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A Comprehensive Overview of the Offshore Wind Energy Lease Rules, 2023

In a significant stride towards sustainable energy development and bolstering national security, the Ministry of External Affairs, through a notification dated December 19, 2023, introduced the Offshore Wind Energy Lease Rules, 2023 ("Wind Energy Lease Rules"). This framework aims to regulate the leasing, operation, and maintenance of offshore areas, fostering the growth of offshore wind energy projects while ensuring environmental sustainability.


Strategic Foundations

Back in September 2023, the Ministry had laid the groundwork by publishing a Strategy Paper for the Establishment of Offshore Wind Energy Projects. This document outlined three distinct models to expedite the development of offshore wind farms in India. Notably, one of the models proposed central financial assistance in the form of viability gap funding, while the other two models did not involve such funding. Elements of Model B, with modifications, found their way into the final 2023 Rules.


Tendering and Site Selection

The momentum gained further traction with the Ministry issuing a tender for offshore wind energy projects at seven sites off the Tamil Nadu coast in the same month. This marked a concrete step towards materializing the ambitious goals set forth in the Strategy Paper.


Leasing Dynamics Rule 5 of the Wind Energy Lease Rules delineates the leasing process for offshore areas within the exclusive economic zone (EEZ), extending up to 200 nautical miles from the coastline. The Central Government holds the authority to lease out these areas for offshore wind energy and transmission projects, subject to specified conditions. The lease duration, ranging from 3 to 5 years depending on the project's nature, is extendable, provided requisite permissions are obtained.


Financial Commitments

Applicants are required to make a refundable security deposit within three months of receiving the letter of demand, along with an annual lease fee of INR 1 lakh per square kilometer. This financial commitment ensures a stake in the lease area and reflects the government's intent to maintain financial discipline within the sector.


Regulatory Compliance and Obligations

The Wind Energy Lease Rules mandate a rigorous compliance framework for lessees. Clearances from various ministries, including Defence, Home Affairs, and Environment, Forest and Climate Change, are prerequisites. Lessees enjoy exclusive rights within their designated areas, encompassing activities related to offshore wind energy and transmission. 


Dispute Resolution and Decommissioning To address disputes, a committee chaired by the Secretary of the Ministry of New and Renewable Energy has been established, promoting amicable resolutions before resorting to arbitration. Furthermore, the rules outline conditions for lease cancellation, focusing on violations, environmental damage, or failure to produce necessary project documents. Lessees are obligated to decommission installations and clear the seabed within two years of lease termination.


India's foray into offshore wind energy is marked by a comprehensive regulatory framework, balancing economic incentives with environmental consciousness and national security imperatives. The 2023 Wind Energy Lease Rules provide a roadmap for stakeholders, fostering a conducive environment for the sustainable development of offshore wind energy projects. 


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