LessonsWindEnergyIndia.pdf
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Pobierz
Emi Mizuno
Climate Strategies
Cambridge, United Kingdom
Enabling environment and policy
principles for replicable technology
transfer: Lessons from wind energy in
India
markets using policy incentives speciically designed for
the particular technology; robust project/technology
quality requirements to deter incentive abuse; support
for physical infrastructure development to accelerate the
low of necessary products, components and services;
and inancial and technical support for supply-chain
and technology-speciic capacity building at irm and
industry levels. he spectrum of the last, e.g. support
for capacity building from manufacturing via project
execution to operation, depends on each country’s
and/or irm’s choices on ‘what to make’ at home and
‘what to buy’ from outside. Policy decisions in this area
require strong communications with industry players
and other experts.
Financial and political policy sustainability and, overall
long-term consistency of policy frameworks with sound
adjustments are essential. Building strong monitoring
and evaluation capacity, public-private partnerships,
communication pathways, and technology- and
industry-speciic strategic thinking are requisite for
both business and policy communities. Capacity
building support from the international community
also needs to focus on this area.
Abstract
his article examines cross-border technology transfer
between Indian and Danish/German irms in the wind
energy industry between 1990 and 2005. he analysis
shows the increasing technology gaps between the two
sides during this time period, the fragmented and non-
performance-oriented market mechanism, the small
market size, the policy inconsistency, the institutional
inadequacy caused by the power sector restructuring
process, the persistent infrastructure deiciency, and the
lack of proper oversights, which all contributed to the
slowdown of technology transfer after the initial strong
transfer trends. he weak demand-pull and supply-
push domestic forces in India prevented replicable
technology transfer from happening, as technology
providers and collaborators looked elsewhere for more
reliable market investment opportunities and suppliers.
he research shows the centrality of policy and
capacity building to support continuous and replicable
technology transfer. Such a policy and capacity-
building framework would consist of the following: the
creation of sizable and performance-oriented domestic
1
program in 1991. his Economic Reform of 1991
1
changed the wind energy policy picture greatly; as in
other sectors, the federal Government of India (GOI)
shifted the focus of wind energy policy to stronger
private-sector involvement, extended public inance
to private-sector wind-power projects and provided
iscal and inancial incentives to encourage private
investments. Investment assistance with soft loans and
tax beneits for wind project investments started in
1992 at the federal level, although these tax beneits
(rates and types of various taxes, tax holidays, rates of
depreciation, etc.; see Annex 1) and the interest rates
on soft loans changed quite frequently over the years.
2
Introducion
his article examines private-sector wind energy
technology transfers from Denmark and Germany to
India between 1990 and 2005. he topic was chosen
because the sector has a record of international private-
sector partnerships between European and Indian
companies. Special attention was paid to: 1) the roles
and efects of government policy and institutional
settings; and 2) enabling environment for technology
transfer in order to learn lessons for how developing
countries can build favorable environments for
replicable technology transfer involving climate change
mitigation technologies and catch-up industries.
he direction of technology-push measures also
changed from initial government-led demonstration
projects and indigenous turbine development to
the more market-driven approach adopted in 1992
focusing on technology commercialization. From
1997, wind energy R&D eforts concentrated more on
government–industry collaboration. he R&D Unit
in the Center for Wind Energy technology (C-WET)
was established in 1999 to provide generic information
and knowledge to innovate wind turbine components
he article is structured as follows. After this
introduction, section 2 describes Indian policy on
wind energy development. Section 3 examines the
technologies that have been transferred to India
from the technology frontier of Denmark/Germany.
Section 4 investigates the causal factors which created
the technology transfer results. Lastly, Section 5
summarises the lessons learned from these experiences
and makes policy recommendations.
Indian Wind Energy Policy and Programs
1 As a result of industrial policy with heavy regulations and
restrictions controlled by bureaucrats since Independence in
1947, Indian business had sufered from the lack of transparency
in the business environment, stagnant private and foreign
investments, heavy government spending on ineicient public
enterprises and the lack of technological progress. he country
sufered from inlation, high budgetary deicits and foreign debt,
increasing government duties and taxes, and low GDP per capita.
he limited attempts at liberalization made in the 1980s were
insuicient to overcome these economic problems. he iscal
imbalance diverted household savings to public consumption
and reduced the resources available for private investment. Due
to the restrictions on foreign investment and trade, India faced
a balance of payments crisis in early 1991, its foreign exchange
reserves reaching an all-time low. he GOI attempted a series of
short-term policies to inance imports and meet its immediate
debt service obligations, which included using its gold reserves to
obtain foreign exchange, use the IMF’s special drawing facilities
and obtaining emergency assistance from Germany and Japan.
