India releases draft RfS for seabed lease for 4 GW offshore wind

By Sidharth Jain, MEC+

photo: Nicholas Doherty/Unsplash
photo: Nicholas Doherty/Unsplash

The Government of India kicked off plans for offshore wind in India by releasing a consultation paper to call for bids to lease an 870 square kilometre seabed area. The area is spread over five blocks near the southern Tip of the Country off the coast of Tamil Nadu.

The blocks are at a depth of 20 to 50 metres and is 10 km to 39 km from coast. The indicative capacity for project installation is 4 GW (with assumed capacity of 4.5 MW per km2).

The seabed leases are to be awarded for a period of 5 years and can be extended by a period of 2 years and are indicated to be awarded before March 2023 which might be a bit ambitious considering that India does not have any offshore development and developers will need time to understand the risks.

Bidding process
The process outlined envisages the award of the bids will be through a two-stage single bid process. The developers will be required to submit a technical bid and a financial bid. The technical bid will have 70% weightage and the financial bid will have 30% weightage. The ministry will only entertain bids of companies/consortiums who have experience in onshore wind in India, offshore wind globally and net worth of more than INR 250 billion (USD 3 billion) along with documentation of various policies. Those who qualify will be scored on the basis of 14 parameters ranging from Experience, to plans, track records and financial evaluation. The criteria laid out are defined objectively but it can be fairly expected to be contested by developers.

Neverthless, the scores obtained will be normalised and added to the score received for the quote of lease fee. This weighted average blended score will be used to declare the winners. The list of criteria indicates that the government aims to invite experience and capable offshore wind players to enter into consortium with onshore wind developers in India to jointly develop the projects.

The winners will need to pay the fee as per their bids until the start of construction i.e., only for the survey. During construction and operation of the farm, the lease fee will revert to the base price of INR 1 lac per km2 (USD 1,300) to keep the cost of electricity competitive. Those who wish to continue and construct the plant after the surveys, will sign a concession agreement for 35 years inclusive of construction and decommissioning.

Funding
The main concern for developers will be the timelines for bids as the commercial and infrastructure risks are not fully mapped. Commercially, the power offtake will be to Corporates or can be sold via exchange and will be the sole responsibility of the developer who wins the block. The government will not be taking any responsibility for power offtake. No subsidy on capex or preferential tariff is envisaged for this particular round. However, incentives available to onshore wind are extended to offshore wind. Additionally, provision of power infrastructure, REC with multipliers, Carbon Credits, and waiver of transmission Charges will be provided as and when they are made available by Govt. of India. These are more generous than what is provided for onshore renewables being sold to third party but will still lead to a higher priced power. The government is banking on the requirement of large steel, cement, and other heavy industry companies in India to use this power as a substitute of fossil fuels due to the profile and quantum of the power available.

On-shore facilities
Additionally, a point that will probably trigger industry demand to provide more time for bid submissions is the requirement that all the infrastructure needed for assembly of WTG, port facilities for storage and coordination of installation and commissioning will need to be done by the developer. Since India does not have any offshore wind development and the ports themselves have done little preparation so far, this will take a bit more time than needed.

The comments on the draft closed on 28 Nov 2022 and will likely involve a lot of engagement within India and abroad.

Sidharth Jain, Founder and CEO, MEC+
Sidharth Jain, Founder and CEO, MEC+

MEC Intelligence, also known as MEC+, is a specialist research and consulting firm for the marine, energy, and cleantech industries. It has expertise in guiding senior managements on new technology and market opportunities and facilitating complex decisions through facts and logic. The consultancy is based out of India and Denmark.