FERROALLOYS : POWERLESS IN INDIA? Presentation on Power Crisis & Ferroalloy Industry in India

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Indian Power Shortage is Achilles Heel of the Ferroalloy Industry. Power Shortages are due to lower generation, Non - Availability of Thermal Coal results in further shortage. The Electric Transmission Grid is Collapsing and rising prices of fossile fuels leads to inevitable rise in power cost : will ferroalloy industry remain profitable ?
Nuclear Power in India remains Controversial.
India to see 6.7% shortage this fiscal
•In 2012-13, the energy shortfall touched 8.7 per cent while peak shortage reached 9 per cent.
•Overall, energy shortfall is expected to be 70,232 million units, resulting in a deficit of 6.7 per cent this fiscal.
•The requirement would be 10,48,533 million units whereas the availability is pegged at 9,78,301 million units.
•Transmission constraints between Northern-North Eastern-Eastern-Western - Southern Regional Grid restricts flow of power.
•The strains on India’s electricity network brutally exposed last summer when the grid collapsed for the best part of two days across north India - the world’s biggest power cut.
Thermal Coal supply by Coal India severely restricted – mines not expanded in time to take care of explosion in demand from the power sector.
•Overpricing of coal & poor coal quality of coal supplied by Coal India
•Mine stoppages due to flooding etc lead to severe seasonal shortages.
•Imported coal from Indonesia – rising coat and decreased availability. Restrictions on foreign ownership of coal mines & export of thermal coal – how long will the party last?
•60% of power generated in India comes from burning coal. Isn’t over dependence on thermal coal for power a dangerous situation?
•Many delayed projects due to lack of coal ….
Despite abundant reserves of coal, India faces a severe shortage of coal - India isn't producing enough to feed its power plants.
•Coal India, is constrained by primitive mining techniques and is rife with theft and corruption; Coal India has consistently missed production targets and growth targets.
•Poor coal transport infrastructure has worsened these problems.
•Most of India's coal lies under protected forests or designated tribal lands. Any mining activity or land acquisition for infrastructure in these coal-rich areas of India, has been rife with political demonstrations, social activism and public interest litigation.
Presentation ends with Ways out of the Crisis.

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FERROALLOYS : POWERLESS IN INDIA? Presentation on Power Crisis & Ferroalloy Industry in India

  1. 1. Ferroalloys Powerless in India ? 9 July 2013 / Prabhash Gokarn 1 National Conference on Energy Engineering, Analysis, Audit & Management Narula Institute of Technology July 8-10, 2013
  2. 2. 9 July 2013 / Prabhash Gokarn The presentation is an amalgamation of author’s own views and thoughts. Tata Steel does not necessarily subscribe to the views and thoughts expressed in the presentation and should not be held responsible for the same. Disclaimer 2
  3. 3. 9 July 2013 / Prabhash Gokarn Outline of Presentation Sl No Content Slides 1 Basic Statistics 6 2 Power Generation : Sources 4 3 Power Demand Breakup 5 & 6 4 Power Generation in India 8 - 10 5 The Indian Ferroalloy Industry – Prospects 11 - 19 6 FerroAlloys – Importance of Power 20 6 Indian Power Shortage is Achilles Heel of the Ferroalloy Industry 21 7 Power Problems 22-28 8 Impact on the Indian Ferroalloy Industry 29 3
