Budget 2024: How viability gap funding for offshore wind energy projects is crucial?

In the 2024 Union Budget, Finance Minister Nirmala Sitharaman announced a significant move that could revolutionize India’s renewable energy sector. The government plans to provide viability gap funding for offshore wind energy projects, starting with an initial capacity of one gigawatt.

India considers offshore wind significant for achieving its goal of 500 gigawatts of renewable energy capacity by 2030 and its target of becoming net zero by 2070. The Ministry of New and Renewable Energy (MNRE) serves as the nodal ministry for the development and use of maritime space within the country's exclusive economic zones (EEZ) for offshore wind energy.

The National Institute of Wind Energy (NIWE) conducts resource assessments, surveys, and studies in the EEZ, demarcates blocks, and assists developers in setting up offshore wind energy farms.

About 7,600 kilometers of coastline gives India strong prospects for harnessing offshore wind energy. The country aims to install 30 GW of offshore wind projects by 2030. According to government estimates, Gujarat and Tamil Nadu states alone possess around 70 GW of offshore wind power potential, which can power over 50 million homes.

The progress in this sector has primarily been slow due to the high initial cost compared to solar and onshore wind. While several offshore projects have lingered in the pipeline for many years, not a single one is operational.

Budget boosts offshore wind energy

The Union Budget for fiscal year 2024-2025 (FY25) will propose a viability gap funding (VGF) scheme with an outlay of ₹6,000 crore, a move that could significantly boost India's offshore wind energy sector.

The notable initiative includes viability gap funding for developing 1 gigawatt (GW) of offshore wind energy, which we expect to play a crucial role in diversifying India's renewable energy portfolio and reducing reliance on fossil fuels.

Nirmala Sitharaman said that the Government will provide viability gap funding to achieve net-zero emissions by 2070. She added that the Government is ready to assist states in developing aspirational districts and blocks faster.

They design this funding to bridge the financial gap in public infrastructure projects that are economically justified but fall short of financial viability. In other words, it’s a subsidy provided by the government to make a project financially viable.

The offshore wind energy sector stands to benefit immensely from this initiative. Offshore wind farms have the potential to generate massive amounts of clean energy, but the high costs associated with these projects often deter investors.

With the aim of accelerating India’s transition to a green economy, the government is using viability gap funding to attract more investment into this sector. Specifically, by 2030, India has set an ambitious target to have 500 gigawatts (GW) of renewable energy installed capacity. This includes a substantial 140 GW from wind energy, and an even larger 280 GW from solar energy.

2024 Budget promotes offshore wind energy

In the 2024 Budget, a significant emphasis is placed on achieving our ‘net-zero’ commitment by 2070. One pivotal strategy towards this goal is the introduction of viability gap funding for offshore wind energy projects. This funding is designed to tap into the vast potential of offshore wind energy, starting with an ambitious initial capacity of one gigawatt.

Additionally, by 2030, a coal gasification and liquefaction capacity of 100 MT will be established. This initiative will aid in reducing the imports of natural gas, methanol, and ammonia, further supporting our sustainability goals.

The government also plans to mandate the phased blending of compressed biogas (CBG) in compressed natural gas (CNG) for transport and piped natural gas (PNG) for domestic purposes. This move will promote the use of sustainable fuel alternatives.

Lastly, financial assistance will be provided for the procurement of biomass aggregation machinery. This support will facilitate efficient collection and management of biomass, contributing to our renewable energy efforts. These measures underline the government’s commitment to sustainable development and its aim to make India a net-zero emission country by 2070.

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