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Viability Gap Funding Scheme for Offshore Wind Energy

  • Context (PIB): The Union Cabinet has approved the Viability Gap Funding (VGF) scheme for offshore wind energy projects with a total outlay of Rs. 7453 crore.
  • It aims to implement the National Offshore Wind Energy Policy, 2015, with the goal of exploiting India’s vast offshore wind energy potential within its exclusive economic zone.
  • The National Offshore Wind Energy Policy, 2015 aims to provide a framework for the development of offshore wind energy projects in India’s exclusive economic zone (EEZ) and territorial waters.

VGF for Offshore Wind Energy

  • Government VGF support will reduce the cost of power from offshore wind projects, making them more attractive for electricity distribution companies (DISCOMs) to purchase.
  • Private developers will be chosen through a transparent bidding process to establish the projects.
  • Power Grid Corporation of India Ltd (PGCIL) will be responsible for constructing the power evacuation infrastructure, including offshore substations.
  • Nodal Ministry: Ministry of New and Renewable Energy.
  • The construction and operation of offshore wind energy projects require specific port infrastructure to handle the storage and movement of heavy and large-dimension equipment. The Ministry of Ports, Shipping, and Waterways will support two ports to meet these requirements under the scheme.
  • The scheme involves the installation and commissioning of 1 GW of offshore wind energy projects (500 MW each off the coasts of Gujarat and Tamil Nadu).
  • This scheme will initiate offshore wind energy development in India, creating an ecosystem to support 37 GW of offshore wind energy, with an investment of ~Rs. 4,50,000 crore.
  • The government has permitted Foreign Direct Investment (FDI) up to 100 per cent under the automatic route for renewable energy projects, including offshore wind energy projects.

Viability Gap Funding (VGF) Scheme

  • The Viability Gap Funding (VGF) Scheme aims to support infrastructure projects that are economically justified but slightly lack financial viability. This support is available only for projects where private sector sponsors are chosen through competitive bidding.
  • The total VGF provided under the scheme is capped at 20% of the total project cost, with the possibility of additional government grants up to another 20%.

Offshore Wind Energy

  • Offshore wind energy (renewable energy source) refers to the generation of electricity from wind turbines installed in bodies of water, typically in the ocean or sea, away from the shoreline.
  • The electricity generated by offshore wind turbines is transmitted to the shore through submarine cables, which are buried in the seafloor to protect them from anchors, trawling, and other potential hazards.
  • Advantages: Higher adequacy and reliability, Lower storage requirement, Higher employment potential.
  • Commissioning 1 GW of offshore wind projects will generate 3.72 billion units of renewable electricity annually, reducing CO2 emissions by 2.98 million tons per year for 25 years.

Illustration of an offshore wind site.

Credits: energy.gov

Offshore Wind Energy in India

  • Presently, there is no offshore wind power capacity under commissioning in the country.
  • The National Institute of Wind Energy (NIWE) in Chennai will be the nodal agency for resource assessment, surveys, and studies in the EEZ, demarcating blocks, and facilitating developers for wind farms.
  • Eight zones off Gujarat and Tamil Nadu coasts were identified as high-potential regions for offshore wind energy through LiDAR-based wind resources and bathymetry assessment.
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