Sustainable energy sector in India has witnessed exponential growth during the twenty-first century, as the country is pledged to become energy-independent by 2047 (1) (2). India has currently installed 39.25 GW of wind energy capacity – 4th highest in the world – which has generated approximately 60 billion units during the financial year of 2020-21 alone (3). As the country looks forward to achieving the energy demand on its own, wind power is, and will be, the most important source for energy alternatives. However, renewable wind energy industries across Indian subcontinent saw an unprecedented drop in wind energy production in the most recent years. These early observations are critical as multiple academic studies also suggest a declining trend in the wind power potential availability in India, particularly in the western parts of the country (4) (5). Such changes in the availability of wind energy potential in India have severe ramifications for the renewable energy companies, as well as for the banking sector across India.
What happened to annual wind energy generation in India in the recent past?
Wind Energy Potential (WEP) across India exhibits a strong inter-annual declining trend (4), particularly prevailing since the beginning of the twenty-first century. This noted decline in WEP is most prominent across the western and southwestern parts of the country – regions where more than 70 percent of the total wind capacity of India are installed (3).
To name but one, in the year 2020 India’s total wind energy generation saw 24 percent decline (locally -29% and -17% in western and southern regions) during June – September season, contrasted with same period in 2019 (6). The maximum decline was noted in the July month as the total wind energy production in some regions was reduced by more than 40 percent compared to 2019 (7), which was the lowest percentage decline on record. Of note, the wind energy production in India exhibits strong seasonality with maximum power being produced during June – September period.
By considering an example site located in western India, we describe as to what extent the overall wind energy generation has declined. As can be seen in Figure 1, the annual wind energy production displays strong inter-annual fluctuations on top of a robust declining trend, with 2020 being the most anomalous year so far. Further, there has been an overall decrease of approximately 12.5 percent in the total annual wind energy produced at this site, with last consecutive five years in-a-row being below-average compared with the long-term mean of past 4 decades (1980 – 2020). These observations should be of huge concern for both – policymakers and renewable power producers present across the Indian subcontinent.
Meteorological aspects: Does climate change play an important role in an overall decrease of wind availability across India?
There have been multiple academic studies targeting to explain this decline in the WEP, most of which attribute it to the changing nature of the Indian monsoon circulation due to climate change. There could be two distinct, plausible mechanisms through which the climate change can impact the WEP across India: directly by impacting the monsoon wind circulation over Indian subcontinent (9) (10), and indirectly by affecting the sea surface temperature over the Indian ocean sector (8).
Erratic nature of the Indian monsoon: Various, climate-induced changes in wind speeds and circulation patterns over India is directly linked with the observed changes in the Indian monsoon circulations (9) (10). The seasonal mean monsoon precipitation over India – which climatologically occurs between June 1 – September 30 period – has declined (12). While this seasonal precipitation change is not exceptional, there exists an observed heterogeneity in mean monsoon circulation, with increased frequency and the spatial extent of extreme precipitation events during the most recentdecades (10). Such regional-scale changes in the monsoon pattern are indicative of weaker-than-normal climatological circulation and result in significant decrease in WEP across India. Further, colder than climatological northern Indian plains during pre-monsoon season and increased cyclogenesis such as in the year 2020 were likely to aid in the lower than usual wind energy generation across India.
Western Indian Ocean Warming: The gradient of the surface pressure between the Indian landmass and surrounding oceanic areas serves as a power house of the wind circulation over India, as the monsoon winds are directly correlated with this pressure gradient (14). Several academic studies have reported an anomalous warming of the Indian Ocean with anomalies over the Arabian Sea being the most pronounced (8) (9). As the western Indian Ocean has warmed due to combined effects of locally increased anthropogenic emissions and planetary scale global warming, the pressure-gradient between the Arabian Seaand Indian landmass has significantly decreased (9). These changes have been most evident during the most recent decades. This persistent decline in the surface pressure gradient has resulted in a relatively weak wind circulation during the Southwest monsoon season over India. Since the strongest winds which lead to maximum wind power generation over India are seen during the monsoon season, the persistent decline in the wind potential availability in India has led to a secular decline in the overall wind energy production across India.
Implications for the Renewable and Banking sectors in India
Energy imports in India, on an average, account for approximately INR 120 billion every year (2). As India aspires to installing 175 gigawatts (GW) of renewable capacity by 2022, 450 GW by 2030 (2), and becoming energy-independent by 2047, aforementioned declining trend in the WEP has large implications for multiple industrial sectors, most prominently for the Renewable and Banking.
Unprecedented drop in wind energy production in the recent years have resulted into revenue variability making it challenging to accurately forecast expected revenue generation from renewable energy projects. This uncertainty around expected revenues is impacting the power producers as well as lenders who have funded such projects. Even for insurers providing parametric covers for the generation losses on account of non-availability of wind, such trends are changing therisk profile significantly.
Additionally, the fact that India expects an exponentially increasing renewable energy productionin coming years to decades, in order to become energy-independent, such declining trends could be perceived as an increasing financial risk for the renewable energy companies and their stakeholders.
Options to adapt at a regional level
There could be multiple levels of action to limit the impacts of declining trends of the wind availability in the Indian subcontinent. For the adaptation purpose, it is possible to act on following major aspects:
Limit the regional contribution to the global warming – Before we start to suggest some of the adaptation strategies, we first focus on the mitigation of this particular risk. The most robust and vital strategy could be to limit the regional contribution to the global warming by restricting the anthropogenic carbon dioxide and other greenhouse emissions. This goal can be achieved through progressive climate sensitive industry adaptation strategies, such as induction of the efficient instruments to consume lesser amount of energy and adopting for other sources as alternative energy at plant levels. These regional level industry adaptations would surely help India to reduce its carbon footprints, and eventually cutting down the growth rate of the regional climate change. Activities such as reforestation and green commute would further aid in slowing the accelerated rate of the climate change over South Asia. These actions are likely to help in re-attaining the Indian monsoon its homogeneity and reinstate the wind circulation to long-term climatological levels.
Risk transfer solution with parametric insurance for Lack of Wind – Climatic conditions and weather patterns occurring over a particular geography are of critical importance in power generation of renewable segments, including wind energy. The unavailability of the wind energy potential due to changing climate and various other meteorological factors are likely to bring windfarm operators under enormous distress, as it has led to an unprecedented fluctuation in revenue generation in the recent years.
As this situation is likely to continue in coming years to decades, to protect renewable companies against loss of income resulting from this threat, parametric insurance for Lack of Wind is going to play an instrumental role. Further, given the fact that nature and magnitude of this declining WEP trend will be distinctly different for the windfarms located across the Indian subcontinent, tailor-made risk profiling and contextualized parametric insurance solution for Lack of Wind for all the major wind energy producing companies is the deemed need of the hour.
Use climate science to strategize the planning – Early assessments and forecasts of the future regime changes in the nature and strength of the wind circulation across India using state-of-the-art numerical models, such as the analysis of the output of Coupled Model Intercomparison Project (CMIP) 6, could be immensely useful in planning the future course of wind energy generation in India. A regional climate model set-up with realistic vertical heating profiles across Indian geographies and including more granular regional-scale features could be even more useful in assessing the future climate-induced extremes and risk-proofing strategies for the renewable energy sector in India. Such analyses will be of immense importance for:
- Relocation of the windfarms to strategic geographies to minimize the risk coming from WEP trend.
- Systematically integrate these WEP trends into the pricing methods used by the capital providing banks and lenders across the country.
- Help renewable industries and lenders better understand the future risks and, at the same time, guide on the mitigation strategies, such as building bigger windfarms in the vicinity of favourable geographies.