Eventually, however, the GOI had no choice but to embark on a
program of more fundamental economic reforms and reduce the
role of the government in economic development (Bajpai 2002;
Bath 1998).
2 For example, the IRENA soft loans for wind power projects
changed every year between 9.5% and 21% (Gupta 1995; IREDA
2002b and 2006; Jagadeesh 2000; Sasi and Basu 2002; Wind
Power Monthly 1997a; Wind Power Monthly 1997c; Wind Power
Monthly 2000; Wind Power Monthly 2004).
India began to be serious about wind energy
development during the 1980s in order to establish
an indigenous industry and exploit further its wind
energy potential. Its eforts in the 1980s were mainly
technology-push (development of indigenous turbine
prototypes; demonstration programs from 1985)
and wind data collection (wind resource assessment
program from 1983) at the federal level.
he situation changed signiicantly in the early 1990s.
By the beginning of that decade, India had amassed
an unsustainable level of public debt and was facing
an unprecedented level of economic crisis. his led
the country to embark on a massive economic reform
2
and subsystems suited for Indian-speciic conditions.
Meanwhile, the National Wind Resource Assessment
Program continued, constantly updating data and wind
development potential by considering technical upgrades.
Besides import duties, the 1993 tax rule made wind
turbines exempt from excise duty and sales tax. he
rule changed in 1998: while the irst parts of wind
turbines and rotor blades had no excise duty, both taxes
were placed on spare parts in order to encourage high-
quality manufacturing and assembly of the parts in the
irst place and avoid replacements (IWTMA 2002).
As for power generation project procedural regulations,
the GOI abolished the clearance requirements of the
Central Energy Authority (CEA) for any renewable
energy projects from 1991 (Eased Industrial
Clearance). In 1994 the MNES and Indian Renewable
Energy Development Agency (IREDA) established
joint-sector companies called ‘Wind Energy Estates,’
which set up wind farms in windy areas to provide
fully developed plots for the installation of wind
turbines by individual investors.
3
he irst technology
quality standards and certiicates and project procedure
guidelines were introduced in 1995 only after a large
number of abuses of these incentives had been reported
between 1992 and 1995.
In addition to these federal policy incentives, various
states began implementing wind policy incentives from
1992. Due to the federal structure of the Indian power
sector, each state dictated the rates of power production
incentives (feed-in tarifs) and the conditions for third
party sales, banking and wheeling beneits. Many
states also implemented state-level capital investment
incentives. However, these incentives greatly difered
among states. In September 1993, the Ministry of
Non-conventional Energy Sources (MNES) issued the
irst federal guidelines for state-level promotional and
iscal incentives for wind project development to all
states. Representative states implementing wind policy
measures were Tamil Nadu, Gujarat, Maharashtra,
Andhra Pradesh, Karnataka and Rajasthan (see Annex
3 for the diversity of states’ policy measures).
Additionally, the GOI implemented many federal-
level wind industry-related policy measures and
regulations. he door to foreign investments was
substantially widened in 1991, when the GOI began
permitting inancial collaboration, joint ventures and
technical collaboration with foreign entities in many
sectors, including wind. Another important policy
change after 1991 was a new trade policy, in particular
a change in custom duties. Between 1991 and 1994,
the GOI trimmed tarif rates on imported power
equipment, including wind turbine sets, from 400% to
20%, and custom duties on capital equipment fell to
25% (Bath 1998). Subsequently, however, the import
duty rates for wind turbines and components changed
quite frequently (see Annex 2). Import application
procedures also remained complex until the 2000-
01 iscal year,
4
when Duty Exemption Certiication
(waiving the need to declare critical components) was
extended to wind turbine erection and spare parts.
Figure 1 summaries the policy instruments used to
promote wind energy in India from 1990 to 2005.
