Economics of Alternative Energy for India

Economics of Alternative Energy for India

by

Author Girish Ramachandra

Contact Details Phone: +91 97316 81111

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mailto:[email protected]


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Table of Contents

1. Introduction .......................................................................................................................................... 3

2. Independent Study – Process ............................................................................................................... 4

3. Possible Alternative Energy Solutions and Their Economics ................................................................ 5

3.1 Wind .............................................................................................................................................. 6

3.2 Solar ............................................................................................................................................ 11

3.3 Thermal ....................................................................................................................................... 14

3.4 Bio Fuels & Bio Materials ............................................................................................................ 17

3.5 Transportation Solutions ............................................................................................................ 21

3.6 Smart Grid ................................................................................................................................... 25

3.7 Mobile Technologies ................................................................................................................... 26

4. Supply Vs Demand Analysis in India.................................................................................................... 28

4.1 Current status of energy market in India .................................................................................... 28

4.2 Supply Vs. Demand analysis ........................................................................................................ 28

4.3 Customer segments, spend analysis ........................................................................................... 29

4.4 Market analysis ........................................................................................................................... 30

5. Climate Change and Government Policies in India ............................................................................. 32

5.1 Overview of climate change........................................................................................................ 32

5.2 Introduction to Kyoto Protocol ................................................................................................... 33

5.3 Overview of India’s energy policies ............................................................................................ 34

5.4 Emission Trading (Cap-and-trade) .............................................................................................. 38

6. Evaluation of Investment Opportunities............................................................................................. 39

6.1 Rationale for investment opportunity ........................................................................................ 39

6.2 Risks ............................................................................................................................................ 41

6.3 Current investment scenario in India.......................................................................................... 42

6.4 Observations and Recommendation .......................................................................................... 42

7. Appendices .......................................................................................................................................... 44

8. Bibliography ........................................................................................................................................ 52


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1. Introduction

India, with its remarkable growth in the past 10 years, has also contributed to the growing

worldwide demand for energy. This has led to an increasing intensity of debate on both climate

change and supply of fossil fuels. Be it the evident threats of climate change or the threat of end of

fossil fuels, there has been a pressing need for alternative energy in recent years. With a population

of over 1.1 billion, India will have significant domestic energy needs to sustain its growth. However,

with large sections of population being classified as middle class, lower middle class or poor,

economics of new energy sources will be interesting.

This study examines the possible alternative energy solutions for India and investment opportunities

thereof, which will not only act to reduce the current rate of climate change but also create

economic profits which are not dependent on government subsidies. It must make economic sense

for the solution to not only to compete with fossil fuels, but also position itself as a viable alternative

in terms of scalability, distribution and ease of use. A possible emergence of such alternative energy

sources could make a significant impact on both domestic and world economy.

It is also worth noting that India has been an active participant in the Kyoto Protocol and the nodal

regulatory body for carbon credits in India, the Ministry of Environment and Forest, has been rated

by UNFCC (United Nations Framework Convention for Climate Change) as the “most active DNA

(Designated National Authority)”. Out of total 812 projects registered with UNFCCC, 350 are from

India and there are more than 400 projects waiting for the ‘host country’ approval.

In this context, this study evaluates if there is a compelling investment opportunity in India in this

sector. Few questions that are answered are:

What are the possible alternate energy sources for India?

How can they achieve profitability with no government subsidies? What is the cost of energy?

Is there sufficient demand?

Whether current ongoing projects in India offer an economically viable alternative to fossil

fuels? Do they offer compelling climate change solutions? What are the investment

opportunities?

Whether Kyoto Protocol and business of Carbon Credits will act as a boon to India’s energy

needs?

Is there leadership in terms of policies, entrepreneurs and venture capital?

Corporate and community values


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2. Independent Study – Process

This study starts with identifying handful of technologies that are potential alternative energy

solutions for India and analyzes the current economic scenarios for these specific solutions. These

specific solutions are selected based on the perceived potential for innovation and investment

opportunities thereof and current growth in these respective areas. Traditional energy sources such

as thermal (coal), hydel and nuclear are not considered for this study. Wind energy is almost

becoming mainstream energy source in India, but has not reached sufficient mass to be considered

as conventional energy source and there is still scope for innovation.

For each of the solutions selected, the analysis is done with relevant topics from a general

framework – basic description of the solution, current growth status, cost of developing the solution

compared to traditional sources, policy of Government of India towards this solution, leadership

commitment and any significant events that have happened in the field in recent past.

Relevant market analysis then provides the pragmatic views about needs for such solutions, besides

the ability to implement such solutions profitably.

It is relevant to know about Kyoto protocol and possible new carbon economy in this context, as

trading of carbon credits is one of the revenue streams. There are few players in India who are

gearing up for emission trading1.

Finally, investment opportunities in these fields are evaluated based on the general framework

adapted. These solutions are considered for early stage, above market return investments

(Traditional Venture Capital investments). Attractiveness of these solutions for such investment

purposes is not only based on the beauty of innovations, but also based on other factors such as

political environment, for example.

Most of the references throughout this document are indicated through footnotes. Major

references and text books are mentioned in the bibliography at the end of the paper. Some of the

sections, where further details may be necessary, make use of appendices listed in the last parts of

this paper. Some of the reference materials that are reproduced here are through appropriate

consent and not for commercial use.

Unless stated otherwise, all the numbers used in this document are in US Dollars for better

readability and understanding.

1 Reference: http://www.livemint.com/2007/06/26155547/What-next-Indias-first-carbo.html

http://www.livemint.com/2007/06/26155547/What-next-Indias-first-carbo.html


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3. Possible Alternative Energy Solutions and Their Economics

Alternative energy, in this paper is a term used for an energy source that is an alternative to using

fossil fuels or traditional sources of energy such as thermal, hydel and nuclear. It indicates energies

that are non-traditional and have low environmental impact. Renewable energy is also considered in

this paper as an alternative to conventional energy. All the terms – renewable energy, clean energy,

and clean tech are interchangeably used for alternative energy. This section explores the

developments in the fields of Wind, Solar, Thermal, Bio Fuels & Bio Materials, Transportation

Solutions, Smart Grid and Mobile Technologies2 and their suitability to Indian economics.

Many research organizations focused in this domain have been tracking the growth of alternative

energy markets since 2000. In the last year there has been a 40 percent increase in revenue growth

globally, for solar photovoltaics, wind, biofuels, and fuel cells, up from $55 billion in 2006 to $77.3

billion in 20073. It is also interesting to note that for the first time, three of these are generating

revenue in excess of $20 billion apiece, with wind now exceeding $30 billion. New global

investments in energy technologies—including venture capital, project finance, public markets, and

research and development—have expanded by 60 percent from $92.6 billion in 2006 to $148.4

billion in 2007, according to research firm New Energy Finance.

In India, there is abundant proof of clean tech’s move from marginalized to mainstream. A growing

number of initiatives announced by the government, plan to generate electricity from renewable

materials. Few corporations have started to jump on, if not lead, the race to transition to alternative

energy sources. The chart below shows the comparative energy uses in Indian market today. The

annual turnover of the alternative energy industry in India is approximately USD 700 million. The

investment in this sector is estimated to be about USD 3 billion4 in the last 5 years.

2 Major reference materials: “The Cleantech Revolution” by Pernick & Wilder, Data available through Ministry of

Power, Govt. of India, Industry Report on India’s Power Sector by Business Monitor Online accessed through HAAS

Library

3 http://www.cleanedge.com/

4 Ministry of new and renewable energy, India - http://mnes.nic.in/

http://www.cleanedge.com/

http://mnes.nic.in/


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3.1 Wind

Wind power is the conversion of wind energy into useful form, such as electricity, using wind turbines.

3.1.1 Current state of Wind Power in India

India boasts a significant progress in Wind energy (4th largest wind energy producer in the world

with and installed capacity of 7844.5MW)5.

The development of wind power in India began in the 1990s, and has significantly increased in

the last few years. Although a relative newcomer to the wind industry compared with Denmark

or the US, a combination of domestic policy support for wind power and the rise of Suzlon (a

leading global wind turbine manufacturer) have led India to become the country with the fourth

largest installed wind power capacity in the world, and the wind energy leader in the among the

emerging countries.

The installed capacity of wind power in India as of September 2007 was 7,844.5 MW, mainly

spread across few states - Tamil Nadu (3457.5 MW), Maharashtra (1984.9 MW), Karnataka

(849.4 MW), Rajasthan (469.9 MW), Gujarat (793.2 MW), Andhra Pradesh (121.8 MW), Madhya

Pradesh (57.8 MW), Kerala (50 MW), West Bengal (40 MW), other states (20 MW).

3.1.2 Economics

Generating electricity from the wind makes economic as well as environmental sense; the wind

is a free, clean and renewable fuel which will never run out. The wind energy industry -

designing and making turbines, erecting and running them - is growing fast and is set to expand

as the world look for cleaner and more sustainable ways to generate electricity. Turbines are

becoming cheaper and more powerful, with larger blade lengths which can utilize more wind

and therefore produce more electricity, bringing down the cost of renewable generation.

Making and selling electricity from the wind is no different from any other business. To be

economically viable the cost of making the electricity has to be less than its selling price.

A totally free market - where all methods of making electricity compete on the same level - does

not exist in India. Price of electricity generated by wind depends not only on the cost of

generating it, but also on the many different factors that affect the market, such as energy

subsidies and taxes.

The cost of generating electricity comprises of

5 Indian Wind Energy Association


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capital costs (the cost of building the power plant and connecting it to the grid)

running costs (such as buying fuel and operation and maintenance) and

the cost of financing (how the capital cost is repaid)

With wind energy, like many other renewables, the fuel is free. Therefore once the project has

been paid for, the only costs are operation and maintenance and fixed costs, such as land rental.

The capital cost is high, between 75% and 90% of the total for onshore projects.

The capital cost breakdown of a typical 5 MW onshore project is shown below.

