The answer is blowing in the windmill

Two decisions by the government are key to this: One, beginning 2002, the government offered an 80% “accelerated depreciation in direct taxes.” This means that an investor can deduct 80% of the money invested in wind energy from his taxable income.

And, two, in 1999, the Textile Ministry came up with a Textile Upgradation Fund Scheme with a 5% subsidy. Meant to make the textile industry technologically and financially competitive in view of the looming threat from China, windmills were included as one item these industries could invest in, to avail of this loan.

As a result of the first policy, companies began pouring money into the windmill sector not just for energy requirements but as investments. So now there’s an unusual set of investors — of the 1,694 companies invested in wind farms spread over nine states, there are names like Ajanta Watch, Alembic Limited, IDBI and Hyderabad Chemicals. And high net worth individuals including Bollywood stars.

But the main driver has been the Tamil Nadu-based textile industry. It saw in the fund, a double advantage: avail of renewable power with no input cost and loans at subsidised rates. So Tamil Nadu has become the most wind energy friendly state, it accounts for 2,432 MW of the national total of 4,228 MW. Districts dotted with windmills include Coimbatore, Kanyajumari, Rameshwari and Tirunelvel.

‘‘Our total generation capacity is a success story even though the concern was not environment but sound financial investment. In the end, it will benefit the environment,’’ said A M Gokhale, Secretary, Ministry of Non Conventional Energy sources. There has been a minor setback when the Textile Ministry cancelled this order earlier this year. The proposal to renew it is has been cleared by the Cabinet and is now with the Committee of Secretaries.

The flip side of this success story is that the energy grid is still largely disconnected from the windmill. States lack the capacity to “evacuate” the power these windmills create. In other words, they lack supporting infrastructure like sub-stations which carry this energy from remote areas to the main grid.

In this, the role of state electricity regulatory authority is key: from deciding buy-back rate to facilitating what in the industry is called “wheeling.” A textile mill based in Coimbatore can invest in wind farm in Kanyakumari and claim the same amount of energy in Tamil Nadu from the grid. A state charges “wheeling fee” for this service. States like Tamil Nadu have lower rates while states like Andhra and Maharashtra are not seen as friendly.

Also, while investment per megawatt for both wind and coal is similar, Rs 4.5 crore, wind energy is the environmental choice but less efficient. However, Ministry officials are bullish with a potential estimate of . 45,000 MW. Following the Electricity Act 2003 which stipulates that a distribution licencee should purchase a particular percentage of electricity from renewable sources, big players are investing.

Reliance is setting up a 500 MW windfarm, so are Tata Power, ONGC and Bajaj. In the meantime, technology’s also improving. More efficient and powerful windmills are now coming in. Two decades ago, an average windmill could generate 250 KW, today it’s 1.65 MW.Also, his is one of the few areas where the country is ahead of the Tenth Plan targets— in three years, India has 18% of its new installed capacity from renewables and wind energy is the major chunk.