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Elephants

Dance

Can

Renewable Energy in
India Implications for
Investment
Narasimhan Santhanam
Renewable Energy Finance,
Singapore
Apr 13, 2010

About EAI
Leading Indian renewable energy business intelligence,
market strategy consulting firm
Work on all primary renewable energy sectors solar, wind,
biofuels/biomass, waste-to-energy and small hydro
Work on market research, entry and diversification strategy,
economic and financial modelling and pre-feasibility
analysis
Team comprises professionals from IITs and IIMs, with
renewable energy, industry research and economics
backgrounds
Based out of Chennai
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Im here to talk about


India Energy - Current Status
India Energy Strategy for the Future
Electricity Grid Improvements
Focus on Renewables

Investments in Renewable Energy

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India Energy - Current Status


The Elephant Has Just Begun to Roar

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GDP Growth
Period

GDP Growth (%)

1900-1950

1950-1980

3.5

1980-2000

2000-2007

8.9

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Electricity Demand Growth

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Energy Sources
Butthe Elephant Has a Problem

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Peak Electricity Shortage


India's peak power shortages are projected to
worsen from
17% peak deficit in 2009 (shortfall of 23 GW), to
25% peak deficit by 2015 (shortfall of over 60
GW)
Electricity generation capacity, most of it coal
fired, will more than treble from 2005 to 2030.
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Villages without Electricity


More than 60,000 villages without access to
electricity
Ministry of Power has accelerated the Rural
Electrification Program with a target of providing
Power to All by 2012

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Huge Oil Import Bill

Consume 3 million barrels per day


Produce 1 million barrels per day
Import about 700 million barrers per year
At $75 per barrel, thats about $50 billion outflow
Easily wipes out all the gains we make from FDI
(about $30 billion per year).

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CO2 Emissions Increase

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Energy Sources
Total primary energy usage approx 600 MTOE
(2008)
Primary energy will be more than double this by
2030.
For its electricity, transport and other industrial
and domestic needs, India needs energy. Current
sources of primary energy are:
Coal, Natural Gas, Oil
Renewables Hydro, biomass
Nuclear
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Oil
Consumed 3 million barrels per day in 2009, up
from about 1.2 million barrels per day in 1990.
Production - from 0.7 million barrels per day in
1990 to about 1 million barrels per day in 2009.
Recent findings of oil in Rajasthan by Cairn
Energy. Cairn estimates that it will be able to
achieve peak production of about 0.24 million
barrels per day in 2011
India currently imports about 70% of its oil
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Natural Gas
Demand expected to nearly double to 320 million standard
cubic meters per day by 2015 (Source: McKinsey Study)
Current demand of 166 mmscmd (million cu meter per day)
made up of 132 mmscmd from domestic and rest from
imported LNG
Hydrocarbon Vision 2025 increasing proportion of natural
gas in total energy consumption from 8% now to 20% by
2025. Will require investments of $40 - $50 billion across
value chain.
Country currently imports 20% of its requirements
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Coal
Uses about 600 million T per annum
Coal imports will increase almost seven-fold, accounting
for 28% of India's total coal needs in 2030 from 12% in 2005
In 2009-10, imported about 60 million T (10%); expected to
hit 100 million T within the next three years.
This for a country which has the fourth largest coal
reserves in the world about 100 billion T of proven
reserves

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Fossil Summary
Natural gas - imports about 15% of consumption;
imports could increase with the fast growth of
industrialization
Coal - imports a little over 10% of its
requirements, likely to increase steeply over the
next five years
Oil - pleasantly surprised by the recent oil finds
in Rajasthan, but over 60% reliance on outside
countries for oil for the foreseeable future.
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The Problem with Fossil


Increases Indias reliance on outside countries
for critical energy inputs
Makes a big hole in our $ reserves
Causes harm to the environment

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Indias Energy Strategy


The Elephant Starts Thinking

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Energy Strategy
Strengthen Ties with Existing Sources
Realpolitik

