TAMIL NADU AGRICULTURAL UNIVERSITY

COIMBATORE - 03

SEMINAR ON

“AN OVERVIEW & Economics of Wind Mill

in tamil nadu”

Submitted By: S.Senthil Kumar

Id No: 09-601-015

Chairman : Dr.K.govindarajan

Members : Dr.T.r.shanmugam
Dr.c.chinnu samy

Department of Agricultural Economics

CARDS
 An overview and Economics of Wind mills in Tamil Nadu
Introduction

Energy is a major input for overall socio-economic development. Use of fossil fuels is
expected to fuel the economic development process of a majority of the world population during
the next two decades. However, at some time during the period 2020-2050, fossil fuels are likely
to reach their maximum potential, and their price will become higher than other renewable
energy options on account of increasingly constrained production and availability. Therefore,
renewable energy are expected to play a key role in accelerating development and sustainable
growth in the second half of the next century, accounting then to 50 to 60 % of the total global
energy supply.

Power generation from wind has emerged as one of the most successful programmes in
the renewable energy sector, and has started making meaningful contributions to the overall
power requirements of some States. Wind turbines today are up to the task of producing serious
amounts of electricity. Turbines vary in size from small 1 kW structures to large machines rated
at 2 MW or more.

Basics of Wind Energy

Growing concern for the environmental degradation has led to the world's interest in
renewable energy resources. Wind is commercially and operationally the most viable renewable
energy resource and accordingly, emerging as one of the largest source in terms of the renewable
energy sector (Teri, 2006).
What is wind energy?
The wind is the natural movement of air across the land or sea. The wind is caused by
uneven heating and cooling of the earth's surface and by the earth's rotation. The land and water
areas absorb and release different amount of heat received from the sun. As warm air rises,
cooler air rushes in to take its place, causing local winds. The rotation of the earth changes the
direction of the flow of air (Teri, 2006).
The wind energy is freely available, widely distributed, renewable and also nature
friendly. The wind has huge potential. It is estimated that if all the available wind energy is
harnessed, it can contribute about five times the total energy demands of the world at present.
The attractions of wind as a source of electricity which produces minimal quantities of
greenhouse gases has led to ambitious targets for wind energy in many parts of the world. More
recently, there have been several developments of offshore wind installations and many more are
planned. Although offshore wind-generated electricity is generally more expensive than onshore,
the resource is very large and there are few environmental impacts.
The wind energy is generally developed in the industrialized world for environmental
reasons; it has attractions in the developing world as it can be installed quickly in areas where
electricity is urgently needed. In many instances it may be a cost-effective solution if fossil fuel
sources are not readily available. In addition there are many applications for wind energy in
remote regions, worldwide, either for supplementing diesel power (which tends to be expensive)
or for supplying farms, homes and other installations on an individual basis(Teri, 2006).The
specific Objectives of the study are 1.To study the World, India and Tamil Nadu wind energy
scenario. 2. To identify the demand and supply of power consumption in Tamil Nadu .3.To study
the financial performance of wind mill in Tamil Nadu.
Methodology
The secondary data required for the study were collected from published and unpublished
resources.
Percentage Analysis

Conventional Analysis was used to study the general characteristics of the wind mills
installation capacity of World, India and Tamil Nadu.
Financial Investment Analysis
The financial investment analysis made by a single medium size unit (600kwh) using
discounted techniques account for the time value of money. The three important discounted
methods are Net Present Value (NPV), Benefit Cost Ratio (B-C ratio) and Internal Rate of
Return (IRR).
1. Net Present Value
NPV is the difference between the present value of the future net cash flow and the present
value of the investment. A project is acceptable if the NPV is positive for a given discount rate.
2. Benefit -Cost Ratio (B-C ratio)
Present value of the net cash flow
B – C ratio = ----------------------------------------
Present value of the investment
 A project is to be acceptable; BC ratio should be greater than one.