Technology Transfer Results between
Denmark/Germany and India
As a result of the above policy implementations, India
experienced strong wind energy sector development
and technological changes. his section examines the
results in terms of private-sector technology transfers,
which signiicantly contributed to the technological
changes occurring in product introduction and
manufacturing, project execution and innovation
capabilities.
Product: Turbine Capacity, Technological
Features and Turbine Eiciency
3 he joint sector companies acquire and lease the land, develop
infrastructure and grid facilities, obtain the necessary clearances,
and install, operate and maintain the wind turbines on behalf of
the investors.
Table 1 shows the wind turbines introduced by
Danish and German manufacturers to India between
1993 and 2005 (data extrapolated from Consolidated
4 An Indian iscal year starts in April of the same calendar year and
ends in March of the next calendar year.
3
Figure 1: Wind Energy Policy in India up to 2005
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
2004 2005
TECHNOLOGY DEVELOPMENT
Wind Resource Assessment
Since 1983
Demonstration
Since 1985
Government RD&D
Since 1980s more commercialization focus from 1992
Industry Collaboration R&D*
Five Generic Areas of R&D**
POWER GENERATION PROJECT PROCEDU
RAL / ENVIRONMENTAL REGULATIONS
Turbine Type Approval / Certificate
Grid Connection Obligation
Project Guidelines
Eased Industrial Clearance
Wind Estates
DOMESTIC MARKET DEVELOPMENT
NATIONAL
IREDA Project Loan
Tax Holiday
Accelerated Depreciation
Zero-Tax
Minimum Alternate Tax
Technology Upgradation Fund (TUF)***
IREDA Equipment Loan
State Policy Guidelines
STATE
Feed-In Tariffs (Fixed)
Tariff rates varied greatly among the states
The conditions of third-party sales varied greatly among
the states
Third-Party Sales
Power Wheeling
The conditions of wheeling varied greatly among the states
Power Banking
The conditions of banking varied greatly among the states
INDUSTRY RELATED POLICY & REGULATIO
NS
Corporate Tax Reduction
Promotion of Foreign Investment
Import Duty Measures
Exercise & Sales Duty Exemption
Exercise & Sales Duty on Spare Parts
Exercise Duty on High Value-Added
Activities
Energy Consultants Ltd. 2005). In terms of turbine
capacity, turbines of between 400kW and 600kW
capacity had been introduced to the Indian market
by the mid-1990s without much of the delay of their
European market launch. However, these medium-
capacity turbines never became mainstream in India.
In addition, a number of turbines between 600kW and
999kW launched on the technology frontier market
of Denmark and Germany between 1995 and 2005
were never introduced to India. By 2001, when the
Indian manufacturer Suzlon introduced the irst 1MW
turbines to the Indian market, the major Danish and
German manufacturers had already launched several
MW-class turbines in the frontier market. By the end
of 2005, when a 5MW capacity model had already
been launched in the frontier market, India had
introduced only four MW-class turbines (up to 2MW).
Although not all the turbines launched in Denmark
and Germany were necessarily suitable for the Indian
market, the number of non-introduced turbines
simply cannot be ignored. he Danish and German
market also had much higher technology depreciation
rates than the Indian market over the years: many
wind turbine models which were no longer available in
the frontier market were still installed in India in 2005.
he average installed turbine capacity of Denmark and
Germany compared with India’s clearly illustrates the
increasing gaps between 1995 and 2005 (Figure 2).
As for technological features, all wind turbines installed
from 1993 to 1997 in India were stall-regulated,
ixed-speed turbines, also the mainstream technology
at the frontier at the time. Two ixed-speed turbines
with dual winding technology were introduced to the
Indian market by various manufacturers. However, the
gaps in technological features began increasing during
the mid-1990s; many important innovations at the
frontier either did not arrive in India at all or were
introduced with signiicant time delays, as the number
of new turbines introduced decreased. While the
increasing number of turbines introduced and installed
in India after 1999 up to 2005 had pitch regulation
(7 out of 18 introduced turbine models were pitch),
ixed-speed turbines were still the majority (11 out of
18 were ixed-speed). Limited-range variable-speed
turbines (shown as turbines with DFIG in Table 1),
which occupied a large fraction of the market share
5
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