Potential and Opportunities in Indian Renewable Energy

Narasimhan SanthanamEnergy Alternatives India – EAI

www.eai.in

Presentation at AGICI Seminar, Milano, ItalyJul 7, 2011

About EAI

• Dedicated focus on renewable energy and cleantech for India

• Diversification, feasibility studies, market entry strategy, business intelligence

• Work with corporates on making their factories use more renewables

• Founded by professionals from IITs and IIMs• Based out of Chennai• More from www.eai.in – see also our club, forum,

mailing list…

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Contents

• WHY…– India and Indian renewable energy?

• WHAT…– is the status of and opportunities in Indian renewable energy?

• WHO…– from abroad is already present in the Indian renewable energy sector?

• HOW…– can you enter this exciting segment?

• AND…– a few other takeaways

WHY?– Why India?

– Why Indian Renewable Energy?

– India’s Energy Needs

– Investments in Indian renewable energy

Why India?

• One of the world’s fastest growing economies• Will be in the top 5 countries GDP-wise by 2020 ($1.5

trillion and growing at approx 9%)• Large and growing middle class• Low wage economy, optimal manufacturing base• 100 Indian companies have market cap of US$ 1bn • 1,000 Indian companies have received foreign

institutional investment• 125 Fortune 500 companies have R&D bases in India

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Why Indian Renewable Energy?• Critical drivers that propel the growth of renewable energy

sources in India:– Fast economic growth– Peak power deficit– Thousands of villages without access to grid

• Country has rich natural resources - esp solar, wind and biomass…and waste.

• Government (center and state) extremely proactive to the growth of renewable energy sources

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Why Indian Renewable Energy Now?

• Get an early mover advantage in one of the fastest-growing renewable energy markets

• Take advantage of a number of attractive government incentives.

• Obtain business partnerships and JVs with prominent Indian companies that might not be available later

• Enter early and go up the learning curve to benefit most when the market starts growing at exponential rate (look at the mobile industry, for instance)

India’s Fuel Needs

• India uses annually (2010 data)– 800 billion kWh of electricity– 138 million T of petroleum– 2.26 trillion cu ft of natural gas

• Electricity– In 2010, peak power shortage was 12 %. Electricity demand

expected to rise by 7.4% a year during the next quarter of a century.– Installed capacity – 171 GW– Expect to install 100 GW during 2012-17– Expected installed capacity 2020 – 350-400 GW

• 15% contribution from RE by 2020; expect to add 17 GW from renewables during 2012-17; wind (60%), solar (20%), biomass and small hydro (10% each)

Power Sources

• Of the 171 GW (Feb 2011), 18.3 GW is renewable energy.

• Wind represents about 13 GW, small hydro represents 2.8 GW, and about 2.2 GW of biomass.

Source: CEA

Thermal , 64.75%

Nuclear ; 2.78%

Hydro (large hydro) ; 21.73%

Other renewable energy sources ,10.73%

Total Electricity Installed Capacity: 171 GW (Feb 2011)

RE Investments in India

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2004 2005 2006 2007 2008 2009 2010

$0.70 $0.80 $1.10

$3.30 $3.70

$4.00 $4.50

Total Investment in Indian RE sector (in billions)

CAGR - 36%

Foreign Direct Investment in Renewable Energy

2006-07 2007-08 2008-09 2009-10 2.11

43.1585.27

497.91

All investments in $million

CAGR - 300%

WHAT?– Needs and Drivers

– Status of Renewable Energy in India

– Regional potential for renewable energy in India

– Attractive Opportunities for European Companies

Needs and Drivers

• Increasing electricity needs– Over 60,000 villages without electricity - Dire need for

distributed energy generation– Peak deficit over 10%– Significant industrial productivity loss due to power cuts –

7% decrease in turnovers of Indian companies, acc to Goldman Sachs

– Significant reliance on diesel as a standby source, increasing the import bill, and resulting in higher pollution