3. Internal Rate of Return (IRR)

IRR is also referred to as discounted rate of return or yield of an investment IRR is the
discount rate, which makes the net present worth of cash flow equal to zero, or IRR is the
discount rate, which makes the present value of the future net cash flow equal to present value of
investment. A project is acceptable if the IRR greater than one or equal to opportunity cost of
capital / cost of capital.
IRR = Lower discount + Difference between NPV at lower discount rate
Rate lower and higher
-----------------------------------
discount rate absolute difference between
Lower and higher discount rates

4. Break-Even Analysis
The contribution margin is exactly equal to the fixed cost. Contribution margin is
estimated by deducting variable cost per unit, from price per unit of output. At quantities smaller
than break even point, is a loss and larger quantities there id a profit.

BEP = F/P – V
Where,
BEP = Break-Even Point
F = Fixed cost in Rs.
P = Price per unit In Rs.
V = Variable cost per unit in Rs.
Result and discussion:
1. Global scenario

Over the last decade significant progress has been made in harnessing wind for power
generation in different parts of the world, particularly in the USA, Europe, China and India. The
technical feasibility of using wind as a source of power generation has now been established and
wind energy has emerged in the near term as the most promising renewable energy technology
for generating electricity. The growth in energy demand, the limitations of supply and increasing
cost of fossil fuel generation, and environmental concerns make wind power a competitive
option in countries which have a good wind resource base.

S.No Country Capacity(MW)

1 USA 36693 Table 1: Worldwide Wind Power Installed
2 Germany 26386 Capacity. (As on 30th June 2010)
3 China 25705
4 Spain 19824
5 India 11952
6 Others 45639
Total 166199

(Source: Wind Power Monthly, October’2010)

The wind power installations world-wide have crossed 166,000 MW in 2010. A total
capacity of about 78000 MW has come up in Europe; 37000 MW in USA; and 12000 MW in
India. India is now the fifth largest wind power generator in the world after USA, Germany,
China and Spain. As per the recent data released by Global Wind Energy Council (GWEC), the
global wind energy sector experienced installation of 11,769 megawatts (MW) in the year 2010,
which represents a 43.4% increase in annual additions to the global market, up from 8,207 MW
in the previous year. The total installed wind power capacity now stands at 166,199 MW
worldwide, an increase of 25% compared to 2009.
2. Indian scenario
The development of wind power in India began in the 1990s, and has significantly
increased in the last few years. Although a relative newcomer to the wind industry compared
with Denmark or the USA, India has the fifth largest installed wind power capacity in the world.
Table 2: State wise Wind Power Installed Capacity in India. (As on 31st March 2010)
 S.No State Capacity (MW)
1 Tamil Nadu 4906.74
2 Maharashtra 2077.7
3 Gujarat 1863.64
4 Karnataka 1472.75
5 Rajasthan 1088.37
6 Others 397.49
Total 11806.69

