The Potential for Renewable Energy in India - 2012 Disclaimer: All information contained in this report has been obtained from sources believed to be accurate by Gyan Research and Analytics (Gyan). While reasonable care has been taken in its preparation, Gyan makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. The information contained herein may be changed without notice. All information should be considered solely as statements of opinion and Gyan will not be liable for any loss incurred by users from any use of the publication or contents.
Quadrillion Btu The Potential for Renewable Energy in India - 2012 Overview: Renewable Energy in India India s significant and sustained economic growth is placing enormous demand on its energy resources. However, there is a pervasive demand-supply imbalance that necessitates serious efforts by the government of India to augment energy supplies. The country imports about 80 percent of its oil. With the threat of a further increase in oil prices, serious problems with regard to energy security is anticipated. India India's Primary Energy Consumption 30 23.8 24.4 25 22.5 21.1 20 20 15 10 5 0 2007 2008 2009 2010 2011E Source: International Energy Outlook- 2011 also runs the substantial risk of lesser thermal capacity being installed. While dependence on imported coal is increasing, supply of indigenous coal is likely to decrease in the coming years because of production and logistic constraints. Significant accretion of gas reserves and production in recent years will probably mitigate power needs only to a small extent. Large hydro power projects fundamentally altered river ecosystems, often fragmenting channels and changing river flows. Natural lakes take hundreds of years to evolve from oligotrophic (low in nutrients) to eutrophic (rich in nutrients) status. But man-made reservoirs underwent this transition within a few years. It has degraded water quality, harmed fisheries, and brought siltation. Further, where reservoirs displaced people or suddenly changed resource availability or agricultural capacity, they brought major socio-economic problems. Difficulties of large hydro projects are increasing and nuclear power is also inundated with problems. The country thus faces potentially severe energy supply constraints. Economic growth, increasing prosperity and urbanization, rise in per capita consumption, and spread of energy access are the key factors that would be responsible for substantially increasing the total demand for electricity. Thus there is an emerging energy supply-demand imbalance. According to a 2 P a g e
Mega Watts The Potential for Renewable Energy in India - 2012 Central Electricity Authority (CEA) report, the anticipated energy and peaking shortage in the country is estimated to be 10.3 percent and 12.9 percent, respectively, in 2011 and 2012. In view of electricity supply shortages, huge quantities of diesel and furnace oil are being used by all sectors industrial, commercial, institutional and residential. Lack of rural lighting is leading to largescale use of kerosene. This usage needs to be curtailed, as it is leading to enormous costs in form of subsidies, and increasing the country s import dependence. At the same time, a very large proportion of Indian citizens continue to live with no access to electricity and other forms of commercial energy. More than 50 percent of the population has little or no commercial energy access in their daily lives. Others with access often have to cope with poor and erratic availability and other fuels to complement the shortfall. With constraints in resource availability and in delivery mechanisms, traditional means of energy supplies are falling short. This is likely to be the case in the foreseeable future; energy access will continue to remain a problem. Role of Renewable Energy Renewable energy can make a substantial contribution in each of the above mentioned areas. It is in this context that the role of renewable energy needs to be seen. It is no longer alternate energy, but is increasingly becoming a vital part of the solution to the nation s energy needs. In terms of all renewable energy categories, India is currently ranked fifth in the India's Installed Power Capacity -2011 140,000 131,353 120,000 100,000 80,000 60,000 38,990 40,000 24,503 20,000 4,780 0 Thermal Nuclear Hydro RES Source: Ministry of Power, Government of India world with 15,691.4 MW grid-connected and 367.9 MW off-grid renewable-energy based power capacity. India is among the top five destinations worldwide for solar energy development according to Ernst & Young s renewable energy attractiveness index. 3 P a g e
Mega Watts(MW) The Potential for Renewable Energy in India - 2012 As on March 31, 2012, installed capacity of renewable energy based power generation was 24,503 MW, which is about 12 percent of the total installed capacity of 199,626 MW. The major renewable energy sources (RES) are wind energy, solar energy, biomass & waste energy, and small-hydro energy. 60000 50000 40000 30000 20000 10000 0 Potential and Installed Capacity of RES - 2011 50 000 45000 30000 15700 15000 3200 3000 482 Wind Small-Hydro Biomass & Waste Solar Potential Installed Capacity Source: MNRE Website I. Wind Energy The development of wind power in India began in the 1990 s, and has progressed steadily in the last few years. The short gestation periods for installing wind turbines, and the increasing reliability and performance of wind energy machines have made wind power a favoured choice for capacity addition in India. 14% Contribution From Various RES - 2011 2% 14% Wind Small-Hydro Biomass & Waste 70% Solar The country s total wind energy Source: Ministry of Power, Government of India potential has been estimated at 45,000 MW. The wind energy sector has seen significant investments spurred by the development 4 P a g e
potential, availability of wind farm equipment at competitive prices, and conducive government policies. Currently, wind power accounts for around 70 percent of the installed generation capacity from renewable sources. Presently, India (15,700 MW) is in fifth position, following China (44,733 MW), the US (40,180 MW), Germany (27,215 MW) and Spain (20,676 MW). Wind power accounts for nearly 8 percent of India s total installed power capacity. II. Small-Hydro Energy In India, hydro power projects with station capacity of up to 25 MW fall under the category of small hydro power (SHP). The total installed capacity of small hydro power projects as on March 31, 2012, was 3200 MW. However, the estimated potential for power generation from such plants is over 15,000 MW. Most of the latent potential is in the Himalayan states - as river-based projects - and in the other states as irrigation canal-based projects. The SHP programme is largely private investment driven. Since the projects are economically viable, the private sector is keen on investing in SHP projects. The viability of these projects improves with increase in the project capacity. III. Biomass & Waste Energy India s climatic conditions offer an ideal environment for biomass production. Biomass gasification is emerging as a method of power production that holds significant social and business benefits. In fact, bio-energy has remained critical to India s energy mix, with a total installed capacity of 3000 MW. The total biomass & waste energy potential in India has been estimated at over 30,000 MW. Biomass gasification based power production is able to generate power on small scales and offers a solution for producing off-grid green power Owing to its virtues, biomass gasification in India could play a key role in the electrification of rural and remote communities Indian industries could start using biomass gasification for power generation, replacing more costly heating options such as furnace oil India has an estimated potential of over 30,000 MW of power from biomass, but around 3000 MW has been exploited. Thus, over 90 percent of potential capacity lies untapped 5 P a g e