• Increasing needs of transport and liquid fuels

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Renewable Energy Status

• Solar• Wind• Biomass• Biofuels• Small Hydro

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• National Solar Mission– 20 GW by 2022; state targets in addition– KPMG estimates put total installed capacity 68 GW by 2022;

EAI estimates put it at 75 GW (solar PV+CSP+offgrid).– Focus on both PV and CSP, and thermal– Midway through the first phase (total 1000 MW)

• 200 MW of PV and 500 MW of CSP awarded

– State-specific Solar Missions – Rajasthan, Gujarat, Maharashtra– PV expected to have race ahead in the near term, CSP higher

prospects post 2015 and long term– Emphasis on developing the entire ecosystem

Solar Focus - Overall

• National Solar Mission– 10 GW by 2022; state targets in addition– 1 GW by end of 2013; 5 GW by end of 2017; 10 GW by 2022– Midway through the first phase

• 200 MW of PV allocated (5 MW each); 300 MW to be allocated soon

– Feed in tariffs in the range – 20-24 Euro cents/kWh– PV expected to have race ahead in the near term, CSP higher prospects

post 2015 and long term– Local content requirements– Emphasis on developing the entire ecosystem

– Opportunities for foreign companies: EPCs, developers, component or equipment manufacturing, solar farm analytics, training and support

Solar Focus - PV

• National Solar Mission– 10 GW by 2022; state targets in addition– Midway through the first phase

• 500 MW of CSP awarded

– Minimum capacity – 50 MW• Feed-in-tariffs range – 16-22 Euro c/kWh• PV expected to have race ahead in the near term, CSP higher

prospects post 2015 and long term• BHEL – Abengoa JV for CSP in India

• Opportunities for foreign companies: EPCs, developers, technology transfer, R&D collaboration

Solar Focus - CSP

• Total installed capacity – 14000 MW• Fifth largest installed capacity in the world • Estimates – 50,000 MW by 2020• Current annual additions of about 2500 MW, expected to increase to 4000

MW• Feed-in-tariffs in range – 5.5-9 Euro cents/kWh• Main companies – Suzlon, Vestas, Gamesa, GE, Siemens, Enercon, WinWind• Demand supply gap in turbines widening• Chennai Major hub for turbine manufacturing – Chennai hosts mfg for

Vestas, Gamesa, WinWind, Pioneer Wincon…

• Opportunities for foreign companies: Developers, turbine component manufacturing, wind energy analytics

Wind Focus

• India has more agricultural land than China (160 mill ha vs 137 mill ha)• Total biomass availability in India – about 400 million T per year; agro waste

availability – about 200 million T per year, which translates to about 30 GW of power capacity

• Total installed capacity (including cogeneration): about 2.2 GW (1.1 GW cogen, 0.9 GW combustion, 0.1 GW gasification)

• Biomass power divided into– Combustion – 5 MW and above; low efficiency; 800 MW installed capacity– Gasification – 10 kW to 2 MW; medium efficiency; 120 MW installed capacity

• Feed-in-tariffs in range – 5.5-8 Euro cents/kWh• Emerging – Pyrolysis and AD• Drivers – rural power needs, small scale power needs• Bottlenecks – biomass supply chain, price of biomass

• Opportunities for foreign companies – Technology transfer (esp for small scale biomass), research collaboration in energy crops, developer

Biomass Focus

• National Biofuels Mission– Blending targets for both biodiesel and ethanol

• Biodiesel– India is a diesel country – (65 million T diesel vs 17 million T gasoline)– Total installed capacity – 1.2 million T– Production – Less than 100,000 T– Biodiesel facing serious pressure on both supply side and demand side (price)

• Ethanol– India second largest sugar producer in the world (350 million T per annum; Brazil – 645 million

T)– 95 million gallons (0.32 million T) of fuel ethanol production – 2010– 5% blending will require about 150 million gallons (0.5 million T)– Tussle between use of ethanol for fuel vs. spirits vs. industrial use

• Opportunities for foreign companies: Research in oilseeds and cellulosic ethanol, research in increasing seed yield for crops such as Jatropha