(Source: indianwindpower.com)
As of 31 March 2010 the installed capacity of wind power in India was 11806.69 MW,
mainly spread across Tamil Nadu (42 %), Maharashtra (18 %), Gujarat (16 %), Karnataka (12
%), Rajasthan (9 %), and other states (3 %) .It is estimated that 6,000 MW of additional wind
power capacity will be installed in India by 2012. Wind power accounts for 6 % of India's total
installed power capacity, and it generates 1.6% of the country's power.
Tamil Nadu Scenario
Tamil Nadu is blessed with conducive natural metrological and topographical settings for
wind energy generation. There are three passes namely; Palghat Pass, Shengottah Pass and
Aralvoimozhi pass are endowed with heavy wind flows due to the tunneling effect during South
West Monsoon.
The first wind farm of 1.165 MW capacities was erected at Mullaikadu in Tuticorin
District, during 1986 in association with Tamil Nadu Energy Development Agency (TEDA)
under the aid of Ministry of Non Conventional Energy Sources (MNES), Government of India.
Subsequently, various wind farms were erected by TNEB at other places in Kayathar,
Muppandal and Puliankulam areas. Similarly, during the year 1993, 8 Nos. of 250 KW Wind
mills were erected at Kethanoor in Coimbatore District. In all 120 wind mills were erected by
TNEB in between 1986 and 1993 totaling to a capacity of 19.355 MW.
Based on successful functioning of these demonstration wind farms, coupled with
conducive environment created by Government a number of private developers have set up wind
farms. Total capacity during 2008-09 has reached 4287.740 MW which has since increased to
4889.765 MW in 2009-10. The corresponding energy generated has also increased from
6655.150 MU during 2008-2009 to 8145.508 MU during 2009- 2010. The installed capacity of
wind generation in the state is 42 percent of the total national installed capacity and is ranked 1st
in the country.
Power Installed Generation Capacity (MW)
The total installed generation capacity of Tamil Nadu as on 31.03.2010 is 15,800 Mega
Watts as detailed below:
(A) Hydel, Coal, oil based and conventional sources:-
(i) TNEB’s own generating stations : 5690 MW
(Hydel, Thermal, Gas and wind)
(ii) Private Sector Power Plants (IPP) : 1180 MW
(iii) Share from Central Sector generating stations : 2825 MW
(iv) External assistance; and : 305 MW
(v) Others (Captive Power Plants) : 214 MW
(Supply to TNEB)
TOTAL : 10214 MW
(B) Renewable or Non-conventional energy sources:-
(i) Wind Mills (Private)
(In-firm power) : 4889.765 MW
(ii) Co-Generation; and : 559.5 MW
(iii) Bio-mass : 137.05 MW
Total (Renewable sources) : 5586.315 MW
--------------
Grand Total 15800.315 MW
--------------
There is an increase of 700 MW over last year. Besides the above 851 MW capacity of
captive power plants are also available for their own use and sale.
Per capita consumption growth
 Tamil Nadu state ranks third in Electricity generation, Transmission and Distribution.
The Tamil Nadu’s per capita consumption has reached the India’s target of 1000 units by 2012 in
2007-08 themselves, which is more than the national growth of 635 units. The Tamil Nadu’s per
capita consumption growth over the past 12 years is shown in Figure above.

Table 3: Peak Demand Met and Unrestricted Demand (MW)

Duration- Quarter Peak Unrestricted Shortage Shortage
Demand Met Demand (%)
Apr - Jun 2009 9730.00 10089.67 359.67 3.56
Jul - Sep 2009 9386.67 9498.33 111.67 1.18
Oct- Dec 2009 9133.67 9402.67 269.00 2.86
Jan-Mar 2010 9851.67 10320.00 468.33 4.54
Table 4: Energy availability &Requirement (MU)
Duration - Energy met Requirement Shortage Shortage
Quarter Avg/Day Avg/Day (%)
Apr - Jun 2009 196.39 207.38 10.99 5.30
Jul - Sep 2009 200.33 211.61 11.28 5.33
Oct - Dec 2009 201.83 218.00 16.17 7.42
Jan - Mar 2010 206.00 221.19 15.19 6.87
(Source: SRLDC)

The maximum peak demand so far reached during 2009-10 is 10,180MW (on
19.03.2010). Highest daily consumption of 223.858 Million Units was recorded on 11.03.2010.
Total energy consumption during 2009-10 as on 31.03.2010 has been 72987 Million Units. The
deficit is proposed to be met by purchasing power from Private Power producers & also through
power exchanges on a day to day basis.
Growth of the Installed Capacity
The total installed Capacity of Wind Mills in the State including 19 MW under public
sector is 4889 MW as on 31.03.2010. The capacity addition made during the year 2009-10 is 602
MW. The installed capacity during the 10th Five year Plan (2002-07) and the three years under
Eleventh Five year Plan is given below:-

Year Installed capacity addition Electricity generated

in MW in (MU)
 2002-03 133 1305.703
2003-04 371 1714.475
2004-05 679 2260.732
2005-06 858 3444.281
2006-07 577 5268.840
2007-08 381 6092.369
2008-09 431 6655.150
2009-10 602 8145.510
(Up to 31.03.2010)