There are two main influences which affect the cost of electricity generated from the wind, and

therefore its final price:

Technical factors, such as wind speed and the nature of the turbines

The financial perspective of those that commission the projects, e.g. what rate of return

is required on the capital, and the length of time over which the capital is repaid.

3.1.2.1 Technical factors

The more electricity the turbines produce the lower the cost of the electricity. This depends on:

The windiness of the site

The power available from the wind is a function of the cube of the wind speed.

Therefore if the wind blows at twice the speed, its energy content will increase eight

fold. In practice, turbines at a site where the wind speed averages eight meters per

second will produce around 80% more electricity than those where the average wind


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speed is six meters per second. Figure below shows how generation cost varies with

wind speed. 6

Wind turbine availability

This is the capability to operate when the wind is available. This is typically 98% or above

for modern European machines.

The way the turbines are arranged

Turbines in wind farms must be arranged so that they do not shadow each other.

3.1.2.2 Financial perspective

The economics of grid connected wind power depend very much upon the perspective taken.

How quickly investors want their loans repaid and what rate of returns they require can affect

the feasibility of a wind project: a short repayment period and a high rate of return pushes up

the price of electricity generated, as shown below. The cost of wind energy varies with wind

speed and rate of return on capital. The graph below shows an indication of how wind speed

and interest rates influence the cost7.

Public authorities and energy planners tend to assess different energy sources on the basis of

the levelized cost. These calculations do not depend upon variables such as inflation or taxation

6 Various wind associations

7Various sources - American Wind Association, India Wind Energy Association and British Wind Energy Association

(http://www.bwea.com )

Gen

erat

ion

co

st c

/kW

h

Annual mean wind speed m/s

http://www.bwea.com/


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system. However, the perspective of private investors or utilities is different, and takes into

account the variables introduced by government policy and shifts in financial and foreign

exchange markets. These investors make decisions on project cash-flow and payback time.

Public authorities and energy planners require the capital to be paid off over the technical

lifetime of the wind turbine, i.e. 20 years, whereas the private investor would have to recover

the cost of the turbines during the length of the bank loan. The interest rates used by public

authorities and energy planners would typically be lower than those used by private investors.

3.1.3 Why is the cost coming down?

Although the cost varies between different countries, the trend everywhere is the same - wind

energy is getting cheaper. The cost is coming down for various reasons. The turbines themselves

are getting cheaper as technology improves and the components can be made more

economically. The productivity of these newer designs is also better, so more electricity is

produced from more cost-effective turbines. There is also a trend towards larger machines. This

reduces infrastructure costs, as fewer turbines are needed for the same output.

The cost of financing is also falling as lenders gain confidence in the technology. Wind power

should become even more competitive as the cost of using conventional energy technologies

rises.

The figure below shows how the cost of wind energy has fallen rapidly since 1980’s. The cost of

power from wind farms has dropped from 38 cents to 4 to 7 cents per kWh, and it continues to

decline. The cost of wind energy is now on a par with the cost of coal and gas, and it is cheaper

than nuclear. As a result, the industry is in a period of extraordinary growth.

Source: American Wind Energy Association


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3.1.4 How do prices compare with other technologies?

It is difficult to compare the cost of making electricity from different energy sources because

many of the benefits of renewable energy (e.g. no pollution and never-ending supply) do not

have a universally accepted price. However, it is important to try and compare 'like with like'

when contrasting wind generation costs with those of the fossil fuel sources and so prices bid

into the unconventional energy sources, are a good guide. Recently, in UK for example, around

1000 MW of wind was bid at 2.8 pence per kilowatt hour (p/kWh) or less - 3.2 p/kWh at 2004

prices while the minimum bid was around 2.2 p/kWh at 2004 prices.

Nevertheless, even if some of these crucial benefits are ignored, the figure below shows that

onshore wind energy is competitive with new coal fired plant, and cheaper than new nuclear

power.

The prices for fossil-fuelled generation used in the figure below have been drawn from recent

government sponsored research except in the case of gas. In this instance, the recent price

movements have been taking into account and, as a result, generation costs from new plant are

likely to be close to 6c/kWh.

3.1.5 What about the cost of pollution?

To determine the true cost of generating electricity, the cost of pollution and other 'external

costs' should be included in the calculations. External costs are the costs to human health and

the environment which are not reflected in the price of the electricity.

Society bears the cost of pollution in terms of poorer health (leading to higher health service

costs funded by the taxpayer) and a degraded environment (which increases the cost of food

and farm products). There is not yet a universally accepted method on how to determine the

price of pollution; however, the European Union funded ExternE8 Project has quantified external

costs of transport and electricity.

3.1.6 A bright future for wind energy

The economics of wind energy are already strong, despite the relative youth of the industry. The

downward trend in costs is predicted to continue. The strongest influence will be exerted by the

downward trend in wind turbine prices. As the world market in wind turbines continues to

boom, wind turbine prices will continue to fall.

The Indian wind energy market is expanding rapidly, creating opportunities for employment

through the export of wind energy goods and services. The global wind industry has an

estimated annual turnover of $11 billion, 84% of which is based in Europe. In the UK, wind

8 http://ec.europa.eu/research/energy/pdf/externe_en.pdf

http://ec.europa.eu/research/energy/pdf/externe_en.pdf


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energy is the fastest growing energy sector creating jobs with every megawatt installed. To date,

over 4,000 jobs are sustained by companies working in the wind sector, and this is projected to

increase as the industry grows.

Suzlon, an Indian-owned company, emerged on the global scene in the past decade, and by

2006 had captured almost 8 percent of market share in global wind turbine sales. Suzlon is

currently the leading manufacturer of wind turbines for the Indian market, holding some 50

percent of market share in India. Suzlon’s success has made India the developing country leader

in advanced wind turbine technology.

3.2 Solar

India provides an ideal combination for solar power through its dense population and high solar

insulation. Much of the country does not have an electric grid, so one of the first applications of

solar power has been for water pumping, to begin replacing India's four to five million diesel

powered water pumps, each consuming about 3.5 kilowatts, cooking, and off-grid lighting. Some

large projects have been proposed, and a 35,000 km² area of the Thar Desert has been set aside

for solar power projects, sufficient to generate 700,000 to 2,100,000 Megawatts.

However, currently, the amount of solar energy produced in India is merely 0.5 % compared to

other energy resources. The Grid-interactive solar power as on Jun, 2007 was merely 2.12 MW.

Government-funded solar energy in India only accounted for approximately 6.4 megawatt-years

of power as of 20059. However, recent mega deals such as IDFC investing $100MM in Moser

Baer’s Solar PV manufacturing plant has rekindled the interest in solar energy in India.

Most of the solar energy is also currently used utility power supply and the uses mostly range

from water heating, cooking and lighting10.

To see how solar applies as electricity and stand-alone systems, let us see what the types of

different Solar Electric Systems are:

Energy Source Connected to the

electricity grid?

Energy Storage Device

in the system?

Examples

Grid-tied* solar

system

Solar Cells** Yes No Home system that

draws on the

electricity grid at night

and exports excess

9 Ministry of power, India

10 For some of the sample products sold in India market, refer Appendix


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power in the day

Stand-alone Grid-

tied* solar system

Solar Cells** Yes Yes (Batteries) Home or business

system

uninterruptible power

(e.g. for computers,

servers). Still operates

when the grid is down

Stand alone solar

system without

energy storage

Solar Cells** No No Water pumping, water

heating.

Stand alone solar

system with energy

storage

Solar Cells** No Yes (Batteries) Remote homes, lighting, TV, radio, telemetry, cooking

etc.

Stand alone off-

grid Hybrid solar

system

Solar Cells** in

combination with another

energy source (e.g. diesel,

wind)

Most often not No Remote large scale communications,

industrial uses

* also known as grid connected

** also known as photovoltaic cells

3.2.1 Cost of Solar

Many economists, including Severin Borenstein of HAAS, Berkeley have predicted that it will

take few more years before solar PV cells will make real economic profitability.

Major cost of utility power supply products are solar PV cells (solar modules) itself. Total price

are also indicative of other operational costs such as manufacturing and distribution.

Overall, key drivers of cost for a solar system are:

PV cells / Solar modules

Charge controller


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Inverters

Batteries

Installation

The solar energy industry typically uses price per Watt Peak (Wp) as its primary unit of

measurement. The prices for high power band (>70 Watts) solar modules has dropped from

around $27/Wp in 1982 to around $4/Wp today. Prices higher and lower than this are usually

dependent upon the size of the order11.

As a rule of thumb, the solar module represents 40-50% of the total installed cost of a "solar

system". This percentage will vary according to the nature of the application. A complete solar

system includes all the other components required to create a functioning system, whether it be

to feed energy in to the grid or to be used in stand-alone off-grid applications. In 2003, a

residential solar system costs about $8,000-$12,000 per kWp installed.

A complete "Solar System" includes all the other components required to create a functioning

system, whether it be to feed energy in to the grid or to be used in (stand alone) off grid

applications.

Japan leads the world in PV

prices as a result of being the

largest country market and

hosting the largest PV cell

manufacturing companies.

The graph shows the

progression of price

reductions over the last ten

years for the cost of 4 kWp

residential solar system in

Japan in money of the day.

In order to translate, kWp (a

standardized measure

excluding solar conditions) to kWh (a measure which takes account of solar conditions), an

adjustment for the actual location of the solar panel is necessary in order to take into account

how much sunlight would be expected in that location over the period of a year.

Some simple examples are that a 1kWp System will produce approximately:

1600-2000 kWh in India and Australia

11

http://www.solarbuzz.com

http://www.solarbuzz.com/


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1800 kWh/year in Southern California

850 kWh/year in Northern Germany

Solar Electricity Prices are today, around 30 cents/kWh, which is 2-5 times average Residential

electricity tariffs.