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Energy Strategy
Diversify Sources - buying up stakes in oil and
natural gas fields worldwide

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Energy Strategy
More Support from Domestic Supplies increasing the investments and by easing the
restrictive policies for private sector investments

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Energy Strategy
Increase Efficiency A key strategy here is to
make the Indian electricity grid more efficient

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Energy Strategy
Focus on Renewables - Increase reliance on
renewable energy

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Overhauling the Electricity Grid


The Elephant Begins to Act

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Electricity Grid - Overview


Generation capacity of about 150 GW; 663 billion
units produced; CAGR of 5% over the last 5 years
The fifth largest electricity generation capacity
in the world
Transmission & Distribution network of 6.6
million circuit km - the third largest in the world

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Electricity Grid - Overview


Majority of Generation, Transmission and
Distribution capacities are with public sector
companies or State Electricity Boards (SEBs)
Private sector participation is increasing
Distribution licences for several cities are
already with the private sector
Three large ultra-mega power projects of
4000MW each have been recently awarded
to private sector

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Grid Problems
Poorly planned distribution networks cross
country grid not good enough
Overloading of system components
Low metering efficiency and bill collection
Power theft
Low operational efficiency of the public
sector utilities

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Grid Progress
Inter-regional power transfer capacity end 2009 was
20,000 MW; plan to take it to 37,000 MW by 2012.
Unbundling State Electricity Boards assets into
separate entities for generation, transmission, and
distribution - intention of eventual privatization
Improving metering efficiency
Auditing to create transparency and accountability
at the state level
Improved billing and collection
Mandating minimum amounts of electricity from
renewables; requiring preferential tariff rates for
renewables
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Grid Progress
Policy framework: Electricity Act 2003 and National
Electricity Policy 2005
100% FDI permitted in Generation, Transmission &
Distribution
Incentives: Income tax holiday for a block of 10 years in
the first 15 years of operation; waiver of capital goods'
import duties on mega power projects
Independent regulators: Central Electricity Regulatory
Commission for central PSUs and inter-state issues. Each
state has its own Electricity Regulatory Commission
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Grid Progress
Implementation of key reforms is likely to foster
growth in all segments
Unbundling of vertically integrated SEBs
Open Access to Transmission and Distribution
networks
Select distribution circles to be
franchised/privatized
Tariff reforms by regulatory authorities

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Grid Progress
Mobilising resources from private sector Two routes
for private sector participation:
Joint Venture (JV) Route, wherein the CTU/STU
shall own at least 26% equity and the balance shall
be contributed by the Joint Venture Partner (JVP);
Independent Private Transmission Company (IPTC)
Route, wherein 100 percent equity shall be owned
by the private entity.

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Grid Progress
Smart Grid
Demand-side management to selectively curtail
electricity use for delinquent customers or
neighbourhoods, while improving power quality for
better customers.
Another driver behind the need for a smarter grid
in India is its need for energy efficiency and
increased use of renewables.

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Opportunities in Transmission
Network
Additional 60,000 circuit km of Transmission
network expected for the period 2007-2012
Private sector participation possible through JV
and 100% equity mode
Total investment opportunity of about US$ 150
billion over a 5 year horizon (2007-2012)

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Focus on Renewables
A New Elephant

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Renewables Contribution to
Electricity
RE
Wind
Small Hydro
Cogeneration
Bio-power
Others

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% of RE contribution
76
16
4
2
2

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Renewables Contribution to
Transport Fuel
Less than 0.5% of total transportation fuels
comprises biofuels
Total production of ethanol and biodiesel
combined were less than 0.25 million T (2009)

