Sanchita Das: Spinning a new energy source

STATE UPDATE

What do textile mills and wind farms have in common? Not much""except in Tamil Nadu. According to one estimate, 100 textile mills have either set up or were considering the possibility of setting up wind mills in the past one year.

Nor is the action concentrated in the state's textile epicentre at Coimbatore. Most of these wind farms are being set up by the newer spinning mills based at Dindigul and Tirupur.

To be sure, over the last decade the Tamil Nadu government (eight wind mills) and companies (Ashok Leyland, India Cements, Madras Cements, Bannari Amman Sugars, Rajapalayam Mills and Super Spinning Mills, to name a few), set up wind farms in the state with a total installed capacity of 1,000 Mw.

Last year, Rs 1,484 crore was invested in setting up 371 Mw of wind mill capacity. This year, another 450 Mw in capacity is expected to be added.

"About 70 per cent of the new installations have been put up by the textile industry," says K Kasthurirangaian, vice-chairman of the Indian Wind Power Association (IWPA).

So, why are textile companies putting up wind mills? A Ramkrishna, executive director at Precot Mills, replies that spinning mills incur heavy power costs.

"It is the biggest cost, next to raw materials, today. Ten years ago labour used to be the second biggest cost element, now it is power," he explains. He reckons that power accounts for 15 per cent of the cost of production of spinning mills.

In contrast, according to a study by the Zurich-based International Textile Manufacturers' Federation, spinning mills in Brazil incur power costs of $0.031 a kilowatt (kw), in China they pay $ 0.066 a kw, in Korea $ 0.047, in the US $ 0.045, and in Indonesia they pay as low as $ 0.025. In India, the power cost is as high as 0.084 cents a kw.

Thermal power here costs Rs 3.50-Rs 4.50 per kw. In Tamil Nadu, where power reforms are yet to take off in a big way, electricity costs Rs 4.10 a kw. To top it all, the state's spinning mills have to pay an added peak hour (six hours of the day) charge of 20 paise.

Operating at a plant load factor of 22-30 per cent (versus 70 per cent for thermal stations), wind mills are not a very efficient source of energy. Even so, they are a far cheaper source of power.

The cost of wind power production is Rs 3-Rs 3.50 a kw in the initial years, with the potential to go down to Re 1 a kw in 10 years' time. That's why power-intensive industries such as cement, chemicals, textiles and foundries have opted for wind power.

"For foundries, power accounts for 40 per cent of its costs," Kasthurirangaian notes. He has already invested in six wind mills and plans on putting up five more.

Triggering these investments by textile mills is the technology upgradation fund (TUF) scheme. This permits textile mills to invest 25 per cent of the core upgradation project cost in captive power generation projects.

With 5 per cent of the interest charged by the financial institutions on sanctioned projects reimbursed, the mills can comfortably make these investments. Using this money to set up wind farms is a more viable option than using diesel-run generators, says Kasthurirangaian.

Investors can also claim an 80 per cent accelerated depreciation in the first year of commissioning the wind mill. The profits from wind farming enjoy a 10-year tax holiday.

"Investment in wind mills can give you returns to the tune of 10-15 per cent," the IWPA vice-chairman says.

The entry of textile mills could well change the dynamics in the wind mill market. "We are currently in a situation where wind mill vendors are actually developing projects on a turnkey basis before selling them to prospective investors," an informed official notes.

Wind mill manufacturers are acquiring vast tracts of land in blocks of 500-1000 acres for this, government officials say. But this may well change as the demand for wind mills goes up.

"We are already seeing wind mill makers beginning to struggle to meet their orders as the demand has picked up and now there is a waiting period," Kasthurirangaian points out.

Tamil Nadu's flatter terrain has also made it possible for wind farms to graduate to the more cost-effective larger wind mills. The single wind mill capacity in the state has moved up from the minuscule size of 50 kw to 1,650 kw (1.65 Mw) today.

Larger wind mills also make operations viable even in a low wind regime. This shift has also tilted the balance among wind mill makers in the market.

NEPC, which had the first mover advantage, still rules as the brand with the largest (300 Mw) amount of installed capacity in the state. The company sells smaller mills. However, its former technology partner, NEG Micon, is making big inroads (210 Mw).

Along with the other brand it has acquired globally, Vestas, it would emerge as the market leader, with Vestas having installed another 232 mw in the state.

Suzlon at 170 mw is the other big player. The remaining wind mill makers such as Enercon, Windworld, Kenedech and Bas Lagerway have small installations in the state.