This precise calculation will depend on the location of the solar installation and the local

electricity tariff rates. Then in order to determine what proportion of total energy solar will

provide, one has to take in to account the size of the solar energy system and the energy

demand of the customer.

Typical kWh usage by homes in three selected US average homes is shown below. For example,

in a Sacramento, California home, it would cost around $16-$20,000 (depending on 8-10,000

above that you may change) to satisfy around 25% of that homes energy needs.

Detroit, Michigan (Edison) 7000kWh/year 19 kWh/day

Sacramento, California 8485 kWh/year 23 kWh/day

Gainesville, Alabama 11,127 kWh/year 30 kWh/day

Costs of solar, measured cents per kilo watt hour varies from 21.32 cents to 37.67 cents (with no

subsidies)12, which is still far higher than the conventional electricity.

3.3 Thermal

There is no commercial geothermal power plant yet in India; however, there are some progress

made in research and development. Overall, geothermal power contributes less than 1% of

world’s energy. The progress is being made in two areas: ocean thermal energy conversion and

geothermal energy.

3.3.1 Ocean thermal energy conversion (OTEC)

OTEC is a method for generating electricity which uses the temperature difference that exists

between deep and shallow waters to run a heat engine. As with any heat engine, the greatest

efficiency and power is produced with the largest temperature difference. This temperature

difference generally increases with decreasing latitude, i.e. near the equator, in the tropics.

India piloted a 1 MW floating OTEC plant near Tamil Nadu (Southern part of India). The

government continues to sponsor various researches in developing floating OTEC facilities.

12

Reference: http://www.solarbuzz.com/solarprices.htm

http://www.solarbuzz.com/solarprices.htm


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OTEC system can also have other benefits like enhanced Mari culture, desalination or even air

conditioning, which might reduce the cost of electricity generated. As OTEC is capital intensive,

Government agencies may provide substantial initiative in developing the technology.

For small plants of 1 MW range the unit power generation cost is considerable compared to

other conventional energy sources as shown in the table below:

The co-production of fresh water along with power is to be considered for the estimation of unit

cost for OTEC plants in islands. It is apparent from the study that OTEC is economical and

production cost is comparative for higher range of plants. The unit cost of electricity is

estimated for Indian conditions for a range of 1 MW to 100 MW as shown in Table 3 below13:

It could be noticed that OTEC

plants of 100 MW range are

competitive with other

conventional energy sources

such as coal or hydel power

plants. In comparison with

other renewable energy sources such as PV and windmills OTEC stands lower for unit

investment cost. There are steep cost improvements for these energy sources. The learning rate

(the pattern of diminishing costs with increasing experience) is nearly 20% for PV and windmills.

The same result can be expected for OTEC in future with increase in experience and

development of technology.

3.3.2 Geothermal Energy

Geothermal energy is the natural heat of the earth. Earth's interior heat originated from its fiery

consolidation of dust and gas over 4 billion years ago. It is continually regenerated by the decay

of radioactive elements that occur in all rocks. Several geothermal provinces in India

characterized by high heat flow (78-468 mW/m2) and thermal gradients (47-100 oC/km)

discharge about 400 thermal springs. After the oil crisis in 1970s, the Geological Survey of India

conducted reconnoiter survey on them in collaboration with UN organization and reported the

13

Reference: Calculation procedure from Dr. Luis A. Vega

Plant capacity (MWe) Plant Life

(Years) Capacity

factor Annual

output (GWh) Cost of energy

(US$/kWh)

Wave 1.5 40 68% 9 0.062-0.072

Hydro 1.2 40 48% 5 0.113

Diesel 0.9 20 64% 5 0.126

OTEC 1.256 30 80% 8.8 0.149

Power Output (Gross MW)

Total Cost Million US$

Cost of electricity US$/kWh

1 6.42 0.189

25 69.42 0.082

50 134.67 0.079

100 242.10 0.068


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results in several of their records and special publications14. Subsequently, detailed geological,

geophysical and tectonic studies on several thermal provinces geochemical characteristics of

the thermal discharges and reservoir temperature estimations have been carried out by several

workers. These investigations have identified several sites which are suitable for power

generations well as for direct use. These provinces are capable of generating 10,600 MW of

power. Though geothermal power production in Asian countries like Indonesia, Philippines has

gone up by 1800 MW in 1998, India with its 10,600 MW geothermal power potential is yet to

appear on the geothermal power map of the world! Availability of large recoverable coal

reserves and a powerful coal lobby is preventing healthier growth of non-conventional energy

sector, including geothermal. However, with the growing environmental problems associated

with thermal power plants, future for geothermal power in India appears to be bright. Several

Individual Power Producers (IPPs) engaged in non-conventional energy projects are looking for

searching for foreign financial institutions to develop geothermal based energy sources.

Potential Geothermal provinces of India

Indian organizations working in geothermal energy:

Central Electricity Authority

Geological Survey of India

14

Reference: Research by IIT, Mumbai - http://www.geos.iitb.ac.in/geothermalindia/pubs/IBC/IBCTALKweb.htm

Province Surface To C Reservoir T

o C Heat Flow Thermal

Gradient

---------------------------------------------------------------------------Himalaya >90 260 468 100

Cambay 40-90 150-175 80-93 70

West coast 46-72 102-137 75-129 47-59

SONATA 60 - 95 105-217 120-290 60-90

Godavari 50-60 175-215 93-104 60

http://www.geos.iitb.ac.in/geothermalindia/pubs/IBC/IBCTALKweb.htm


www.whitemonk.in 17

Indian Institute of Technology, Mumbai

Regional Research Laboratory, Jammu

National Geophysical Research Institute, Hyderabad

Oil and Natural Gas Corporation, Dehradun

Ongoing Projects in India:

Magneto-telluric investigations in Tattapani geothermal area in Madhya Pradesh

Magneto-telluric investigations in Puga geothermal area in Ladakh region, Jammu &

Kashmir

Costs of a geothermal plant are heavily weighted toward early expenses, rather than fuel to

keep them running. Well drilling and pipeline construction occur first, followed by resource

analysis of the drilling information. Next is design of the actual plant. Power plant construction is

usually completed concurrent with final field development. The initial cost for the field and

power plant is around $2500 per installed kW in the U.S., probably $3000 to $5000/kWe for a

small (<1Mwe) power plant. Operating and maintenance costs range from $0.01 to $0.03 per

kWh. Most geothermal power plants can run at greater than 90% availability (i.e., producing

more than 90% of the time), but running at 97% or 98% can increase maintenance costs. Higher-

priced electricity justifies running the plant 98% of the time because the resulting higher

maintenance costs are recovered.

Recent estimates place the generation costs from new plants at 4.5 to 7.3 cents per kilowatt-

hour for geothermal, which over the lifetime of the plant can be competitive with a variety of

technologies, including natural gas. Most geothermal developers contend that the cost for new

projects is more accurately reflected in a range of 5.5 and 7.5 cents per kilowatt hour, with cost

estimates under 5.5 cents per kilowatt hour relying on lower than average upfront financing

agreements, or considering only new projects that are built as extensions onto existing projects.

Extension projects typically forgo many of the construction, risk, and transmission costs

associated with brand new plants. Also, while upfront costs for geothermal are high, lifetime

costs are low because geothermal’s fuel source is stable, free, indigenous, and renewable.

3.4 Bio Fuels & Bio Materials

India imports nearly 70% of its annual crude petroleum requirement, which is approximately

110 million tons. The prices are in the range of US$ 110-135 per barrel, and the expenditure on

crude purchase is in the range of over $60 billion per year, impacting in a big way, the country's

foreign exchange reserves.


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3.4.1 Biodiesel

Biodiesel is generated both from edible and non-edible oil resources. However, a significant progress has happened in the area of Jatropha cultivation, which is heavily used in India to produce biodiesel. Jatropha15 is a genus of approximately 175 succulent plants, shrubs and trees (some are deciduous, like Jatropha curcas L.), from the family Euphorbiaceae. The name is derived from (Greek iatros = physician and trophe = nutrition), hence the common name physic nut. Jatropha is native to Central America and has become naturalized in many tropical and subtropical areas, including India, Africa, and North America. The hardy Jatropha is resistant to drought and pests, and produces seeds containing up to 40% oil. When the seeds are crushed and processed, the resulting oil can be used in a standard diesel engine, while the residue can also be processed into biomass to power electricity plants.

There are many significant developments that are happening in this area, few of the notable ones are:

Price Policy for Biodiesel: Public sector oil firms have announced a price of Indian Rupees 25 (US$ 0.56) per liter for procuring bio-diesel extracted from non-edible oilseeds for mixing in diesel. The program to sell diesel mixed with non-edible oil extracted from Jatropha Curcas and Pongamia Pinnata, which could cut India's import dependence, but would take 4-5 years to launch on commercial scale. It will take time for adequate quantities of Jatropha Curcas and Pongamia Pinnata to be planted and oil extracted for mixing in diesel.

Bio-Diesel Credit Bank: The Petroleum Conservation Research Association (PCRA), launched a biodiesel Credit Bank. It will co-ordinate activities relating to Carbon Credits. Several Field trials have been performed.

Indian Oil Corporation (IOC) placed an order of 450 kiloliters of bio-diesel in 2004, for field trials with the Indian Railways (largest railway network in the world) and State Roadways. IOC will be able to supplement 5% of diesel with bio-diesel in three years. The first phase of the project, by Daimler-Chrysler India, in 2003-04 saw production of the indigenous biodiesel and completion of road trials on two C-Class Mercedes-Benz cars. The cars, powered by pure Biodiesel, traversed the rugged terrain of the country in April-May, 2004, and clocked over 5,900 kilo meters under very hot and humid conditions.

The Council for Scientific and Industrial Research (CSIR) is now in talks with country's biggest truck and bus maker Tata Motors and Indian Oil to take its biofuel project to the next stage, for testing its vehicles on bio-diesel developed from jatropha plant.