Biofuels Focus

• Potential – 15000 MW• Status – 2950 MW (20% of total)• Grew at about 10% CAGR between 2005-2010; expected to grow at about 13% between

2010-2015• Drivers

– Power requirements in remote locations– Availability of small hydro resources in these locations– Requirements of baseload power

• Bottlenecks– Long approval times (over 3 years)– Very geography dependent

• Run of river and hydrokinetic in its nascent stages• Large companies more interested in large hydro• Number of companies in small hydro keen on selling their licences

• Opportunities for foreign companies – equipment and component supply, especially more efficient turbines and accessories

Small Hydro Focus

• Potential – 148700 MW• Status – 37400 MW installed capacity• Drivers

– Need for large-scale baseload power– Need for large-scale low cost power

• Bottlenecks– Large ecological imprint– Long time for starting off– Large capital requirements– Geological surprises

• Companies in large hydro – (Govt) SJVN, NHPC, Damodar Valley Corp., (Private) Tata Power, Reliance Power, Jaiprakash Power

• Opportunities for foreign companies – equipment and component supply, ability to bring in large-scale financing

Large Hydro Focus

• 42 million T of municipal solid waste (MSW)• 200 million T of agricultural waste• Indian cities alone generate 32 billion liters of sewage a day.• A wide variety of industrial waste, including animal waste from poultry and cattle farms• Potential – 17 MW for MSW and 29 MW for industrial waste• Drivers

– Need to dispose of waste in an environment friendly manner– Need to incentivise such waste disposal

• Bottlenecks– Complex logistics– Technology still evolving– Need to deal with government in many cases, slowing down processes

• Opportunities for foreign companies – technology transfer (esp gasification related domains), innovative tech to deal with distributed energy production using waste, tech for treatment for hazardous waste

Waste to Energy

Growth Potential for Renewable Energy Sources in IndiaShort term = less than 3 years; medium term = 3-8 years

RE Power Source Short Term Growth Potential

Medium Term Growth Potential

Solar PV High High

Solar CSP Medium High

Wind High High

Biomass Power High High

Small Hydro High High

Large Hydro Medium Medium

Waste to energy Medium High

Biofuels Low High

Geothermal Low Low

Wave Low Low

Tidal Low Low

Overall Market Potential in India

RE Power Source Opportunities

Solar PV EPC, developers, component/equipment mfg, analytics

Solar CSP EPC, developers, tech transfer

Wind Developers, component mfg, analytics

Biomass Developer, small scale biomass and energy crops research

Biofuels R&D in oilseeds and cellulosic ethanol

Small Hydro Equipment and component supply

Large Hydro Equipment and component supply, financing

Waste to energy Tech transfers, solutions for distributed waste to energy

Opportunity Matrix for Foreign Cos.

Summary of Attractive Opportunities

• Opportunities in all major sectors – especially solar PV, wind, biomass

• Opportunities across the value chain

component manufacturing->equipment supplies->power plant development->financing->training and support

• Specific opportunities for European companies in equipment and OEM sectors

• Waste to energy is an important pain point where technology partnerships are being sought – both MSW and industrial waste

• Positive Indian government policies for component manufacturing and local content

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Regional Potential for Renewable Energy

WHO?– European Companies in the Indian Renewable Energy Sector

European Companies in SolarCompany Country

AEG Power solutions Germany

Juwi Energy Germany

IBC SOLAR Germany

Gehrlicher Solar AG Germany

Centrotherm Photovoltaics AG Germany

Mola Solaire Produktions GmbH Germany

Siemens Germany

Bonfiglioli ItalyImmodo Solar SA Spain

Airees Systems Engineering Spain

Proener Renovables SpainT-Solar, Spain Spain

Abengoa Solar SpainAreva France

Solairedirect France

European Companies in Wind

Company Country

Leitner Group Italy

Bonfiglioli Italy

Caparo Energy Limited UK

Gamesa Spain

Gestamp Wind Steel Limited Spain

Moventas Finland

The Switch Finland

Vestas Denmark

European Companies in Biomass

Company Country

Danstoker (along with its subsidiary Omnical Kessel)

Germany

Lanxess AG Germany

Biogas Nord Germany

European Companies in Other RE

Company Country

Reykjaavik Geothermal (geothermal) Iceland

Sataram AG (waste to energy) Switzerland

HOW?

