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Viability Gap Funding (VGF) Scheme for Offshore Wind Energy Projects

20th June, 2024 Economy

Viability Gap Funding (VGF) Scheme for Offshore Wind Energy Projects

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  • The Union Cabinet, chaired by Prime Minister Shri Narendra Modi, approved the Viability Gap Funding (VGF) scheme for offshore wind energy projects.
  • The scheme has a total outlay of Rs. 7,453 crore, including Rs. 6,853 crore for installing and commissioning 1 GW of offshore wind energy projects and a grant of Rs. 600 crore for upgrading two ports to meet logistics requirements.

Viability Gap Funding (VGF) Scheme

  • The Viability Gap Funding (VGF) Scheme aims at supporting infrastructure projects that are economically justified but fall marginally short of financial viability.
  • Support under this scheme is available only for infrastructure projects where private sector sponsors are selected through a process of competitive bidding.
  • The total VGF under the scheme does not exceed 20% of the total project cost, however, the Government may decide to provide additional grants up to a limit of a further 20%.

Objective of the Scheme for offshore wind energy projects

  • The scheme aims to implement the National Offshore Wind Energy Policy of 2015, exploiting India's vast offshore wind energy potential within its exclusive economic zone.
  • Government support through VGF will reduce power costs from offshore wind projects, making them viable for purchase by DISCOMs.

National Offshore Wind Energy Policy

The National Offshore Wind Energy Policy, introduced in 2015, aims to promote the development of offshore wind energy in India. Despite significant progress in onshore wind power, the vast potential of offshore wind energy remains largely untapped, necessitating a targeted policy framework to unlock its benefits.

Objectives: Pioneering Offshore Wind Energy

The policy delineates multifaceted objectives aimed at catalyzing the offshore wind energy sector:

  • Exploration and Promotion: By fostering the deployment of offshore wind farms within India’s Exclusive Economic Zone (EEZ), the policy seeks to harness the abundant wind resources available in offshore areas.
  • Investment Encouragement: Encouraging investment in energy infrastructure and spatial planning enables efficient utilization of maritime renewable energy resources, contributing to energy security and sustainability.
  • Environmental Sustainability: Aligned with India's commitment to combat climate change, the policy aims to reduce carbon emissions while promoting the indigenization of offshore wind energy technologies.
  • Economic Empowerment: The policy envisions the creation of job opportunities and skilled manpower in the offshore wind energy sector, fostering economic growth and enhancing coastal infrastructure and supply chains.

Mechanism of Offshore Wind Energy: Leveraging Nature's Bounty

Offshore wind energy harnesses the formidable power of the wind at sea, where wind speed is higher and more consistent. This clean, renewable energy source leverages sophisticated structures equipped with cutting-edge technology to capture wind energy and convert it into electricity. Advancements in offshore wind technology have enabled installations in shallow waters up to 60 meters deep, facilitating efficient deployment and operation of offshore wind farms.

Development in India: Nurturing Growth and Innovation

  • Government Leadership: The Ministry of New and Renewable Energy spearheads India's offshore wind energy development efforts, collaborating with various stakeholders to facilitate policy implementation and project execution.
  • Resource Assessment and Support: The National Institute of Wind Energy (NIWE) plays a pivotal role in resource assessment, surveys, and studies within the EEZ, supporting the identification and development of potential offshore wind energy sites.
  • Project Assistance Initiatives: Projects like Facilitating Offshore Wind Energy in India (FOWIND) and the First Offshore Wind Power Project in India (FOWPI) provide technical expertise, capacity building, and pre-financial investment decision support, fostering project development and stakeholder engagement.

Benefits and Global Perspective: Harnessing Nature's Bounty

Offshore wind energy offers a myriad of benefits:

  • Clean, renewable, and abundant energy source.
  • Higher wind speeds at sea result in up to twice the power generation compared to onshore facilities.
  • Reduced noise and visual impact, along with easier transportation logistics, make offshore wind farms an attractive option for sustainable energy development.

Leading nations in offshore wind energy, including the UK, Denmark, and Germany, serve as beacons of success, showcasing the immense potential and benefits of offshore wind energy development.

MUST READ ARTICLE: OFFSHORE WIND ENERGY IN INDIA: https://www.iasgyan.in/daily-current-affairs/offshore-wind-energy-in-india#:~:text=Offshore%20wind%20energy%20refers%20to,and%20convert%20it%20into%20electricity.

WIND ENERGY IN INDIA: https://www.iasgyan.in/daily-current-affairs/wind-energy-in-india

Implementation Strategy of VGF for offshore wind energy projects

  • Private developers will establish projects through a transparent bidding process.
  • Power excavation infrastructure, including offshore substations, will be constructed by Power Grid Corporation of India Ltd (PGCIL).
  • The Ministry of New and Renewable Energy will coordinate with various Ministries/Departments for successful scheme implementation.

Port Infrastructure Support

  • Construction of offshore wind projects requires specific port infrastructure.
  • Ministry of Ports, Shipping, and Waterways will support two ports to meet offshore wind development requirements.

Benefits of Offshore Wind Energy

  • Offshore wind offers advantages over onshore wind and solar projects, including higher reliability, lower storage requirements, and higher employment potential.
  • Development of the sector will attract investments, develop indigenous manufacturing capabilities, create employment opportunities, and drive technology development, contributing to India's energy transition targets.

Environmental Impact and Future Prospects

  • Commissioning 1 GW of offshore wind projects will produce renewable electricity, resulting in significant CO2 emission reduction.
  • The scheme will kickstart offshore wind energy development in India and create the necessary ecosystem to support the development of 37 GW of offshore wind energy at a substantial investment.





Q. Analyse the potential impact of offshore wind energy on India's renewable energy landscape. Evaluate the challenges and opportunities associated with the development and integration of offshore wind energy projects. Discuss the policy measures required to harness offshore wind energy effectively and its role in achieving India's energy security and sustainability objectives.