India’s Accelerated Depreciation Policy for Wind Energy

The document examines India's Accelerated Depreciation (AD) scheme, which served as a primary driver for wind capacity growth from 1994 until its withdrawal in 2012 and subsequent reinstatement in 2014. While the AD benefit successfully attracted private investment from corporations and high-net-worth individuals, it was criticized for incentivizing capacity additions over actual power generation and excluding large independent power producers and foreign investors. The report contrasts this with the Generation-Based Incentive (GBI) and the US experience with Production Tax Credits, concluding that future policies must link incentives to performance and improve grid infrastructure to ensure sustainable industry growth.

• The Accelerated Depreciation (AD) benefit was a primary driver for the rapid growth of India's wind power capacity, which increased from less than 1 GW in 1997 to 22 GW by September 2014.
• The AD scheme incentivized the installation of capacity regardless of actual energy output, leading to the use of inefficient turbines and the occupation of high-potential wind sites by low-performing installations.
• The policy design limited the diversity of investors, as the tax benefits could only be accessed by entities with existing book profits in India, effectively excluding foreign investors and independent power producers (IPPs) using Special Purpose Vehicles (SPVs).
• While the AD scheme fostered a domestic manufacturing hub, the lack of emphasis on operational efficiency meant Indian manufacturers failed to keep pace with global technological advancements in turbine size and functionality.
• The withdrawal of the AD and Generation-Based Incentive (GBI) schemes in 2012 resulted in a steep decline in annual wind capacity additions, falling from 3,168 MW in 2011–12 to 1,700 MW in 2012–13.
• Significant wind energy generation has been lost due to a mismatch between the growth of installed capacity and the development of evacuation and transmission infrastructure, with nearly 5,000 million kWh lost in 2010–11.
• The GBI scheme, introduced in 2009 and reinstated in 2013, aimed to broaden the investor base and increase efficiency by providing an incentive of INR 0.50 (0.8 US cents/kWh) per unit of electricity fed into the grid.
• A comparison with the United States shows that similar tax-driven booms (such as in California in the 1980s) often led to poor project planning and the installation of inefficient turbines when incentives were not linked to production.

APA

Sud, T., Sharma, R., Sharma, R., & Kitson, L. (2015). India’s Accelerated Depreciation Policy for Wind Energy. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/india-accelerated-depreciation-policy-wind-energy-case-study.pdf

Chicago

Sud, Tushar, Rajneesh Sharma, Radhika Sharma, and Lucy Kitson. India’s Accelerated Depreciation Policy for Wind Energy. International Institute for Sustainable Development, 2015. https://www.iisd.org/system/files/publications/india-accelerated-depreciation-policy-wind-energy-case-study.pdf.

Wikipedia

{{cite report |last1=Sud |first1=Tushar |last2=Sharma |first2=Rajneesh |last3=Sharma |first3=Radhika |last4=Kitson |first4=Lucy |title=India’s Accelerated Depreciation Policy for Wind Energy |publisher=International Institute for Sustainable Development |date=April 2015 |url=https://www.iisd.org/system/files/publications/india-accelerated-depreciation-policy-wind-energy-case-study.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sud2015indias, author = {Sud, Tushar and Sharma, Rajneesh and Sharma, Radhika and Kitson, Lucy}, title = {{India’s Accelerated Depreciation Policy for Wind Energy}}, institution = {International Institute for Sustainable Development}, year = {2015}, month = apr, url = {https://www.iisd.org/system/files/publications/india-accelerated-depreciation-policy-wind-energy-case-study.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }