The Ministry of New and Renewable Energy MNRE has issued guidelines to implement viability gap funding (VGF) for 1 GW offshore wind energy projects.

The VGF program for 1 GW offshore wind projects to be commissioned until the financial year 2031-2032 has an outlay of ₹68.53 billion (~$816.88 million).

The nodal agency, National Institute of Wind Energy (NIWE) has identified a 500 MW project site off the Gujarat coast. Another site off the Tamil Nadu coast for a 500 MW project is yet to be finalized.

The program will be implemented through the implementing agency Solar Energy Corporation of India (SECI), which will be eligible to get 0.5% of the VGF amount released as administrative charges annually.

SECI will issue bids for the 500 MW offshore project in Gujarat. It will also sign 25-year power purchase agreements (PPAs) with offshore wind power developers and power sale agreements (PSAs) with the respective states’ distribution companies (DISCOMs).

Bidding rules

SECI will invite bids through an international competitive bidding process. The bidders must quote the necessary VGF per MW as part of their financial bid, which must be less than or equal to the ceiling limit. They will have the greenshoe option to allocate an additional capacity of up to 50 MW and not exceeding 550 MW.

The extra capacity offered will be calculated at the lowest VGF per MW discovered under the request for selection (RfS) and provided at the lowest discovered VGF rate. If the allocated VGF is inadequate, the capacity will be reduced in multiples of 10 MW, and a revised RfS will be issued.

The successful bidder will quote the VGF amount in the financial bid.

Bidders should have experience commissioning offshore or onshore wind energy or offshore infrastructure projects in India. The financial criteria will include net worth/asset under management/ investible funds and average annual turnover of the last three financial years.

After securing the award letter, the developer must obtain stage II clearance per the National Offshore Wind Energy Policy 2015. NIWE will help the developer obtain Stage II clearance. After receiving the clearance, the developer will sign a ‘Seabed Lease Deed Agreement’ with the Union government to grant the lease and set up offshore wind energy capacity in line with Offshore Win Energy Lease Rules, 2023. The developer may commence construction activities after signing the agreement.

VGF disbursal

The VGF will be disbursed in a phased manner: 25% will be released after the completion of foundation works, 35% after commissioning  50% of project capacity, 35% after commissioning the total project capacity accepted under the PPA, and 5% after one year of operation of the project.

The first installment of VGF will only be released after the developer submits an equal amount of equity/debt or both.

Project Commissioning

The projects must be commissioned within 48 months of signing the PPAs.

They must be designed for inter-state transmission systems (ISTS) by Central Electricity Regulatory Commission regulations.

The project’s interconnection/metering point will be an offshore pooling substation constructed as part of the ISTS network. The developer will be responsible for power evacuation from the project to the offshore metering/interconnection point. The developer must set up the project, including inter-array cables to connect with the offshore substation at a 66 kV voltage level.

Central Transmission Utility (CTU) would develop the offshore substation and transmission work beyond that. Bay construction at the offshore pooling substation for power injection should be done under CTU. SECI will facilitate the coordinates of the offshore substation in consultation with CTU.

The installed wind turbine should have an IEC or BIS standard-type certification.

Power offtake agreements

A successful developer in Gujarat will be entitled to ₹4.5(~$0.05)/kWh for the PPA period, and a developer in Tamil Nadu can receive ₹4(~0.047)/kWh.

Monitoring

A scheme monitoring committee will monitor the projects under the chairmanship of the Secretary, MNRE. The committee will include representatives from MNRE, the Ministry of Power, the Ministry of Ports, Shipping, and Waterways, SECI, CTU, NIWE, state energy departments, managing directors of state nodal agencies, and experts from other organizations.

The committee will periodically review the status of offshore wind energy projects. It may also ask the bidders to facilitate simultaneous commissioning of evacuation infrastructure and offshore wind projects.

Penalties

The earnest money deposit can be forfeited if the selected bidder refuses to submit the required documents/ performance bank guarantee or any other performance guarantee instrument or if the selected bidder fails to meet the eligibility criteria after submitting documents.

In case of delay or default in project commissioning, SECI will forfeit the bank guarantee and other similar performance guarantee instruments.

In June 2024, the Union Cabinet approved a VGF program with a total outlay of ₹74.53 billion (~$893.34 million) for offshore wind energy projects. The program includes ₹68.53 billion (~$821.43 million) for installing and commissioning 1 GW of offshore wind energy projects, split equally between the coasts of Gujarat and Tamil Nadu.

In August 2023, MNRE formulated three models for developing offshore wind energy projects, especially along the country’s extreme southern and western shorelines.