Project Development, Wind Power

India’s Wind Industry Seeks Production Credits

India may not be bound by any of the Kyoto Treaty’s current obligations, but now is a good time for the country’s wind industry to gain a better footing in the country for future emissions obligations that may arise. A change in the way the country subsidizes their wind power industry would also greatly help to accelerate new developments.

The Indian Wind Energy Association (InWEA) has made a formal submission to the Finance Ministry, requesting a change in the prevalent tax incentive for the wind energy sector in the country. InWEA has sought the introduction of a performance-based incentive system. The new system is expected to accelerate growth of the wind energy sector in India. Wind energy in India today enjoys an accelerated depreciation benefit at the rate of 80 percent. InWEA said that while this has brought in a large amount of investment in the wind energy sector, all of the installation has been based on balance sheet financing by the companies whose wind energy investments have been part of their tax-planning strategy. The trade group said this has effectively shut out independent power producers and foreign institutional investors who are unable to absorb this upfront depreciation benefit. To enable a smoother implementation of a change in the tax structure, InWEA proposes the introduction of tax credit certificates (TCCs), moving away from the current system of accelerated depreciation. The proposed TCCs would expand investor base and reduce the cost of wind electricity to utilities, according to the trade group. “While the existing provision of an accelerated depreciation benefit has undoubtedly given a noticeable lift to the development of the market for different renewable energy technologies, the time has now come to take the wind energy sector to a higher level of performance,” Anil Kane, Chairman, InWEA said. “Performance-based incentives will help attract more investors as well as make electricity available to consumers at a lower cost.” India is already the fifth largest producer of wind energy in the world and has one of the largest renewable energy programs across the globe. With an installed capacity of over 2,800 MW of wind energy as of September 30, 2004, wind energy accounts for about three percent of the overall generation capacity in the power sector. India now has indigenous wind-energy equipment manufacturing capacity in excess of 1000 MW per year. There has also been a considerably increase in capacity installed from about 30 MW in 1990 to nearly 3000 MW at the end of 2004.