15

Online sources, mainly Wikipedia

http://www.pcra.org/


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The Indian government assists states to promote Jatropha cultivation for increasing bio-diesel production in the country under the National Rural Employment Guarantee Scheme. Following this, there are more than 20 companies in the last two years producing oil from Jatropha. However, India is yet to see the scale that is required.

3.4.2 Bio-ethanol

Ethanol fuel is ethanol (ethyl alcohol), the same type of alcohol found in alcoholic beverages. It can be used as a fuel, mainly as a biofuel alternative to gasoline, and is widely used in cars in Brazil. Because it is easy to manufacture and process, and can be made from very common crops, such as sugar cane and maize (corn), it is an increasingly common alternative to gasoline in some parts of the world.

Anhydrous ethanol (ethanol with less than 1% water) can be blended with gasoline in varying quantities up to pure ethanol (E100), and most spark-ignited gasoline style engines will operate well with mixtures of 10% ethanol (E10). Most cars on the road today in the U.S. can run on blends of up to 10% ethanol, and the use of 10% ethanol gasoline is mandated in some cities where harmful levels of auto emissions are possible.

Ethanol can be mass-produced by fermentation of sugar or by hydration of ethylene (ethene CH2=CH2) from petroleum and other sources. Current interest in ethanol mainly lies in bio-ethanol, produced from the starch or sugar in a wide variety of crops, but there has been considerable debate about how useful bio-ethanol will be in replacing fossil fuels in vehicles. Concerns relate to the large amount of arable land required for crops, as well as the energy and

Some of India’s ideal

growing regions for

Jatropha; however,

Jatropha can mostly

withstand any conditions

and could be grown in most

of the regions.


www.whitemonk.in 20

pollution balance of the whole cycle of ethanol production. Recent developments with cellulosic ethanol production and commercialization may allay some of these concerns.

According to the International Energy Agency, cellulosic ethanol could allow ethanol fuels to play a much bigger role in the future than previously thought. Cellulosic ethanol offers promise as resistant cellulose fibers, a major component in plant cells walls, can be used to generate ethanol. Dedicated energy crops, such as switch grass, are also promising cellulose sources that can be produced in many regions of the United States

The petroleum industry in India now looks very committed to the use of ethanol as fuel, as it is expected to benefit sugarcane farmers as well as the oil industry in the long run. Ethanol (Fuel Ethanol) can also be produced from wheat, corn, beet, sweet sorghum etc. Ethanol is considered to be one of the best tools to fight vehicular pollution, contains 35% oxygen that helps complete combustion of fuel and thus reduces harmful tailpipe emissions. It also reduces particulate emissions that pose a health hazard.

The Center’s ‘Gasohol Program’ of blending 5% ethanol in petrol has given an assured scope for ethanol industry in the country. The Center’s “Kisan-friendly” (agriculture friendly) initiative has definitely been a boost to the venture. There is a continuous shortfall of 5% Ethanol blend gas16.

In one of the recent developments, according to the Minister of Petroleum and Natural Gas, India will increase the ethanol blend in gasoline from 5% to 10% starting in October. This announcement came during a meeting with Miguel Jorge, Brazilian Minister for Development, Industry and Foreign Trade, to explore further cooperation between the two countries specifically in the oil and gas sector.

3.4.3 Co-Generation and Gasification

India is very rich in biomass and has a potential of generating 19,500 MW from bagasse based cogeneration (3,500MW) and surplus biomasses (16,000MW). Currently, about 537MW of power generation is already comissioned and a similar capacity of generation is under construction. States that have potential for cogeneration and gasification are:

Andhra Pradesh (200 MW)

Bihar (200 MW)

Gujarat (200 MW)

Karnataka (300 MW)

Maharashtra (1,000 MW)

Punjab (150 MW)

16

Ministry of renewable energy, India


www.whitemonk.in 21

Tamil Nadu (350 MW)

Uttar Pradesh (1,000 MW)

Normal fuel sources for biomasses are abundant in India - wood, agricultural residues, energy crops, municipal solid waste, residential fuels. There are Taluka-level (Taluka is a equivalent to a congressional district in the US) biomass resource assessment program, which would cover about 500 Talukas.

Most of the cogeneration and gasification programs are targeted in the rural areas.

3.5 Transportation Solutions

Motorized vehicles are responsible for a significant percentage of air pollution worldwide.

Whereas the industrialized world primarily uses automobiles for personal transportation, the

developing world uses two- and three-wheelers powered by two- and four-stroke internal

combustion engines. For example, the global motorized 2-wheeler fleet currently exceeds 200

million units and is projected to grow to >500M units by 2010. Most of these vehicles are in

India and China. Additionally, there are about 2.4 million three-wheeler taxis on the roads of

India and large numbers in other countries such as Bangladesh, Thailand and the Philippines.

3.5.1 “Hydrogen Economy”

17The market in developing countries cannot be ignored and can be a critical pathway to start

the move towards a “Hydrogen Economy”. In an effort to reduce pollution caused by the use of

diesel and gasoline, India has already done a remarkable job of converting a large number of

three-wheelers and buses to compressed natural gas (CNG), and there is an on-going effort to

extend this transition to hydrogen, through the formation of the National Hydrogen Energy Task

Force. India and China are both members of the International Partnership for a Hydrogen

Economy (IPHE), formed in November 2003, and led by the United States.

In India, while the relatively wealthy segment of the population (a middle class the size of the US

population) uses most of the energy and creates most of the pollution, the poor people

especially the very young and the elderly, who breathe the same air, suffer the most in health

consequences.

Because two and three wheelers are a major mode of transportation, this can be an advantage

in the transition to hydrogen as transportation fuel. For example, the average daily driving

distance in India is about 20-50 km. While the US hydrogen fueled passenger vehicle will require

4-6 kg of hydrogen on board to deliver the desired range of 480 km before refueling, the Indian

scooter or three-wheeler will need about 300 grams to 1 kg of hydrogen for a range of 50-150

17

From the USAID/DOE cost shared study in collaboration with Energy Conversion Devices and Bajaj Auto, India.


www.whitemonk.in 22

km. These lower per-vehicle fuel requirements can allow the country to leapfrog, by

implementing hydrogen technologies in a time frame of 3-5 years, if the political will exists.

But the developing countries will not be able to do this alone. Successful implementation will

require appropriate international collaborations and the necessary resources. Early use of clean

hydrogen combustion technologies for transportation, will also position developing countries for

a smooth transition to fuel cells, which are expected to be more energy efficient in the long run,

but which are probably at least 15-20 years away from widespread commercialization.

Additionally, utilization of the existing Internal Combustion Engine (ICE) manufacturing and

maintenance infrastructure does not involve the need for large capital investment.

Transitioning to a hydrogen energy economy requires widespread availability of cost effective

hydrogen fuel. For India, a recent study done by USAID/DOE, in collaboration with Bajaj Auto,

suggested three options to get started. These are: use of low cost electricity from the bagasse

co-generation in sugar mills to produce hydrogen via electrolysis of water; hydrogen by-product

from the chlorine-caustic industry; and direct gasification of biomass to hydrogen.

India is one of the world’s largest producers of sugar from sugar cane. These sugar mills have

the potential to generate power significantly in excess of their captive needs. It is estimated that

just 1MW power can result in the production of about 162,000 kg (162 tons) of hydrogen per

year. This is sufficient for 32.4 million kilometers of driving with a scooter or about 16 million

kilometers for a three-wheeler. Thus, even if a small fraction of the total power from bagasse

cogeneration is used to produce hydrogen fuel for transportation and distributed power

generation, it can have a very positive impact on air quality and reduction of imported fossil

fuels, while significantly helping towards sustainable economic growth.

3.5.2 Electric Vehicles

Electric Vehicle (EV) technology is gaining ground and popularity rapidly in India. With depletion

of oil reserves and many cities characterized by smog (smoke and fog combined), noise and all

kinds of pollutants, governments and communities are awakening to the several benefits of EV

technology. 18

Zero emission vehicles are almost noiseless and can be charged at home or work, saving

commuters endless queues at petrol stations. Charging at night when consumption is low,

allows for efficient use of electricity.

EVs are easier to service and maintain due to the absence of spark plugs, clutch and gears. Ideal

for "stop - start" city driving conditions, EVs are extremely reliable and easy to drive.

18

Online sources


www.whitemonk.in 23

The average speed of travel in Indian cities has been steadily on the decline as the vehicle

population rises. In fact, a recent study conducted by TERI (Tata Energy Research Institute)19

found that the average speed in Indian cities was as low as 20 km/hour (1 mile = 1.6km)

With the innumerable advantages of EVs, companies in developed countries have spent huge

amounts to develop electric cars that can travel longer distances, providing high levels of

comfort. In spite of this technology being available now, the cost of electric vehicles to suit

driving requirements in these developed countries is prohibitively high.

On the other hand, India is ready and well suited for the introduction of EVs today with the

existing technologies available, making EVs cost effective.

The ideal EV for India and the developing world is basic, simple and reliable - designed especially

for local conditions using cutting edge technology and which is modular to incorporate and

absorb newer technologies. EVs with a top speed of 40-60 kmph (kilo meters per hour) and a

range of 50-80 km would meet over 90 percent of the city mobility requirements in India.

India has an array of electric vehicles (EV’s).20 There are more than 10 different models of

electric vehicles sold in India including scooters, 3-wheelers and cars. Many others models are

awaiting clearance from ARAI (Automotive Research Association of India). Couple of Indian

automobile manufacturers, including Tata, one of the biggest private conglomerates and

producer of “Nano” (the $2,000 car), have announced plans to launch EV’s in the near future.

India also has the maximum market potential for EVs owing to an established auto component

infrastructure, low manufacturing and R&D costs, mechanical hardware availability, high urban

congestion and the presence of a large domestic market. The industry could significantly gain

from rising exports by 2010 and with appropriate government support.