– Indian Govt Policies and Regulations Relevant to Foreign Investors

– Next Steps

Indian Govt Policies and Regulations Relevant to Foreign Investors

• National Solar Mission

• Foreign Direct Investment

• Electricity Act 2003 and Open Power Access

• Renewable Purchase Obligations (RPO) and Renewable Energy Certificates (REC)

• Local content requirements

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RECs and RPOs

RPO/REC (all renewables)

• Long term, sustainable, market driven

• REC trading started

• Voluntary purchase as part of corporate social responsibility (CSR) also reported

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Next Steps

• Do a more market potential study for the segment of your choice

• Hunt for local partners

• Evolve a marketing/sales plan

• Set up a presence in India

• Gowww.eai.in

AND….a few other takeaways

Legal Inputs on Entry of Foreign Companies into Indian RE

• Refer to the Guide

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Real Status of the Solar PV / CSP Industry in India

• JNNSM first round of bidding over – 150 MW allotted in PV and 470 MW in Solar Thermal

• Challenge in terms of reverse bidding prices

• Not all projects expected to achieve financial closure

• Banks hesitant to lend, but coming around

• Even though local content is mandatory for C-Si technology, no such guideline for thin films

• About 50% projects expected to use thin film technology

• No company yet in the polysilicon and wafer manufacturing in Indiawww.eai.in

Real Status of Solar PV / CSP industry in IndiaPolicy – Gujarat

- Allotted about 1200 MW of projects- Only 100 MW expected to come online by December 2011- No local content requirement

Policy - Others

- Rajasthan has announced policy- Maharastra enforcing RPOs

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Real Status of the Solar PV / CSP Industry in India

PV Manufacturing

• Module capacity at about 1.4GW, expected to increase

• Cell capacity at about 800 MW, expected to cross 1 GW soon

• No inverter company in India

EPC

• Many global EPC majors like Juwi Solar, Gehrlicher Solar have set up Indian subsidiaries

• Indian infrastructure/EPC companies also diversifying into solar – like L&T

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Indian Power Hierarchy

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GoI

Ministry of Power

Ministry of New & Ren Energy

Central Electricity Authority

CEREC

State

SNA

Other Organizations and Apex Bodies

• IREDA – Indian Renewable Energy Development Agency

• Power Finance Corporation

• Rural Electrification Corp.

• State Renewable Energy Development Agencies

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Specific Trade Associations between India and EU• A EU India coordinated call for proposals on research in the area of

solar technologies for Euro 10 million is underway• European Investment Bank is offering loans of upto Euro 1 billion to

support investments contributing the climate change mitigation through renewable energy projects.

• A 28 million Euro project on renewable energy, energy efficiency and low carbon urban development has been agreed upon. Work will commence beginning of 2012.

• Bilateral agencies such as the Nordic Investment Bank, the French Development Agency and KfW have also helped European firms access the Indian market.

• In 2008, an EU funded initiative, the European Business and Technology centre (EBTC), was launched to facilitate small and medium European firms to tap clean technology opportunities in India.

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Specific Trade Associations between India and Italy

• MoU on Indo-Italian Renewable Energy Cooperation between the Ministry of New and Renewable Energy, Government of India and the Ministry for Environment, Land and Sea of Italy (Feb 2007)

– Identifying various areas of interest and cooperation for development of new and renewable energy technologies, systems, sub-systems, devices, components etc. Monitoring and evaluating cooperative activities.

– Working Groups will be headed by the Joint Secretary of the Ministry of New and Renewable Energy and the General Director of the Department of Environmental Research and Development of the Ministry for Environment, Land and Sea, respectively. The Working Group meet twice a year in India and Italy alternatively.

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All the best!

Narasimhan SanthanamEnergy Alternatives India – EAI

Mob: +91-98413-48117narsi@eai.in, www.eai.in

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