The withdrawal of incentive had put new projects in limbo as they could not get loans due to low RoE

The proposal in the Union Budget to reintroduce the Generation-Based Incentive (GBI) for wind energy projects and ensure availability of low-interest loans for renewable energy projects has brought cheer to wind energy developers in Karnataka, which is among the leading wind energy-generating States.

Wind energy expert U.B. Reddy, who is associated with many projects in the State, points out that several new projects were shelved after the GBI was withdrawn a year ago since banks did not find them economically viable.

“The details of these new projects had been worked out assuming that there would be GBI, which was about 50 paise a unit with a ceiling of Rs. 1 crore per megawatt a year. Without this incentive, the Return on Equity (RoE) of these projects dipped so low that banks were not willing to finance them. Those willing to do so quoted high interest rates. In such a scenario, none of the new projects have come up in the past year barring implementation of projects that had already completed all the formalities,” he said.

Reintroduction of the GBI would give a thrust to new projects, he said and expressed confidence that Karnataka may add wind energy projects with a total capacity of 250 MW to 300 MW in the next one year. Presently, the total wind energy capacity in the State is close to 3,000 MW, and it ranks fourth in terms of capacity after Tamil Nadu, Maharashtra and Gujarat.

Similarly, the proposal to reduce the cost of renewable energy by providing funds at low interest rates from the National Clean Energy Fund to the Indian Renewable Energy Development Agency for lending to renewable energy projects too is expected to provide some support for the green energy projects. Presently they pay a high interest rate of up to 13.5 per cent.

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