What Happened
- The Indian government has reconsidered its plan to float a fresh 1 GW offshore wind energy tender, citing rising global costs and persistently weak developer interest in previous offshore wind auctions.
- Earlier offshore wind tenders in India attracted no bidders due to unviable tariff levels — offshore wind tariffs are projected at ₹7–9 per unit, against an expected Levelised Cost of Energy (LCOE) of ₹9.7–9.8 per unit.
- Tariff concerns were compounded by steel price surges, which significantly increase offshore infrastructure costs.
- A key procedural mismatch: India's tender process demands submissions within 100–120 days, while European offshore wind firms require 6–7 months for internal project approvals.
- The government had allocated ₹7,453 crore in Viability Gap Funding (VGF) for the initial 1 GW capacity — a subsidy meant to bridge the economics — but this has not been sufficient to attract bids.
- The pause signals a broader reassessment of India's offshore wind rollout strategy ahead of the 500 GW renewables-by-2030 target.
Static Topic Bridges
India's Renewable Energy Targets and Offshore Wind Policy
India has committed to 500 GW of non-fossil fuel electricity capacity by 2030 — a target enshrined in its updated Nationally Determined Contribution (NDC) under the Paris Agreement. Within this, approximately 100 GW is allocated to wind energy, of which 30 GW must come from offshore wind. The National Offshore Wind Energy Policy (2015) designated MNRE as the nodal ministry and the National Institute of Wind Energy (NIWE) as the offshore development agency. MNRE estimated India's offshore wind potential at approximately 70 GW — 36 GW off Gujarat and 35 GW off Tamil Nadu.
- India's total installed renewable capacity crossed 200 GW by 2024.
- Offshore Wind Energy Lease Rules (2023): seabed leases extended for 35 years for construction and operation.
- MNRE's auction trajectory: 37 GW of offshore auctions to be completed by 2030 (September 2023 strategy document).
- Onshore wind tariffs in India are approximately ₹2.64/unit — far more competitive than offshore.
- India has zero operational offshore wind capacity as of 2026.
Connection to this news: The pause in tendering directly threatens India's 30 GW offshore wind target by 2030, creating a significant gap in its overall 500 GW renewable energy roadmap.
Viability Gap Funding (VGF) as a Policy Tool
Viability Gap Funding is a government grant to infrastructure projects that are economically justified but financially unviable without support. In renewable energy, VGF is used to bridge the gap between the project's required tariff and the market-competitive tariff. The concept originates from the Scheme for Financial Support to PPP in Infrastructure (2006), administered by the Ministry of Finance.
- VGF for offshore wind: ₹7,453 crore allocated for the first 1 GW capacity.
- VGF is typically a one-time grant, reducing upfront capital costs and lowering required tariff.
- India has used VGF extensively for metro rail, airports, and now offshore renewables.
- The decision to provide VGF for offshore wind acknowledges that markets alone cannot drive deployment at scale given current cost structures.
Connection to this news: Despite ₹7,453 crore in VGF, the economics remain challenging. This raises questions about whether higher VGF, domestic manufacturing mandates, or a revised tariff discovery mechanism is needed.
Levelised Cost of Energy (LCOE) and Renewable Tariff Discovery
LCOE represents the average net present cost of electricity generation over a project's lifetime, expressed as ₹ per unit (kWh). It is the benchmark for comparing technologies. India uses reverse auction (competitive bidding) for renewable energy tariff discovery — the lowest bidder wins. Offshore wind's high LCOE (₹9.7–9.8/unit estimated) compared to onshore wind (₹2.64/unit) or solar (₹2–2.5/unit) reflects higher capital costs, installation complexity, and maintenance in marine environments.
- Global offshore wind costs rose sharply after 2022 due to supply chain disruptions, higher steel/copper prices, and rising interest rates.
- Europe's offshore wind projects (North Sea) benefit from lower financing costs, mature supply chains, and shallower waters.
- India's offshore sites (Gujarat, Tamil Nadu) involve deeper waters requiring foundation engineering challenges.
- Specialized vessels for offshore wind installation are scarce globally — India lacks a domestic fleet.
Connection to this news: The tariff fallout is fundamentally an LCOE problem — until offshore wind costs fall or VGF rises substantially, competitive tariff discovery in India will remain elusive.
Key Facts & Data
- India's offshore wind target: 30 GW by 2030 (part of 500 GW renewables target).
- Estimated offshore wind potential: 70 GW (36 GW Gujarat, 35 GW Tamil Nadu).
- VGF allocated for 1 GW pilot: ₹7,453 crore.
- Projected offshore wind tariff: ₹7–9 per unit; LCOE: ₹9.7–9.8 per unit.
- Onshore wind competitive tariff (India): approximately ₹2.64 per unit.
- National Offshore Wind Energy Policy issued: October 2015.
- Offshore Wind Energy Lease Rules issued: December 2023.
- India's installed renewable capacity as of 2024: over 200 GW (predominantly solar and onshore wind).
- European firms' approval timeline for offshore wind bids: 6–7 months (vs. India's 100–120 day window).