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Renewables with Short and


Medium Term Potential
Solar
Solar PV
Solar CSP
Wind
Biofuels
Biodiesel
Ethanol
Second Generation Biofuels
Hydro
Small Hydro
Large Hydro
Biomass-based electricity
Waste to Energy
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Solar PV + CSP
Current installed capacity (grid connected) :
Approx 6 MW for PV and 0 for CSP
Targets under the National Solar Mission : 20,000
MW by 2022 (for PV + CSP)
2000 MW BY 2013
10000 MW by 2017

Attractive Feed-in-tariffs and other incentives

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Wind
Potential: 90000 MW
Installed capacity Approx 12,000 MW,
expected to reach 17,000 MW by 2012
Investments in wind energy
2007 - $2.2 billion
2008 - $2.7 billion (63% of total RE
investments)
2009 Over $3 billion (EAI estimate)
Accelerated depreciation benefits, or GBI
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Biofuels
Potential: Significant for both biodiesel and
ethanol, esp with second gen crops - Jatropha
(biodiesel) and Cellulosic feedstock (ethanol)
Currently, biofuels contribute less than 0.5% of
total transport fuel
Feedstock availability, prices major concerns
Mandatory blending of 5% in petrol and diesel
Future depends on both government incentives
and feedstock availability

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Hydro Small Hydro


Potential of up to 15,000 MW
Current installed capacity about 2500 MW
Small hydro investment in India grew by 300% 200708
$543 million in 2008 (15% of total RE investments)
$140 million in 2007

Concerns

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Delays & long timelines


Poor transmission and distribution
Geological and social uncertainties
Regulatory challenges
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Large Hydro
Total potential of 150,000 MW
Installed capacity 36,000 MW
Most investments are government dominated, but
private investments beginning to happen
Total investments of 28,000 crores planned in the 11th
five year plan (2007-12)
Concerns
High capex
Large gestation periods
Geological surprises
Societal and environmental impacts
Uneven distribution of hydro resources and possible
demand-supply mismatch
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Biomass Power
Total available potential 19500 MW
Exploited potential 795 MW
Expected installed capacity by 2012 1000 MW
Dominated by small MW plants (1-5 MW)
Feedstocks used - waste biomass such as rice husk,
cotton seed husk, crop waste
Gasification/pyrolysis is the process used for power
production
Incentives from government - duty exemption on
components, exemption in sales tax, depreciation
benefits
Concerns - feedstock availability and price stability

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Waste to Energy
Types of waste considered MSW, industrial waste
MSW biodegradable household waste and sewage
Industrial waste non-hazardous biodegradable waste

Potential - over 20,000 MW of power generation


Typical process used is anaerobic digestion.
Gasification being explored
Concerns
Collection and segregation of waste
Cost and efficiency of technology

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Attractive RE Sectors
The most attractive renewable energy investment
opportunities for the short and medium term:
Solar PV
Wind
Small Hydro
Biomass-based Power

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Investments in Indian
Cleantech ($ billion)

2004

2005

2006

2007

2008

CAGR

0.7

0.8

1.1

3.3

3.7

50%

Over 80% of the investment through project finance,


rest through VC and PE investments

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Foreign Companies that Have


Invested in Renewable Energy

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Abengoa Solar CSP


Centrotherm PV Polysilicon processing
Signet Solar thin film module manufacturing
Vestas wind turbine manufacturing
Gamesa wind turbine manufacturing
eSolar solar CSP power plants
Siemens wind turbine manufacturing
Refex Energy Solar PV
BP Biodiesel
GE wind turbine manufacturing
Biogas Nord biogas plants
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By 2020
India is likely to have about 38% of its total
electricity powered by renewables, from
about 33% today (including large hydro)
About 300 MW of electricity installed capacity,
with a more efficient grid network
Most of its villages electrified
Much larger participation from private sector
in energy
Hopefully much less reliance on foreign
sources of energy

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Who Says Elephants Cant Dance?


All you need to do is to look at India to see an
elephant dancing, and DANCING PRETTY
WELL.
Thank you!
Narasimhan Santhanam
narsi@clixoo.com
Mob: +91-98413-48117
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