During the year 2009-10, 8145.5 million units have been generated from wind which is
11.20% of Tamil Nadu’s grid consumption. The TNERC has issued orders enhancing the rates
from Rs.2.90 to Rs.3.39 per unit, effective from 1.04.2009. The wheeling and banking charges
remain unchanged at 5%.
Wind resource assessment studies were carried out in 69 Wind prone Zones by setting up
Wind monitoring stations since 1986, out of which 41 sites having annual mean wind speed of
18 KM per hour and above and annual mean Wind power density of 150/200 W/m2 and above at
30 m / 50 m level, have been declared by MNRE as potential and viable for commercial projects.
Wind mills have so far come up in 26 sites. 9 new wind monitoring stations have been installed
through C-WET, a Govt. of India undertaking in various Districts with 20% cost sanctioned by
the State Govt. and balance 80% cost provided by MNRE to C-WET. They are under study with
data being collected every month.
Cost calculation

Project Size 0.60MW Capacity of WEG 600KW

Project Cost Rs 310 Lakhs Plant Load Factor 26.64%
Generation 14Lakhs KWh/Annum Selling Price Rs 3.39/kwh
O&M Rate(first 3years) Nil From 4th year RS 5 Lakhs /Annum +
5% escalation.
Depreciation Rate 5.28% Term Loan ( 75% ) Rs 232.5 Lakhs
Interest Rate 10.00% / Annum Investors Equity Rs77.5 Lakhs
(25%)

MAT Rate 11.22% MAT/IT IT Rate 33.99%

on Return On Equity
(Source: IWPA)
Result & Discussion
 NPW : Rs 334.69 lakhs.

 B- C ratio : 1.5
  IRR : 11.15 %
 Break even point : 6.52 lakhs kwh/ annum
 Pay back period : 5.27 years

Above data calculated for the case, does not include the accelerated depreciation benefits,
Tax benefits and CDM benefits.

Cost of Wind Power

To ensure sustained and healthy growth of Wind Energy Sector, it is necessary to
rationally evaluate the cost of generation and to determine a selling rate which should be
acceptable to consumers and attractive for investor.
The cost of wind energy can be calculated as per standard practice followed by Institute
of Cost Accountants but the assumptions of parameters must be realistic-particularly regarding
expected generation at site.
The selling/purchase rate would however, vary for three different mode of use/sale of
wind energy:
• Captive consumption
• Third Party sale
• Sale to Utility
Cost of Wind Energy

The cost of wind energy generation varied from site to site depending on the wind resource and
also on year-to-year basis due to yearly variation in wind speed. The cost can be calculated
accurately provided the assumptions are realistic corresponding to wind resource and market
conditions. Further, there are certain parameters which would influence the cost of wind energy
project installations.
Benefits of Wind Energy
 Reduces climate change and other environmental pollution.
 Wind energy can be utilized as a shield against ever increasing power prices. The cost per
kWh reduces over a period of time as against rising cost for conventional power projects.
  Diversifies energy supply, eliminates imported fuels, and provides a hedge against the
price volatility of fossil fuels. Thereby provides energy security and prevention of
conflict over natural resources.
 One of the cheapest sources of electrical energy.
 Least equity participation required, as well as low cost debt is easily available to wind
energy projects.
 A project with the fastest payback period.
 A real fast track power project, with the lowest gestation period; and a modular concept.
 Operation and Maintenance (O&M) costs are low.
 No marketing risks, as the product is electrical energy.
 Creates employment, regional growth and innovation.
 Reduces poverty through improved energy access.
 Fuel source is free, abundant and inexhaustible.
 Delivers utility-scale power supply.
Limitations

 Wind machines must be located where strong, dependable winds are available most of the
time.
 Because winds do not blow strongly enough to produce power all the time, energy from
wind machines is considered "intermittent," that is, it comes and goes. Therefore,
electricity from wind machines must have a back-up supply from another source.
 As wind power is "intermittent," utility companies can use it for only part of their total
energy needs.
 Wind towers and turbine blades are subject to damage from high winds and lighting.
Rotating parts, which are located high off the ground can be difficult and expensive to
repair.
 Electricity produced by wind power sometimes fluctuates in voltage and power factor,
which can cause difficulties in linking its power to a utility system.
 The noise made by rotating wind machine blades can be annoying to nearby neighbors.
 People have complained about aesthetics of and avian mortality from wind machines.
Special features:
 (i) Wind Electric Generators can be installed only at specific locations with adequate
wind potential as notified by the Government based on studies.
(ii) Available in various capacity ranges from 225 KW to 750 KW (now up to 2.0 MW).
(iii) Tower height can be in the range of 30M to 50 M to tap wind energy more
effectively.
(iv)Wind Electric Generator of 250 KW can generate 4 lakhs to 6 lakhs units of
electricity per annum depending upon the wind potential of the area.