IV. Solar Energy Solar power has so far played an almost non-existent role in the Indian energy mix. The gridconnected capacity in the country now stands at 481.48 MW, while the total solar energy potential has been estimated at 50,000 MW. On the upside, the market is set to grow significantly in the next ten years, driven mainly by rising power demand, escalating fossil fuel prices, the ambitious National Solar Mission (NSM), various state level initiatives, renewable energy quotas (including solar energy quotas for utilities), as well as by falling international technology costs. India has great potential to generate electricity from solar energy and is on course to emerge as a solar energy hub. The techno-commercial potential of photovoltaics (PV) in India is enormous. With GDP growing in excess of 8 percent, the energy gap between supply and demand will only widen. Solar PV is a renewable energy resource capable of bridging this gap. Most parts of India have 300 330 sunny days in a year, which is equivalent to over 5000 trillion kwh per year. This is more than India s total energy consumption per year Average solar incidence stands at a robust 4 7 kwh/sq mtr/day About 66 MW of aggregate capacity is installed for various applications comprising one million industrial PV systems 80 percent of which is solar lanterns, home/street lighting systems and solar water pumps, among others The estimated potential envisaged by the ministry for the solar PV programme, i.e. solar street/home lighting systems, solar lanterns is 20 MW/sq km The potential of the solar thermal sector in India also remains untapped. The ministry has proposed an additional 500 MW during the Phase-I of the Jawaharlal Nehru National Solar Mission (JNNSM) Establishing manufacturing units at Export Oriented Units, SEZs or under the SIPS programme presents a good opportunity for firms. These can leverage India s cost advantage to export solar modules at competitive prices to markets in Europe and the United States 6 P a g e
Highlights of the Indian Renewable Energy Market A number of facts and factors make the Indian renewable energy market exciting for entrepreneurs and investors. Here are some highlights: 1. India is the most developed renewable energy market in South Asia, with annual revenues of about USD 185 billion. 2. It is the third most attractive country to invest in renewable energy, according to Ernst & Young. 3. The overall demand-supply gap in the energy sector is expanding due to an increase in the population s standard of living. The demand-supply gap in power is currently at 10.3 percent and is one of the key drivers of renewable energy. 4. The utilization of renewable energy sources is still relatively low in India, thus presenting excellent business potential. 5. The Indian government expects the sector to grow to USD 19 billion, between 2008 and 2012, with renewable energy making up 20 percent of the 70,000 MW of total additional energy planned from 2008-2012. 6. India has been attracting over USD 3 billion investment every year in renewable sector 7. The country is emerging as one of the largest potential sources of Certified Emission Reduction (CER) and Renewable Energy Certificates (REC). Government Incentives In the early 1980 s, the Ministry of New and Renewable Energy (MNRE) was established to encourage diversification of the country s energy supply and to satisfy the increasing energy demand of a rapidly growing economy. The MNRE issued guidelines to all state governments to create an attractive environment for the export, purchase, wheeling and banking of electricity, generated by renewable power projects. Some of the other key incentives provided by the Government of India for the renewable energy industry are: Feed-in-tariffs for both wind and solar energy Up to 80 percent accelerated depreciation for renewable energy investments 7 P a g e
Preferential tax rate of 15 percent, instead of the standard 30 percent Exemption from Central Sales Tax and customs duty concessions on soft loans for the import of material, components, and equipment used in renewable energy projects Establishment of the National Solar Mission (NSM), which aims to deploy 20 GW of solar energy by 2020 Soft loans for setting up renewable energy enterprises Tax holiday for 10 years for Biomass power projects Investments Renewable energy investment in India was the second fastest-growing among the G-20 in 2011, with investments increasing 54 percent to USD 10.2 billion. Wind resources received 45 percent of the financing (USD 4.6 billion), while 41 percent (USD 4.2 billion) went to solar. This growth propelled the country from the 10 th to the sixth place in the G-20; it now ranks fifth in terms of five-year investment growth. Foreign Direct Investment (FDI) The Indian government allows 100 percent foreign direct investment (FDI) in the renewable energy sector and has put in place favorable policies to attract foreign companies into the sector. Outlook Developing renewable energy can help India increase its energy security, reduce adverse impacts on the local environment, lower its carbon intensity, contribute to a more balanced regional development, and realize its aspirations for leadership in high-technology industries. According to a KPMG report, India is the third most favoured destination globally, for investments in the renewable energy sector. The report also says that the country will be a major source of new entrants into the sector, after the US and China. The Indian renewable energy market has become increasingly dynamic in recent years as a result of strong natural resources, greater accommodation to international investments and a variety of government incentives. Solar and wind energy will be the major areas to witness overseas investments and acquisitions in the near future. 8 P a g e
With all the attractive characteristics and potential stated above, India presents a significant market opportunity for renewable energy firms worldwide. However, these firms will need external guidance and assistance on several strategic and operational aspects before they are in a position to effectively tap into this opportunity. 9 P a g e