Indian Power Scenario: Increasing importance of renewables A Knowledgefaber Article focusing on Solar Power in India Written by Vipul Vohra and Sushil Rajpurohit, Engagement Manager and Consulting Partner at Knowledgefaber respectively. Knowledgefaber can help you at every step of building and growing successful power generation, transmission or distribution business 11/14/2011

Indian Power Scenario: Increasing importance of renewables

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In this article the main objective is to understand the renewable energy scenario in India:

1. What is the current power situation in India?

2. What is the current renewable power portfolio in India?

3. What factors are responsible for attractiveness of renewable energy and solar energy generation sectors in India?

4. Solar energy policies and incentives offered by Central and State governments in India

Research Methodology

Knowledgefaber researchers have been tracking Indian Power sector on an ongoing basis

Extensive secondary research including but not limited to company websites, journals, magazines, literature shared by participants, web search, etc. Numerous Interviews (primary research) with key participants from existing industry players, investors and industry experts

Indian Power situation:

Power deficits are common in India and to some extent is one of key constraint to achieve high GDP growth. Supply is much less than demand. Power cuts are common in most parts of country and power supply is erratic and unreliable to be least

The GDP growth of 7-9% in last 7-8 years has fueled a rapid rise in demand which has outpaced the capacity addition/renovation of the power plants in India. As of 31st march, 2011 the Installed power capacity is 176 GW with energy mix of 65% thermal, 21% hydro, 3% nuclear and 11% from renewables as also indicated in fig.1. Capacity addition has grown at 7% CAGR from 2007-2011 but still there remains high power and peak power deficit ranging from 9-11%.

Figure 1: India’s segment-wise installed power generation capacity 2008-2011 (GW)

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Renewable portfolio

One of the interesting aspects of India’s energy mix is the relatively high penetration of renewables and this segment has witnesses the highest growth at about 20-22% in last four years.

As of 31st March, 2011 the installed renewable energy capacity in India is ~ 21 GW. As reflected in Fig. 2 wind has 69% share, small hydro with 15% followed by Cogen at 8% at Biomass at 6%. Solar is at nascent stage with <1%. So we can see that in India the renewable energy is heavily skewed in favour of wind although enough potential exists for biomass and bagasse. The biggest potential we believe lies in Solar. Solar has present capacity of ~45 MW with 87% as grid connected and 13% as off grid.

Figure 2: Segment-wise break up of installed renewable power generation capacity (GW)

Attractiveness of Renewable in India

1) India has limited coal availability for power as well the quality of coal has 30-35% ash content which makes it highly undesirable. Also, coal policies are controlled by government and establishing sufficient coal linkages is a challenge for the power generators

2) In a bid to secure supplies to high grade coals, many Indian power generating players have to make coal mine acquisitions abroad resulting in added costs. These players should look at investing in renewable energy generation to diversify their operations and reduce dependence upon thermal energy alone.

3) Limited domestic production of oil and gas in India restricts its use in power plant 4) Increasing thrust from Indian top leaders on sustainable growth and clean technology 5) Large thermal plants require huge tracts of land adjacent to a water source. Availability of such land and land

acquisition are the major challenges.

The above mentioned issues does indicate the importance of renewable energy and particularly solar to meet the rising demand of power and also to provide the energy security to India.

Potential and attractiveness of Solar in India

India receives solar energy equivalent to - 5,000 trillion kWh/year

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Daily average solar energy incident varies from 4 -7 kWh per sqm with about 2,500–3,000 sunshine hrs/year

High solar yield

Attractive Feed in tariffs and solar policies(National solar mission and various state solar policies)

Tremendous opportunity for offgrid solution in India

Solar In India has potential to reach 20-30 GW by 2020

Figure 3: India’s segment-wise installed power generation capacity 2008-2011 (GW)

Solar policies/incentives

Indian solar policies can easily be divided into two main categories

A) Central level B) State level At central level National solar mission(NSM) is the most attractive solar policy with target of adding 20 GW of Solar by 2022.The intent of this policy is to create a environment for a self-sustaining business models for utility scale solar power plants and rapid diffusion of solar technologies in India. In long term, promote India as a leader in solar industry through indigenous R&D, local manufacturing hub and innovative solar solutions Highly attractive feed in tariff of INR 18-19 Kwh of PV and INR 12-14 kWh for solar thermal has been announced and also a solar Renewable purchase obligation of 0.25% to start with is also mandated. NSM has created lot of excitement among domestic and international solar community to look at India as one of the potential solar hub. Already plants of ~ 300-400 MW are under various stages of construction/approval

Indian Power Scenario: Increasing importance of renewables

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At state level the two states of Rajasthan and Gujarat have taken the initiatives to launch state specific solar polices with attractive tariffs and incentives. Both the states are attracting tremendous investor interest. 500+ MW of solar projects are under various stages of approval/construction as per state policies

Figure 4: Central and state level solar energy policies in India

With fast rising fuel costs and depleting resources, solar energy will play a vital role in ensuring energy security for the country. Huge potential of solar energy in India along with investor friendly policies present an attractive opportunity for investors to enter this largely untapped space and achieve high rate of growth

Solar application in India

India provides varied opportunities for the application of solar technology. Application ranges from power generation in grid and off grid way to non power application of lighting, water heating and cooking food, irrigation pumps etc.

Figure 5: Power and non-power applications of solar energy in India