In spite of India being a hub for inventions of such technologies, EVs have not gained popularity

owing to lack of adequate and timely support from central and state governments. Although,

government has reduced the custom duty on three of the imported components in battery

operated vehicles to 10%, still the incentives seem too less for the price reduction of such

vehicles. Other initiatives, which need to be taken to make the EVs affordable, include measures

like relaxation in excise duty and VAT uniformity for the key inputs and components and also for

the finished electric vehicle. To look at this from the other angle, the private industry is still

looking for subsidies from government to make EV’s profitable to the consumer.

19

http://www.teriin.org/

20 http://www.evfuture.com

http://www.teriin.org/

http://www.evfuture.com/


www.whitemonk.in 24

3.5.3 Public Transportation

The rapid growth of India’s urban population—as in other developing countries— has generated

an enormous need for efficient public transport services to carry high volumes of passengers

through dense, congested urban areas. By 2001 over 285 million Indians lived in cities, more

than in all North American cities combined (Office of the Registrar General of India 2001). There

has been especially rapid growth of the very largest metropolitan areas such as Mumbai

(Bombay), Kolkata (Calcutta), and Delhi, which now exceed 10 million residents each. Chennai

(Madras), Hyderabad, Ahmedabad, and Bangalore each have more than 5 million residents. And

35 metropolitan areas have populations exceeding 1 million, almost twice as many as in 199121.

Since large cities are far more dependent on public transport than small cities, the need for

public transport services has increased faster than overall population growth. Moreover, the

lack of effective planning and land-use controls has resulted in rampant sprawled development

extending rapidly in all directions, far beyond old city boundaries into the distant countryside.

That also has greatly increased the number and length of trips for most Indians, including those

by public transport.

Most public policies in India actually encourage sprawl. In an explicit attempt to decongest city

centers, government regulations limit the ratio of floor areas to land areas for buildings in the

center, and thus restrict the heights of buildings and density of development in the center. For

example, the so-called “floor space index” in sampled city centers in India was only 1.6,

compared to indices ranging from 5 to 15 in other Asian city centers (Bertaud 2002; Padam and

Singh 2001).

By contrast, government regulations permit higher floor space/land area ratios in suburban

developments, yet more inducement for firms to decentralize. Indeed, local governments even

advertise the less stringent regulations in the suburbs to promote more development there.

Such land-use policies obviously discourage development in the center and force both firms and

residences to seek locations on the suburban fringe. Moreover, local governments have

permitted scattered commercial and residential development in outlying areas without the

necessary infrastructure such as roads, utilities, hospitals, shopping, and schools. That generates

long trips between residences and almost all other trip destinations.

There are important consequences of such low-density, sprawled decentralization for public

transport. Just as in North America and Europe, it generates trips that are less focused in well-

traveled corridors and thus more difficult for public transport to serve. In India, it has led to

rapid growth in car and motorcycle ownership and use, and thus increasingly congested

roadways that slow down buses, increase bus operating costs, and further discourage public

transport use.

21 The Crisis of Public Transport in India: Overwhelming Needs but Limited Resources; John Pucher and Nisha

Korattyswaroopam, Rutgers University Neenu Ittyerah, Indian Railways, Chennai, India


www.whitemonk.in 25

The best statistics for public transport in India are for suburban rail, because it is centrally

owned and operated by Indian Railways. Suburban rail usage has sharply increased over the

past five decades, with a 14-fold growth in passenger km of travel22. Buses carry more than 90

percent of public transport in Indian cities.

There are no comprehensive national statistics on bus service supply, let alone the number of

riders, but the fragmented statistics for individual cities suggest substantial growth. For

example, in the 10 years from 1990 to 2000, there was an 86 percent increase in the size of

Mumbai’s bus fleet, and a 54 percent increase in Chennai’s bus fleet. While the size of Delhi’s

public bus fleet actually fell, the number of private buses rose by almost twice as much, yielding

a net 28 percent increase23.

3.6 Smart Grid

Smart Grid is a transformed electricity transmission and distribution network or "grid" that uses

robust two-way communications, advanced sensors, and distributed computers to improve the

efficiency, reliability and safety of power delivery and use. Smart Grid is called several other

things, including "Smart Power Grid," "Smart Electric Grid," "Intelligrid," "FutureGrid," etc.

Deploying the Smart Grid became the policy of the United States with passage of the Energy

Independence and Security Act of 2007. The Smart Grid is also being promoted by the European

Union and other nations24.

The term Smart power grid may best be defined as using communications and modern computing

to upgrade the current electric power grid so that it can operate more efficiently and reliably and

support additional services to consumers. Such an upgrade is equivalent to bringing the power of

the Internet to the transmission, distribution and use of electricity - it will save consumers money

and reduce CO2 emissions.

3.6.1 Current grid structure in India

The Indian electricity system is divided into five regional grids, viz. Northern, Eastern, Western,

Southern, and North-Eastern. Each grid covers several states. As the regional grids are

interconnected, there is inter-state and inter-regional exchange. A small power exchange also

takes place with neighboring countries like Bhutan and Nepal.

Power generation and supply within the regional grid is managed by Regional Load Dispatch

Centre (RLDC). The Regional Power Committees (RPCs) provide a common platform for

22

Indian Railways 2001

23 Association of State Road Transport Undertakings 2002.

24 Online resources


www.whitemonk.in 26

discussion and solution to the regional problems relating to the grid. Each state in a regional grid

meets its demand with its own generation facilities and also with allocation from power plants

owned by the Central Sector such as NTPC and NHPC etc. Specific quotas are allocated to each

state from the Central Sector power plants. Depending on the demand and generation, there

are electricity exports and imports between states in the regional grid. The regional grid thus

represents the largest electricity grid where power plants can be dispatched without significant

constraints and thus, represents the “project electricity system” for a specific project.

While India currently does not have a unified national power grid, the country plans to link the

India's state electricity boards (SEB) grids eventually, and has set up a state company,

Powergrid, to oversee the unification. India also plans to establish national and state level

regulatory bodies to set tariffs and promote competition25.

3.6.2 Miscellaneous Initiatives

A number of private players are interested in the electric meter market, which would amount to

about $100million per year. Recently, Echelon Corporation announced that HCL Infosystems

Limited has become a value-added reseller (VAR) of Echelon's Networked Energy Services (NES)

advanced metering system in India. HCL Infosystems is India's leading information and

communication technologies system integrator, specializing in infrastructure projects including

power and utility systems.

Advanced metering infrastructures like Echelon’s NES System can make the energy grid more

efficient by enabling utilities to implement direct load control and demand/response programs,

limit maximum energy consumption during times of peak demand and detect and reduce meter

tampering and energy theft. HCL plans to market the solution to utilities looking to improve

power delivery while reducing operation costs, and to provide revenue recovery and protection.

Moser Baer India is also planning to foray into the Smart Grid market. The company recently

raised $150million through private equity.

3.7 Mobile Technologies

Utility power storage technologies have an immediate market of approximately $3Billion in India.

However, the supplier side of equation appears fragmented – with one or two major players and

many smaller players. However, the overall market is set to double within four years. The growth

is coming from not just the automotive segment but significantly from the industrial sectors

powered by usage in the telecom, railways, power and other industrial applications.

25

See Appendix: Current grid structure of India


www.whitemonk.in 27

3.7.1 Storage Technologies & Utilities

There are several technologies in the market today and the area is ripe for innovation. Different

battery technologies offer various advantages and each technology is suitable for a different

purpose. The performance parameters of storage devices are often expressed in a wide variety

of terms and units. The following table and charts are intended to provide a side-by-side,

comprehensible comparison of the key features of different storage technologies. The data are

representative of typical devices within each category, but may not cover all available products

All of the battery technologies, except for the lead-acid based and basic technologies, are

imported in India.

3.7.2 Fuel Cells

A fuel cell is an electrochemical device that combines hydrogen and oxygen to produce

electricity, with water and heat as its by-product. As long as fuel is supplied, the fuel cell will


www.whitemonk.in 28

continue to generate power. Since the conversion of the fuel to energy takes place via an

electrochemical process, not combustion, the process is clean, quiet and highly efficient – two

to three times more efficient than fuel burning.

No other energy generation technology offers the combination of benefits that fuel cells do. In

addition to low or zero emissions, benefits include high efficiency and reliability, multi-fuel

capability, siting flexibility, durability, scalability and ease of maintenance. Fuel cells operate

silently, so they reduce noise pollution as well as air pollution and the waste heat from a fuel cell

can be used to provide hot water or space heating for a home or office.

There is some nascent research done in India and Tata’s are working on releasing a fuel cell car

in the next five years.

4. Supply Vs Demand Analysis in India

4.1 Current status of energy market in India

In recent years, India reported a net energy trade deficit26. Many economists and pundits alike

agree that a successful long-term energy strategy for India must emphasize next-generation ways

to use energy efficiently, and increase energy independence. India is too big and too late in the

game to develop an oil-based energy economy, and the country must leapfrog the industrial

development model of the west. Lifting the huge Indian economy to higher economic standards

will require creativity, vision, diplomacy, innovation.

As India competes for conventional sources of energy, the country must also prioritize developing

energy efficient vehicles and buildings, and direct its financial and technological prowess towards

developing alternative energy.

4.2 Supply Vs. Demand analysis

The all India installed capacity of electric power generating stations under utilities was reported at

123,901 MW as on 31 January 2006 of which contributions of hydro, thermal, nuclear and

renewable sectors were 26.0%, 66.4%, 2.7% and 4.9%, respectively.27 The shortages in peak

electricity demand (10,556 MW) and energy supply (41,630 million kWh) in the country for the

period April 2005 to January 2006 were about 11.6% and 8.0% respectively.

A study by Govt of India and world bank indicates more than $100 billion in investments would be

required in the next 5 years for India to gear up to the energy demands.