  4. 4. 9 July 2013 / Prabhash Gokarn Annexures Sl No Content Page 1 Inputs to Steel Making 33 2 Inputs to Steel Making – Cost 34 3 80% of Ferroalloys go into Steelmaking 35 4 Rising Proportion of Steel is Made in India 36 5 Steel Use & Economic Growth 37 6 Indian FerroAlloy Industry 38 4
  5. 5. 9 July 2013 / Prabhash Gokarn INDIAN ELECTRIC POWER SITUATION PART - 1
  6. 6. 9 July 2013 / Prabhash Gokarn Basic Statistics India Power Situation : Installed capacity : 1.37 GW in Aug1947 : 156 GW in Jan 2010 : 257 GW in Jan 2013 Current Average growth in electricity demand : 10% CAGR India is world’s 5th largest electricity producer Per capita energy consumption : 778 kWh (2013) 6
  7. 7. 9 July 2013 / Prabhash Gokarn Electricity Statistics Sector MW %age State Sector 86,343.35 40.77 Central Sector 62,963.63 29.73 Private Sector 62,459.24 29.49 Total 2,11,766.22 Fuel MW %age Total Thermal 141713.68 66.91 Coal 121,610.88 57.42 Gas 18,903.05 8.92 Oil 1,199.75 0.56 Hydro (Renewable) 39,416.40 18.61 Nuclear 4,780.00 2.25 RES** (MNRE) 25,856.14 12.20 Total 2,11,766.22 100.00 7
  8. 8. 9 July 2013 / Prabhash Gokarn Power Generation : Sources Captive, 32, 12% Utility, 225, 88% Captive & Utility 8
  9. 9. 9 July 2013 / Prabhash Gokarn Power Demand • India's industrial demand accounted for 35% of electrical power requirement, domestic household use accounted for 28%, agriculture 21%, commercial 9%, public lighting and other miscellaneous applications accounted for the rest. • The electrical energy demand for 2016–17 is expected to be at least 1392 Tera Watt Hours, with a peak electric demand of 218 GW. • The electrical energy demand for 2021–22 is expected to be at least 1915 Tera Watt Hours, with a peak electric demand of 298 GW. 9
  10. 10. 9 July 2013 / Prabhash Gokarn Power Demand Break up 10 Industrial 35% Domestic Household 28% Agricultur e 21% Public Lighting 9% Others 7%
  11. 11. 9 July 2013 / Prabhash Gokarn 11 PowerGenerationinIndiaisGrowing
  12. 12. 9 July 2013 / Prabhash Gokarn 12 Power in India is mostly coal based
  13. 13. 9 July 2013 / Prabhash Gokarn Why Power Demand is Rising Fast • India's manufacturing sector is growing faster than in the past • Domestic demand is increasing rapidly as the quality of life for most Indians improve • About 125,000 villages are getting connected to India's electricity grid • Currently blackouts and load shedding artificially suppresses demand; could this be soon a thing of the past? Source : Powering India: The Road to 2017". McKinsey. 2008. 13
  14. 14. 9 July 2013 / Prabhash Gokarn FERROALLOY INDUSTRY IN INDIA PART - 2
  15. 15. 9 July 2013 / Prabhash Gokarn Ferroalloys • Used for manufacture of all steels and accounts for 8%(for plain carbon steel) to 30%(for stainless steel) of steel making cost. • Ferroalloys are used in the production of steel (as deoxidants, for refining and for alloying). • The principal functions of alloying steel is for increasing its resistance to corrosion and oxidation, improving hardenability, tensile strength, high temperature properties (such as creep strength), wear and abrasion resistance, etc. • Bulk Ferroalloys (viz. Ferro Manganese, Ferro Silico Manganese, Ferro Silicon, Ferro Chrome, etc., manufactured through Submerged Arc furnaces). • Ferroalloy manufacturing is power intensive 15
  16. 16. 9 July 2013 / Prabhash Gokarn Ferroalloy Manufacture needs Electricity Sl No Ferro Alloy Electricity Needed 1 FerroChrome 4300 kWh/MT 2 Ferro Manganese 2800 kWh/MT 3 Silico Manganese 4200 kWh/MT 4 Ferro Silicon 9000 kWh/MT …and lots of it!! 16
  17. 17. 9 July 2013 / Prabhash Gokarn Indian Ferroalloy Industry 17