Incentives / facilities offered by Government of India.

 Accelerated depreciation on Wind Electric Generator is permissible up to 80% of the cost
for Income Tax calculations subject to minimum utilization for six months in the year in
which the deduction is claimed.
 Import of Wind Electric Generators is permitted under Open General License.
 Customs duty concessions are available for the import of Wind Electric Generators and
certain essential spares.
 Tax holiday granted for ten years in respect of profits and gains from the investments in
Wind Electric Generators.
Incentives / facilities offered by Government of Tamil Nadu
 TNEB buys surplus energy at the rate of Rs.2.75 per unit from the existing wind mills
commissioned before 15.5.2006 from the date of renegotiation of the existing agreement
and Rs.3.39 per unit from the Wind Mills Commissioned after 1.4.2009 as per the new
tariff order issued by the Tamil Nadu Electricity Regulatory Commission.
 Concessional wheeling charge is levied at 5% for captive use of power under which
industries can draw the power produced anywhere in the state at the point of
consumption.
 Banking facilities within the same financial year are allowed subject to 5% charges.
 Providing wind data and power potential at potential sites based on the study conducted
by Tamil Nadu Energy Development Agency.
Generation Based Incentives (GBI)
 In the last few years, the power scenario in India has witnessed a qualitative change with
the entry of independent power producers, who are also being encouraged to enter the field of
renewable. Also there is good possibility for foreign direct investment in this sector. Since they
cannot avail of the accelerated depreciation provision already available, Ministry announced
during the year a new scheme on Generation Based Incentive for wind power projects. Both the
incentives of accelerated depreciation and GBI would run simultaneously, till the end of 11th
plan period, though in a mutually exclusive manner. Under the scheme, an incentive of Rs.0.50
per unit of electricity fed into the grid by wind power projects will be provided over and above
the tariff given by the state utilities. The GBI will have an overall cap of Rs. 62 lakhs per MW to
be availed in a period not less than four years and maximum period of 10 years. The GBI would
be limited to cover a maximum capacity addition of 4000 MW during the 11th Plan only.

Small aero generator (Mini-wind mills)

It is a stand alone type generator which can be used to produce electricity for captive
purposes. It can be installed in places where the wind speed is more than 15 kmph. 41 such
places have been identified in 8 districts from 67 sites surveyed which are suitable for installing
aero generators. In other places too aero generators could be installed where wind speed is > 15
kmph. It consists of smaller capacity wind electric generator, (up to 30 kW) a tower, a battery
bank with an inverter and electronic control system.

Potential for use

Industries Lighting & other electrical uses in Office / factory

buildings, Guest houses, residential quarters, street
lighting etc.
Local bodies/Institutions Office buildings, guest houses, tourist home, hostels,
remote buildings in remote locations, street lighting etc.
Individuals Farm houses, gardens, campus lights

Economics (Tentative)

• Cost of system - Rs.2.50 - 3.00 lakhs / kW

• MNRE Subsidy available for the system for 2007 - 08 up to 50% of Ex-works cost for
individuals and 75% for community users subject to a maximum limit (subject to change)
 • Saves around 2500 kWh per kW per annum depending on wind speed and duration.

Eligible categories of beneficiaries

• Community uses such as street lighting.

• Direct use by central and State Govt. agencies.
• Individuals, Industrial users.
• R & D and academic institutions.

References:
 www.mnre.gov.in
 www.cwet.tn.nic.in
 www.teda.gov.in
 www.teriin.org
 www.tneb.org.in
 www.srldc.org
 www.indiawindpower.com
 India Wind Power Association – http:\\windpro.org