26

http://www.eia.doe.gov/cabs/India/Profile.html

27 http://powermin.nic.in

http://www.eia.doe.gov/cabs/India/Profile.html

http://powermin.nic.in/


www.whitemonk.in 29

Reference: Salman-Zaheer, World Bank

4.3 Customer segments, spend analysis

Whereas about 20% of 593,732 villages are yet to be electrified, only about 44.0%2 of rural

households have access to grid supplied electricity. Government of India has envisaged

electrifying remaining villages by 2007 and all households by 201228. In India, nearly 24,500

villages are classified in the category of ‘remote villages’ where extension of the conventional

electricity grid may not be possible in the near future.

All these remote villages are proposed to be provided with electricity supply from renewable

energy based decentralized electricity generating options such as PV, small hydro, biomass

gasifiers and wind energy conversion systems under a remote village electrification program

started by the Ministry of Non-Conventional Energy Sources (MNES) of Government of India in

2001–2002. The MNES provides financial assistance up to 90% of the cost of the projects as grant

for electrification of remote villages with specific benchmarks (e.g. up to Rs. 1.50 million for a

50 kW biomass gasifier power project) as applicable in respect of technologies adopted for

electrification. 1744 remote villages and 572 remote hamlets have been electrified and projects

for electrification of 1349 remote villages and 724 hamlets were in progress as on 30 November

2004 under the remote village electrification program of the Ministry of Non-Conventional Energy

Sources (MNES, 2005a). The focus of this program is mainly on deployment of biomass gasifier

power project (BGPP) and micro hydro power projects (MNES, 2005a). In view of the fact the

biomass resources (for power generation) are distributed throughout the country as compared to

the availability of suitable micro hydro sites.

28

Ministry of Non-Conventional Energy Sources

http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V2W-4K4PSW4-1&_user=4420&_rdoc=1&_fmt=&_orig=search&_sort=d&view=c&_version=1&_urlVersion=0&_userid=4420&md5=fa63bff5188fbbfab6a36a0ad1a56a8a#fn2


www.whitemonk.in 30

The power supplied through Grid from the state electricity boards to agriculture is heavily

subsidized and private players are not interested in rural market. This is has encouraged the use

of more non conventional resources in rural areas. Traditional players are more interested in

metro areas and industrial power, as this is obviously more profitable. Govt of India is considering

institutionalizing a distributive system like the ones used to mandate private banks (where certain

amount of operations is mandatory in rural areas).

4.4 Market analysis

By 2020, India’s demand for commercial energy is expected to increase by more than 2.5 times

(IEA World Energy Outlook 2000). Underpinning this trend will be the ongoing growth in

population, urbanization, income, industrial production and transport demand.

For India to tackle the economic and environmental challenge of its demand growth it is

important to have a good understanding of how these and other factors shape energy use in the

various sectors of the economy. Detailed and coherent information is needed in order to judge

the potential for energy efficiency improvements or to measure the progress of already

implemented policies.

For example, the trend in India’s energy per GDP ratio is puzzling. As Figure 1 shows, the use of

commercial energy per unit of GDP has increased in India since the early 1970s. This is in stark

contrast to the developments in China and in OECD29 countries. Over the most recent years,

however, the energy per GDP ratio in India turned around and started to decline. Why this

development? Is it due to changes in energy efficiency or changes in economic structure? The

answer is probably both.

Chart: Primary Supply of commercial energy per unit of GDP

29

OECD - Organization for Economic Co-operation and Development - http://www.oecd.org

http://www.oecd.org/


www.whitemonk.in 31

Using data for energy use and economic activity, indicators representing energy intensities can be

developed for different sectors of the Indian economy. The diagram below shows these

intensities (left axis) and the contribution each sector is making to overall GDP (right axis). Three

main findings arise from this figure: First, it is interesting to note how much more energy is

needed to generate one rupee of output in industry compared to the two other sectors. A small

change in the level of output in industry can thus have a big impact on energy per GDP. Then note

the increasing share industry has in total GDP. Given the high energy intensity of the industry

sector, the increasing role of this sector in the Indian economy may offer part of the explanation

behind the growth in the energy to GDP ratio.

Finally, note also the increase and then decrease in the intensity for industry.

Chart: Energy intensities and GDP shares for the three sectors of Indian economy

Clearly, Indian economy is moving towards a service economy, where the future energy market

will grow.


www.whitemonk.in 32

5. Climate Change and Government Policies in India

Ever since the earth came into being there has been a climate system30. The climate of a place is the

average weather that it experiences over a period of time. The factors that determine the climate at

a location are the rainfall, sunshine, wind, humidity, and temperature.

While changes in the weather may occur suddenly and noticeably, changes in the climate take a long

time to settle in and are therefore less obvious. Throughout the earth's history there have been

changes in the climate. There have been well-marked cold and hot periods and all life forms adapted

naturally to this change. However, over the last 150-200 years, this change has been taking place

too rapidly.

5.1 Overview of climate change

Over the last 150-200 years climate change has been taking place too rapidly and certain plant and animal species have found it hard to adapt. Human activities are said to be responsible for the speed at which this change has occurred and it is now a cause of worry to scientists.

The atmosphere surrounding the earth is made up of nitrogen (78%), oxygen (21%) and the remainder, 1%, is made up of trace gases (called so because they are present in very small quantities) that include the greenhouse gases (GHG) carbon dioxide, methane, ozone, water vapor, and nitrous oxide.

31Greenhouse gases reduce the loss of heat into space and therefore contribute to global temperatures through the greenhouse effect32. Greenhouse gases are essential to maintaining the temperature of the Earth; without them the planet would be so cold as to be uninhabitable. However, an excess of greenhouse gases can raise the temperature of a planet to lethal levels, as on Venus where the 90 bar partial pressure of carbon dioxide (CO2) contributes to a surface temperatures of about 467 °C (872 °F). Greenhouse gases are produced by many natural and industrial processes, which currently result in CO2 levels of 380 ppmv in the atmosphere. Based on ice-core samples and records (see graphs)33 current levels of CO2 are approximately 100 ppmv higher than during immediately pre-industrial times, when direct human influence was negligible.

Most greenhouse gases have both natural and anthropogenic sources. During the pre-industrial Holocene, concentrations of these gases were roughly constant. Since the industrial revolution, concentrations of all the long-lived greenhouse gases have increased due to human actions. The

30

Refer Appendix for an illustration of climate system

31 Referred from various online resources, including Wikipedia

32 Refer Appendix for more details on Greenhouse Effect

33 Refer Appendix

http://en.wikipedia.org/wiki/Ppmv


www.whitemonk.in 33

sharp acceleration of emission of CO2 since 1990 has been largely attributed to developing countries, particularly China and India34. The Kyoto Protocol was put into place through United Nations Framework Convention on Climate Change (UNFCCC) and Intergovernmental Panel on Climate Change (IPCC) to address the raise of Greenhouse Gases through global collaboration.

5.2 Introduction to Kyoto Protocol

The Kyoto Protocol is a protocol to the international Framework Convention on Climate Change

with the objective of reducing greenhouse gases in an effort to prevent anthropogenic climate

change. Countries that ratify this protocol commit to reducing their emissions of carbon dioxide

and five other greenhouse gases (GHG), or engaging in emissions trading if they maintain or

increase emissions of these green house gases.

As of today, around 182 parties (governments/countries) are signatories to the Kyoto protocol.

Governments /countries are separated into two general categories: developed countries, referred

to as Annex I countries (who have accepted greenhouse gas emission reduction obligations and

must submit an annual greenhouse gas inventory); and developing countries, referred to as Non-

Annex I countries (who have no greenhouse gas emission reduction obligations but may

participate in the Clean Development Mechanism or CDM).

Of the 182 parties, who are signatories to the protocol, 36 developed countries (plus the EU as a

party in its own right) are required to reduce greenhouse gas emissions to the levels specified for

each of them in the treaty (representing over 61.6% of emissions from Annex I countries), with

three more countries intending to participate. One hundred and thirty-seven (147) developing

countries have ratified the protocol, including Brazil, China and India, but have no obligation

beyond monitoring and reporting emissions.

At its heart, the Kyoto Protocol establishes the following principles:

Kyoto is underwritten by governments and is governed by global legislation enacted under

the UN’s aegis.

Governments are separated into two general categories: developed countries, referred to as

Annex I countries (who have accepted greenhouse gas emission reduction obligations and

must submit an annual greenhouse gas inventory), and developing countries, referred to as

Non-Annex I countries (who have no greenhouse gas emission reduction obligations but may

participate in the Clean Development Mechanism).

Any Annex I country that fails to meet its Kyoto obligation will be penalized by having to

submit 1.3 emission allowances in a second commitment period for every ton of greenhouse

gas emissions they exceed their cap in the first commitment period (i.e., 2008-2012).

34

Refer Appendix for more information on Greenhouse Gases

http://en.wikipedia.org/wiki/European_Union


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As of January 2008, and running through 2012, Annex I countries have to reduce their

greenhouse gas emissions by a collective average of 5% below their 1990 levels (for many

countries, such as the European Union (EU) member states, this corresponds to some 15%

below their expected greenhouse gas emissions in 2008). While the average emissions

reduction is 5%, national limitations range from an 8% average reduction across the European

Union to a 10% emissions increase for Iceland; but, since the EU's member states each have

individual obligations, much larger increases (up to 27%) are allowed for some of the less

developed EU countries Reduction limitations expire in 2013.

Kyoto includes "flexible mechanisms" which allow Annex I economies to meet their

greenhouse gas emission limitation by purchasing GHG emission reductions from elsewhere.

These can be bought either from financial exchanges, from projects which reduce emissions in

non-Annex I economies under the Clean Development Mechanism (CDM), from other Annex 1

countries under the Joint Implementation (JI), or from Annex I countries with excess

allowances. Only CDM Executive Board-accredited Certified Emission Reductions (CER) can be

bought and sold in this manner. Under the aegis of the UN, Kyoto established this Bonn-based

Clean Development Mechanism Executive Board to assess and approve projects ("CDM

Projects") in Non-Annex I economies prior to awarding CERs.

