughness of terrain (obstacles presence like nearby trees, buildings etc.)


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Wind power can be measure by:

WPD (W/m2) = ½*air density*rotor swept area*(wind speed) 3

3.6.4 Validation of Data through CWET

The data collected though the mast has to be verified through CWET. The CWET Verifies

the method and procedure of wind monitoring including installation details, sensors

calibrations and data collection by the company at the station and prepares report

accordingly. The cost is to be paid by the developer. The Developer also has to arrange site

visits for the CWET scientists for verification of ground realities if the CWET asks for the

same.

3.7 Site Survey

After the data has been approved by the CWET, team of the developer makes a visit to the

site to conduct a site survey. Primary feasibility of the site for a wind farm development is

checked at this stage.

3.7.1 Soil / Ground Conditions

Wind turbine generators require very solid foundations to secure that large structure in high

wind conditions.

parth belani

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