Making money out of thin air
The advantage of investing in a wind turbine [in India] is that 80 per cent of the project cost is considered accelerated depreciation given as a tax benefit for renewable energy during the first year.
Editor's Note: Experts estimate that in the USA as much as two-thirds of a wind developer's return on investment is generated by the Production Tax Credit and depreciation allowances. Without these subsidies wind development would be a modest fraction of current levels.
January 12, 2006
by S Bridget Leena
in rediff.com
You do not need to be an industrialist to make a killing in renewable energy business. Yes, but you do need Rs 30-35 lakh as capital investment to debut in the most talked-about virgin investment avenue — wind energy.
V V Shanta Raman, secretary, Indian Wind Turbine Manufacturers Association, says to install the least capacity wind generator of 250 kw (the minimum capacity that can be installed), an individual will have to invest close to Rs 1 crore. Banks provide almost 70 per cent of the project cost as loans to install a wind generator as it comes under renewable energy.
If you think it is difficult to mobilise even Rs 30-35 lakh, 10 to 15 individuals can join together and form an association and jointly invest in a wind farm estate, called Madhya Pradesh Windfarms (MP Windfarms). This wind farm is primarily for small investors.
MP Windfarms is promoted by Consolidated Energy Consultants that holds 51 per cent stake, the Madhya Pradesh government -- through MP Urja Vikas Nigam -- holds 25 per cent and the remaining 24 per cent is with the central government through Indian Renewable Energy Development Agency.
The advantage of investing in a wind turbine is that 80 per cent of the project cost is considered accelerated depreciation given as a tax benefit for renewable energy during the first year.
Through central- and state-level policy intervention wind energy is produced at any identified windy site in the state. The energy produced, which is supplied to the State Electricity Board's grid, can be either sold to electricity boards or utilised against captive consumption and third-party sale on payment of wheeling charges.
India has installed capacity of more than 3,595 mw as on March 31, 2005. Tamil Nadu and Karnataka are seen as suitable states for generation of wind energy as well as garnering revenues by selling the energy to the electricity boards.
Tamil Nadu Electricity Board pays about Rs 2.70 per unit, while Karnataka Electricity Board pays about Rs 3.25 a unit.
About five-six lakh units of renewable energy can be generated from a 250 kw generator during the first year of installation, Raman says.
So, on an initial estimation, an individual investing in a wind turbine will garner about Rs 13 lakh by selling energy to the state electricity board in the first year. Raman says a wind turbine takes five-six years to break-even, while its lifespan is about 20 years.
The annual operation and maintenance cost, including insurance, works out to Rs 40,000-50,000. Wind turbine makers provide one-year warranty on the installation.
The good news for those interested in investing in wind energy is that wind turbine manufacturers do provide assistance from ideas to installation. Suzlon and NEG Micon have a larger wind generator of 750-1,650 kw. Wind turbine makers also take care of spotting a suitable location to install and maintain wind turbines.
To set up a 250 kw wind generator all that a person has to do is approach any of the wind turbine manufacturers such as Shriram EPC, Pioneer Asia Wind Turbine, Vestas RRB and NEPC India.
As wind is highly site-specific and may widely vary even at a distance of 1 km, on the spot, wind data is collected by ministry of non-conventional energy sources through installation of sophisticated computerised data loggers at more than 500 locations.
HIGH POINTS OF WIND ENERGY
<li>As wind energy comes under non-conventional energy it gets a tax break of 80 per cent as depreciation during the first year. All the other investments over Rs 1 lakh are taxed by the government.
<li>Banks provide 70 per cent of the project cost as loans at 9 per cent interest for installation of wind energy. The minimum cost of installation works out to Rs 1 crore for a 250 kw wind turbine. Thus, an individual will have to bring in Rs 30-35 lakh upfront, while the balance can be funded through bank loans.
<li>The energy produced can be sold to the state electricity board and so, during the first year of operations, almost half the amount that individuals invest – close to Rs 14 lakh –can be obtained as revenue. Thus, this revenue can be used to pay off part of the loan as well.
<li>Cost of operation, maintenance and insurance works out to Rs 40,000-50,000 a year. Wind turbine manufacturers give a one-year warranty on the installed turbine.
<li>Wind energy is considered to be one of most environmental friendly way of producing energy compared conventional energy.
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Tax Breaks & Subsidies
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Asia
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