In practice, this means that Non-Annex I economies have no GHG emission restrictions, but when

a greenhouse gas emission reduction project (a "Greenhouse Gas Project") is implemented in

these countries the project will receive Carbon Credits, which can then be sold to Annex I buyers.

These Kyoto mechanisms are in place for two main reasons:

There were fears that the cost of complying with Kyoto would be expensive for many Annex I

countries, especially those countries already home to efficient, low greenhouse gas emitting

industries, and high prevailing environmental standards. Kyoto therefore allows these

countries to purchase (cheaper) carbon credits on the world market instead of reducing

greenhouse gas emissions domestically, and

This is seen as a means of encouraging Non-Annex I developing economies to reduce greenhouse gas emissions through sustainable development, since doing so is now economically viable because of the investment flows from the sale of Carbon Credits.

5.3 Overview of India’s energy policies

Govt. of India has elaborate energy policy and also has a separate ministry for renewable

energy35. India's strategy is to encourage development of renewable sources of energy by the use

of incentives by the central (federal) and state governments. Other examples of encouragement

35

Ministry of New and Renewable Energy - http://mnes.nic.in/

http://mnes.nic.in/


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by incentive include the use of nuclear energy (India Nuclear Cooperation Promotion Act),

promoting wind farms, and solar energy.

5.3.1 Electricity Industry

The electricity industry has been restructured by the Electricity Act 200336, which unbundles the

vertically integrated electricity supply utilities in each state of India into a transmission utility,

and a number of generating and distribution utilities. Electricity Regulatory Commissions in each

state set tariffs for electricity sales. The Act also enables open access on the transmission

system, allowing any consumer (with a load of greater than 1 MW) to buy electricity from any

generator. Significantly, it also requires each Regulatory Commission to specify the minimum

percentage of electricity that each distribution utility must source from renewable energy

sources.

The introduction of Availability based tariff has brought about stability to a great extent in the

Indian transmission grids.

5.3.2 Oil

The state-owned Oil and Natural Gas Corporation (ONGC) acquired shares in oil fields in

countries like Sudan, Syria, Iran, and Nigeria – investments that have led to diplomatic tensions

with the United States. Because of political instability in the Middle East and increasing domestic

demand for energy, India is keen on decreasing its dependency on OPEC to meet its oil demand,

and increasing its energy security. Several Indian oil companies, primarily lead by ONGC and

Reliance Industries, have started a massive hunt for oil in several regions in India including

Rajasthan, Krishna-Godavari and north-eastern Himalayas. The proposed Iran-Pakistan-India

pipeline is a part of India's plan to meet its increasing energy demand.

5.3.3 Nuclear Power

India boasts a quickly advancing and active nuclear power program. It is expected to have 20

GW of nuclear capacity by 2020, though they currently stand as the 9th in the world in terms of

nuclear capacity.

An Achilles heel of the Indian nuclear power program, however, was the fact that they are not

signatories of the Nuclear Non-Proliferation Treaty. This has many times in their history

prevented them from obtaining nuclear technology vital to expanding their use of nuclear

industry. Another consequence of this is that much of their program has been domestically

developed, much like their nuclear weapons program. United States-India Peaceful Atomic

Energy Cooperation Act seems to be a way to get access to advanced nuclear technologies for

36

Electricity Act 2003 - http://powermin.nic.in/acts_notification/electricity_act2003/preliminary.htm

http://powermin.nic.in/acts_notification/electricity_act2003/preliminary.htm


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India. The Govt. of India essentially won the mandate in parliament, to continue with US-India

civil nuclear agreement.

The United States-India Peaceful Atomic Energy Cooperation Act, along with other bilateral

agreements, should allow US technology to be exported to India, but the issue remains hotly

debated in American politics.

India been using imported enriched uranium and are under International Atomic Energy Agency

(IAEA) safeguards, but it has developed various aspects of the nuclear fuel cycle to support its

reactors. Development of select technologies has been strongly affected by limited imports. Use

of heavy water reactors has been particularly attractive for the nation because it allows Uranium

to be burnt with little to no enrichment capabilities. India has also done a great amount of work

in the development of a Thorium centered fuel cycle. While Uranium deposits in the nation are

extremely limited, there are much greater reserves of Thorium and it could provide hundreds of

times the energy with the same mass of fuel. The fact that Thorium can theoretically be utilized

in heavy water reactors has tied the development of the two. A prototype reactor that would

burn Uranium-Plutonium fuel while irradiating a Thorium blanket is under construction at the

Kalpakkam Atomic Power Station.

Uranium used for the weapons program has been separate from the power program, using

Uranium from scant indigenous reserves.37

5.3.4 India’s energy policy challenges

A recent study conducted by Planning Commission of India outlined several challenges and

requirements. The report highlighted that India faces an enormous challenge if it is to meet her

energy requirement over the coming 25 years and support a growth rate of 8 percent. The study

outlined several challenges and correspondingly identified following recommendation:

Reducing energy requirements through energy efficiency and conservation.

Augmenting energy resources and supply through nonconventional means.

Rationalization of fuel prices to mimic free market prices that promote efficient fuel

choice and substitution.

Promoting coal imports.

Accelerating power sector reforms.

37

Uranium used for the weapons program has been separate from the power program, using Uranium from scant

indigenous reserves.


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Cutting cost of power.

Encouraging renewables and local solutions.

Enhancing energy security.

Promoting and focusing energy R&D.

Promoting household energy security, gender equity and empowerment through

targeted entitlements for the poor.

Creating an enabling environment and regulatory oversight for competitive efficiency.

5.3.5 Discontents with alternative energy strategy in India

Few sections of people in India believe that they should get into the league of developed nations

by using any form of energy that is available cheaply and immediately. Currently, the average

Indian produces around a 10th of the greenhouse gases38 of the average European - a 20th of the

average American. That helps to explain the attitude of some of India's political leaders to the

recent request from the US and Europe that India should join talks on restricting emissions.

One of the reasons given by President Bush for America's rejection of the Kyoto Protocol was

the absence of emissions targets for the Asian giants. India's politicians observe the American

lifestyle, compare it with lifestyle of their own people and consider the president's demand

morally outrageous. Some Indian politicians think climate change is an excuse by the West to

suppress the economic boom that is intoxicating this great nation. So while the Chinese

government willingly joins preliminary talks on a future global climate agreement, some

observers say, India either attends as a silent observer or does not attend at all.

Some observations mention that India's political leaders may be interested in gaining cheap

finance for clean technologies through the world trading system in carbon emissions - but they

are not interested in even thinking about limiting emissions from their coal-fired power stations

while so many millions scrabble in poverty. They want to see the developed nations keep

promises they made under the UN Framework Convention on Climate Change in 1992 that they

would make the first move in cutting emissions. And so far there is little sign of that.

Scientists are warning that if we fail to cut emissions, the future will be hard for families in

developing countries who live on the margins. They did not cause the climate problem - but they

are likely to suffer most from it.

38

Numerous studies and recent study by BBC


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5.4 Emission Trading (Cap-and-trade)

Emission trading is an administrative approach used to control pollution by providing economic

incentives for achieving reductions in the emissions of pollutants. It is sometimes called cap and

trade.

UNFCC, along with the DNA, sets a limit or cap on the amount of a pollutant that can be emitted.

Companies or other groups are issued emission permits and are required to hold an equivalent

number of allowances (or credits) which represent the right to emit a specific amount. The total

amount of allowances and credits cannot exceed the cap, limiting total emissions to that level.

Companies that need to increase their emissions must buy credits from those who pollute less.

The transfer of allowances is referred to as a trade. In effect, the buyer is paying a charge for

polluting, while the seller is being rewarded for having reduced emissions by more than was

needed. Thus, in theory, those that can easily reduce emissions most cheaply will do so, achieving

the pollution reduction at the lowest possible cost to society.

Bulk of the emission trading market today is for Carbon emissions trading, which is emission

trading specifically for carbon dioxide (calculated in tonnes of carbon dioxide equivalent or

tCO2e). It is one of the ways countries can meet their obligations under the Kyoto Protocol to

reduce carbon emissions and thereby mitigate global warming.

Carbon emissions trading has been steadily increasing in recent years. According to the World

Bank's Carbon Finance Unit, 374 million metric tonnes of carbon dioxide equivalent (tCO2e) were

exchanged through projects in 2005, a 240% increase relative to 2004 (110 mtCO2e), which was

itself a 41% increase relative to 2003 (78 mtCO2e).

In terms of dollars, the World Bank has estimated that the size of the carbon market was 11

billion USD in 2005, 30 billion USD in 2006, and 64 billion in 200739.

With the creation of a market for mandatory trading of carbon dioxide emissions within the Kyoto

Protocol, the London financial marketplace has established itself as the center of the carbon

finance market, and is expected to have grown into a market valued at $60 billion in 2007. The

voluntary offset market, by comparison, is projected to grow to about $4bn by 2010.

There has been reaction by business for emission trading. 23 multinational corporations came

together in the G8 Climate Change Roundtable, a business group formed at the January 2005

World Economic Forum. The group included Ford, Toyota, British Airways, BP and Unilever. In

June 2005 the Group published a statement stating that there was a need to act on climate

change and stressing the importance of market-based solutions. It called on governments to

39

Reference: http://carbonfinance.org/docs/StateoftheCarbonMarket2006.pdf

http://carbonfinance.org/docs/StateoftheCarbonMarket2006.pdf


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establish "clear, transparent, and consistent price signals" through "creation of a long-term policy

framework" that would include all major producers of greenhouse gases. By December 2007 this

had grown to encompass 150 global businesses.

Businesses in the UK have come out strongly in support of emissions trading as a key tool to

mitigate climate change, supported by ‘Green’ NGOs.

6. Evaluation of Investment Opportunities

This section analyzes what are the rationale for investments and then what are risks associated.

