Indian Cabinet Approves $908 Million Viability Gap Funding Scheme for Offshore Wind Energy Projects
June 21, 2024 – The Indian Union Cabinet, led by Prime Minister Narendra Modi, has approved the Viability Gap Funding (VGF) scheme for the country’s first offshore wind energy projects. This initiative, with a total allocation of $908 million, is set to significantly reduce carbon emissions and enhance the nation’s renewable energy capacity.
The VGF scheme, aligning with the National Offshore Wind Energy Policy of 2015, aims to harness the vast offshore wind energy potential within India’s exclusive economic zone. Of the total outlay, $835 million is designated for the installation and commissioning of 1 GW of offshore wind energy projects—500 MW each off the coasts of Gujarat and Tamil Nadu. An additional $73 million is earmarked for upgrading two ports to meet the logistical demands of these projects.
This financial support from the government is designed to lower the cost of power generated from offshore wind projects, making it economically viable for DISCOMs to purchase. While private developers, selected through a transparent bidding process, will establish these projects, the Power Grid Corporation of India Ltd (PGCIL) will construct the necessary power evacuation infrastructure, including offshore substations. The Ministry of New and Renewable Energy, acting as the nodal ministry, will coordinate with various government departments to ensure the successful implementation of the scheme.
A critical aspect of the VGF scheme is the development of port infrastructure to handle the specific needs of offshore wind energy projects. This includes the storage and movement of heavy and large-dimension equipment. The Ministry of Ports, Shipping, and Waterways will oversee the enhancement of two ports to support the offshore wind sector.
Offshore wind energy offers several advantages over traditional onshore wind and solar projects, such as higher adequacy and reliability, lower storage requirements, and greater employment potential. The development of the offshore wind sector is expected to yield economy-wide benefits by attracting investments, fostering indigenous manufacturing capabilities, creating jobs across the value chain, and advancing technology for offshore wind energy in India. Moreover, this initiative will contribute significantly to India’s energy transition targets.
The successful commissioning of 1 GW of offshore wind projects is projected to generate approximately 3.72 billion units of renewable electricity annually, resulting in an annual reduction of 2.98 million tons of CO2 emissions over 25 years. This scheme is poised to not only kickstart offshore wind energy development in India but also to create an ecosystem that supports ocean-based economic activities. This ecosystem will be crucial in developing an estimated 37 GW of offshore wind energy, requiring an investment of about $55 billion.
