The rapidly growing Indian economy requires an investment of around USD 120 to 150 billion over the next five years in the energy sector. Strong private sector participation is required to complement public sector and to bring in the required capabilities and technologies. Policies have increasingly recognized the need to promote private investment. Private interest in captive coal mining, oil, and gas exploration and in power sector has shown significant progress.
Chart1: Power generation vis-a-vis GDP
India Energy Needs
 Energy shortage is expected to be one of India’s major growth challenges in the coming years. Electricity generation has lagged behind the demand for several years now. India has a current capacity of 132 GW, and faces energy shortage of 8 percent and a peak demand shortage of 11.6percent. The projected elasticity of electricity to GDP is 0.95. Thus, a GDP growth rate of 8% implies that electricity consumption is expected to grow at 7.6 per cent.
To sustain a growth rate of 8per cent, it is estimated that the power generation capacity in India would have to increase to 306GW in the next ten years. Further, by 2012, India requires an additional capacity of 107 GW (almost the entire capacity it took to create in the 60 years of independence), of which around 22,900MW is earmarked for the private sector. To enable the growth momentum in the economy at current rates, India’s energy sector requires new investments of the order of US$ 120- 150 billion over the next five years. A sizeable part of these investments are to come from the private sector.
|
2003-04 |
2006-07 |
2011-12 |
2016-17 |
2021-22 |
Installed Capacity Required |
131 |
153 |
220 |
306 |
425 |
Capacity created |
|
123 |
|
|
|
A large share of India’s power generation comes from thermal plants. Even in the medium term, Coal is expected to continue to be the dominant energy source. However, India would have to actively develop non-coal sources given that at a growth rate of 5 percent in coal production, India’s extractable coal reserves would get exhausted in 45 years.
As a result, diversifying the energy sources is the major task ahead, including international production linkages and alternative energy forms, including renewable. Renewable energy currently contributes a small fraction and it is expected to grow very rapidly especially in areas like wind and solar power.
Implementation of Power Projects:
Despite a proven demand supply gap and the priority accorded for the power sector, there have been enormous challenges in the implementation of large scale power projects with conventional fuels- land acquisition, environmental clearances, and power purchase guarantee agreements with loss-making state utilities, that have impaired financial closure of several projects.
As a result, there is a rising deficit in the power sector, which calls for a mix of long term and short term initiatives. Small, distributed and short gestation projects are the need of the hour in the energy sector for the next few years. Many of these are likely to be alternative energy projects. In the short-term, renewable energy would play an important role of supplementing the total energy requirement. Over the longer term, its importance would be more strategic so that the country can build a certain level of self-reliance in renewable technologies of the future.
Renewable Energy Sources (RES) are an important element of India’s power policy aimed to meet the power needs of remote areas in an environmentally friendly way. India’s RES potential is estimated to be close to 85000 MW, of which less than 12500 is presently exploited.
CHART2: Renewable Energy Statistics
|
Estimated Potential |
Achievement |
Wind |
45195 |
8757 |
Biomass |
16881 |
606 |
Bagasse co generation |
5000 |
800 |
Small hydro |
15000 |
2180 |
Solar photo voltaic |
- |
2.12 |
Waste recovery |
2700 |
55 |
Total |
84776 |
12400 |
Source: MNRE, March 2008
|
CHART3: Different Sources of Energy
Outlook: Wind Power Sector
- India is the fourth largest wind power producer in the world with a installed capacity of 8757 MW.
- Gross Wind Energy Potential: 45,000 MW.
- States with high potential:-Tamil Nadu, Gujarat, Andhra Pradesh, Karnataka, Kerala, Maharashtra
- State-of-the-art wind power technologies are indigenously available in India.
Cost Economics
- Capital cost of wind power projects ranges from USD 1-1.2 million /MW & the cost of generation is estimated to be cent 2.25-2.75/KWH.
- These costs compare favorably with new conventional projects.
- There is an added advantage of shorter gestation period.
- Concessions like tax write offs, accelerated depreciation and soft loans are provided by central and some state governments.
Key Opportunities
- Captive/Merchant Wind Farms
The favorable policy environment in some states enables the wind power generation companies to directly sell their power to Industrial consumers instead of selling it to state utility at lower prices. The wind farms of 20-50MW are increasingly becoming viable in states like Tamil Nadu, Maharashtra, Karnataka and Gujarat, having several industrial zones.
- Outsourcing/ JV production of Wind Turbine
All the major machinery manufacturers have huge order backlogs over the next 4 years with bulk orders from the big wind energy generating Companies. This has tended to push up the equipment costs for others, as well as create entry barriers for new players. At the same time, a large share of wind energy manufactured is to be outsourced to China and India.
Several foreign players have marked their presence in this industry and there are opportunities for manufacturers of wind turbine for expansion, and for new entries so as to meet the demand and also to support the global Wind Energy Scenario.
- Financing of Wind Power Projects
The Viability of wind energy projects requires a Plant load factor (PLF) of 21% to compensate for any variances in wind availability. Finance costs are critical for the profitability of wind farms.
One of the major opportunity in India is to secure International finance for Imported wind energy equipments.
CHART4: Market Share of Wind Turbine Manufacturers
Acknowledgements:
Merrill Lynch,
MNRE,
KPMG,
Ministry of Power
Disclaimer: The information contained in this report has been obtained from public domain considered reliable. However, Ace Global has not independently verified the accuracy or completeness of the same. Neither Ace Global nor any of its affiliates, its directors or its employee accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein
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