Investment climate in India has been buoyant for the last three years and various macro-economic

parameters are reflecting that pace of growth of the economy has accelerated and macroeconomic

fundamentals are sound and moving towards right direction. However, there has been a scarcity of

financial investment instruments for the start-ups in the alternative energy sector.

6.1 Rationale for investment opportunity

6.1.1 Huge demand for energy

India has a demand for an installed generation capacity of about 60,000MW in the next five

years40. Industry experts estimate this is a total investment opportunity of $100billion for

generation ($60 billion) and distribution ($40 billion). In addition to this, about 20,000MW of

existing thermal capacity needs to be rehabilitated and modernized. Besides, distribution

networks to be upgraded and MIS need to be strengthened. These operations and initiatives

need human resources and there is an investment opportunity to revitalize the human

resources too.

Projected investment in the alternative energy sector is estimated to be about $5billion in the

next 3-5 years. Even though it is only 5% of the total projected investment in the energy sector,

this could lead into breakthrough innovations in alternative energy sector and could provide

huge technological leaps thereby producing further investment opportunities in innovations and

human capital.

6.1.2 Centralized power sector ready to be modernized

As we analyzed earlier in this study, India has a centralized power sector which is getting to

ready to re-organize. More investment is being done in the distribution and this would further

open up the opportunities for independent projects to sell the power to industry. A spot market

is also emerging in India, which will further encourage private players.

40

Power ministry of India, World Bank data


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Concept of Smart Grid is very rapidly catching up in India, both in rural areas as well as densely

packed urban areas.

6.1.3 Good research on wind speeds

One of the reasons India is progressing remarkably well in the wind energy sector is the progress

of research on wind speed.41 There are six different wind zones in India and each has different

technology configurations. Though it was expected that there would be different tower designs,

manufacturers like Suzlon have designed suitable towers for each locations through a

combination of technologies.

6.1.4 Healthy start-up growth rates and returns

A recent estimate by the Venture Intelligence India estimates the equity investment IRR in India

as the highest among the emerging markets:

India 15 – 25%

China 10 – 15%

Korea 10 – 15%

Brazil 15 – 20%

Chile 10 – 15%

Out of this a 2.5 – 5% of the returns are due to carbon credits. This includes the country risk

premiums.

6.1.5 Increasing environmental awareness

There has been a ever increasing environmental awareness in India due to wide spread internet

and media attention. Indian industry recognizes the need to be compliant with environmental

regulations. Though a smaller section of people do not care about the environmental impact, an

influential majority of people willingly support clean alternative energy mechanisms.

6.1.6 Relevant national / local policies in place

India has the most active DNA (Designated National Authority) in place today. It has a separate

ministry for non conventional energy and this ministry has been very active. The impression

about this ministry has been exemplary to other departments and ministries. It has been very

transparent and active in the last five years.

41

Center for Wind Energy Technology - http://www.cwet.tn.nic.in/

http://www.cwet.tn.nic.in/


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6.1.7 Ability to utilize CDM benefits

There are more than 400 projects approved under clean development mechanism in India and

this has been a major boost in the sector for small businesses and individual investors alike.

6.1.8 Excellent international relationships

India is one of the few nonmember countries having signed a bilateral cooperation agreement

with International Energy Agency (IEA) since 1998. India and IEA have been jointly working on

many areas including, but not limited to energy information and Statistics, energy supply

security, energy efficiency, energy and environment, energy pricing etc. IEA is also playing an

instrumental role in the ongoing negotiation of the India-US civil nuclear agreement.

6.2 Risks

A study by World Bank show different areas of interests investors look for in a country and

corresponding weights in the areas.

Reference: Salman-Zaheer study, World Bank

On one hand, India fares well in most of the sectors when compared to developed countries; on

the other hand most of the risks are associated for investments in India re related to following

issues:

There is a lack of reliable local developers for projects for energy projects. This is largely

due to the fact that construction is an unorganized sector in India and there are no

agencies which can satisfactorily provide background information on local vendors.


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There is a risk of regulatory changes which is often related to changes in local

governments.

Counterparty credit risk

Different markets offer varied prices across the states.

6.3 Current investment scenario in India

While there were significant investments in traditional power sectors (including the

oversubscribed IPO of Reliance Power), Venture Capital (VC) firms invested $158 million over 26

deals in India in the three months to June, marginally lower than the $163 million they invested

over 25 deals a year earlier, according to a study by Venture Intelligence in partnership with the

U.S.-India Venture Capital Association42. It is reported that about 40% of these deals are in the

non-IT (Information Technology) sector, which amounts to about $63 million. However, it is not

very evident from the data available how much was specifically invested in alternative energy

sector. Even with a liberal assumption of 50% out of this has been invested in the alternative

energy sector, the total amounts to about $32 million, which is not a huge amount when

compared to developed markets like US. Alternative energy sector is not attracting traditional VC

investments yet.

However, there is different spectrum of investments going on in the alternative energy area.

There are individual bootstrap investments from families and few of the Private Equity firms who

are active in the space beside government and bigger private industry houses like Tata and

Reliance Industries. Two of the prominent domestic Private Equity players are IDFC (Infrastructure

Development Finance Company Limited) and Chrys Capital. A total of $1.2billion was invested in

year 2007 in alternative energy sector between family owned businesses, private equity firms and

industries.

6.4 Observations and Recommendation

At the outset, India is open for business in this sector. There is also significant progress in terms

research and development in each of the sectors. India’s official energy policy clearly encourages

investments in the sector. The policy framework also encourages environmental sustainability.

Recently, there has been a boom in energy sector, including the much hyped US-India civil nuclear

agreement. The study found no formal obstacles to implementation of energy projects; however,

many incidents show that the bureaucracy and overall operating framework is still a great hurdle.

Traditional VC investments are shying away from the staggering investment opportunities in

alternative energy sector because of the following reasons:

42

Venture Intelligence India - http://www.ventureintelligence.in/

http://www.ventureintelligence.in/


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India’s government system is a combination of capitalistic market with many socialistic

leaning policies. This is clear from the fact that government may mandate energy

companies to serve rural market which will affect their profits significantly. Putting the

market first seems to be a prerequisite for more entrepreneurs to venture into this

sector.

India’s energy policy doesn’t address issue of market pricing in the energy sector. Pricing

is still largely decided by the state electricity boards.

The investment framework needs to be more stable and attractive for venture capitalists.

It is the recommendation of this study that investors in alternative energy sector in India must

give more thoughts on entrepreneur background check, suitability of sector to the local

conditions and local policies at the state level. It is not completely enough to understand the

policies and plans for government of India, but state policies and local market segments make a

lot of difference in the prices and overall investment environment. Macroeconomic conditions are

conducive to the investments. However, the final success of investment will totally depend on the

level of local expertise.

Most of the current investments appear to be done either by entrepreneurs who are already

‘insiders’ to the industry sector or by bigger industry houses like Tata or Reliance. A political

‘blessing’ seems to be must for any larger investment in this sector. One of the prominent venture

capital firms who recently opened office in Mumbai opined that a reliable investment framework

will eventually evolve due to the nature of demand.

Key parameters to evaluate before investments in alternative energy sector in India:

Market segments – key segments who will pay in the immediate market

Reliability of local developers

Relationship with the government constituencies

Possible subsidies for your product

Background check, history of entrepreneur team


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7. Appendices

Following diagrams/graphs/pictures are re-produced for noncommercial purpose only, with consent

from India’s ministry of power.

Power ministry of India tracks the supply situation of energy on an yearly basis and the graph below

details the supply situation over a period of last 10 years43.

43

Sources from India’s ministry of power


www.whitemonk.in 45

Note: Reproduced with permission strictly for noncommercial use; and for the purpose of this

study only.


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Power grid of India:


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Climate System:

The climate system consists of five components: atmosphere, ocean, cryosphere (ice), biosphere, and

geosphere. The fundamental processes driving the global climate system are heating by incoming short-

wave solar radiation and cooling by long-wave radiation into space. If the earth had no atmosphere, the

average temperature at the surface would be well below freezing.


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Carbon dioxide concentration:

Top: Increasing atmospheric CO2 level as measured in the atmosphere

and ice cores.

Bottom: The amount of net carbon increase in the atmosphere,

compared to the carbon emission from burning fossil fuel.

Courtesy - Wikepedia


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Some of the solar products sold in India:

Screenshot from http://www.tatabpsolar.com/prod_gallery.html

http://www.tatabpsolar.com/prod_gallery.html


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A sample biomass gasifier:


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Legend:

kWh Kilowatt-hour; is a unit of energy. It is most commonly used to express amounts of energy delivered by electric utilities, and it appears on electric meters and bills in some countries.

The kilowatt hour is a measure of work, the watt is a measure of power. The amount of wattage times the amount of time is the amount of work done.

CO2 e/kWh Emission Coefficient

GHG Greenhouse Gases

NTPC National Thermal Power Corporation Limited

NHPC National Hydroelectric Power Corporation Limited

UNFCC United Nations Framework Convention for Climate Change

DNA Designated National Authority

CDM Clean Development Mechanism

EROI Energy Return on Investment

IDFC Infrastructure Development Finance Company Limited

PPM Parts-per million

UN United Nations

CNG Compressed Natural Gas


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8. Bibliography

Economist Intelligence Unit. (2008). The Economist.

Ganguly, P. S. (n.d.). Energy Trends in China and India: Implications to US.

Ghemawat, P. (2007). Redefining Global Strategy. Harvard Business School Publishing Corporation.

Ghosh, S. (2007, December). Investment Opportunities in India energy sector. p. 20. Accessed through

HAAS Library

NPCI. (n.d.). Nuclear Power Corporation of India. Retrieved from http://www.npcil.nic.in/

Renewable Energy World. (n.d.). Retrieved 2008, from

http://www.renewableenergyworld.com/rea/news/story?id=45306

Wilder, R. P. (2007). The Cleantech Revolution. Collins.

Tata BP Solar. (n.d.). Retrieved from http://www.tatabpsolar.com

Economics of Alternative Energy for India

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