  18. 18. 9 July 2013 / Prabhash Gokarn 18 Indian Ferroalloy Industry : Growing At Over 12% CAGR
  19. 19. 9 July 2013 / Prabhash Gokarn 19 Exports from India Growing over 20% CAGR
  20. 20. 9 July 2013 / Prabhash Gokarn 20 Significant Growth in Domestic Demand for Ferroalloys
  21. 21. 9 July 2013 / Prabhash Gokarn 21 Leading to Projected Increase in Ferroalloy Production
  22. 22. 9 July 2013 / Prabhash Gokarn 22 1 Ability to immediately scale up : •Large Capacity for Ferroalloys •Industry currently operating at 60% of rated capacity •New capacities coming up - near ports (Vizag, Haldia). 2 Location near high growth regions: •Freight advantage in markets such as China, Korea and Japan compared to Ukraine, Kazakhstan and South Africa •Short sailing time, freight advantage 3 Cost Advantages over China: •Domestically sourced LG & MG Mn Ore available for blending with imported HG Mn Ore. •Power, labour and inland freight costs comparable to China. Ferroalloy Industry : Advantage India (1)
  23. 23. 9 July 2013 / Prabhash Gokarn 23 Ferroalloy Industry : Advantage India(2) 4. Backward linkage to Ore: Chrome Ore - Indigenous Chrome ore of high grade quality available Manganese Ore – Low and medium grade Manganese ores abundantly available but need to be sweetened by import of high ore. 5 Reductants : Coke : Increasing use of indigenous coke/coal for ferro alloy making has helped the industry to mitigate the high cost of imported LAM Coke. Slowing GDP growth in China has prompted the Chinese government to withdraw Export Tax on Coke. 6 Rising domestic consumption of ferroalloys : The projected ~8% growth in carbon steel and ~10% growth in stainless steel production augurs well for the ferroalloy industry in India.
  24. 24. 9 July 2013 / Prabhash Gokarn 24 Ferroalloy Industry : Importance of Power
  25. 25. 9 July 2013 / Prabhash Gokarn IMPACT OF THE INDIAN POWER SHORTAGE PART - 3
  26. 26. 9 July 2013 / Prabhash Gokarn Indian Power Shortage is Achilles Heel of the Ferroalloy Industry • Power Shortage due to lower generation • Non - Availability of Thermal Coal resulting in further shortage • The Electric Transmission Grid is Collapsing • Rising prices of fossile fuels – inevitable rise in power cost : will ferroalloy industry remain profitable ? • Nuclear Power in India – Controversial • Transmission & Distribution Losses – who pays ? 26
  27. 27. 9 July 2013 / Prabhash Gokarn 27 POWER SHORTAGE Indiatosee 6.7% shortage this fiscal • In 2012-13, the energy shortfall touched 8.7 per cent while peak shortage reached 9 per cent. • Overall, energy shortfall is expected to be 70,232 million units, resulting in a deficit of 6.7 per cent this fiscal. • The requirement would be 10,48,533 million units whereas the availability is pegged at 9,78,301 million units. • Transmission constraints between Northern-North Eastern-Eastern- Western - Southern Regional Grid restricts flow of power. • The strains on India’s electricity network brutally exposed last summer when the grid collapsed for the best part of two days across north India - the world’s biggest power cut.
  28. 28. 9 July 2013 / Prabhash Gokarn 306.2 82.4 66.6 63.9 38.2 India Nigeria Bangladesh Congo Tanzania POWER SHORTAGE People WithoutAccess To Electricity, Mn Source : FT 31-May-13 28
  29. 29. 9 July 2013 / Prabhash Gokarn 29 POWER SHORTAGE Non - Availability of Thermal Coal • Thermal Coal supply by Coal India severely restricted – mines not expanded in time to take care of explosion in demand from the power sector. • Overpricing of coal & poor coal quality of coal supplied by Coal India • Mine stoppages due to flooding etc lead to severe seasonal shortages. • Imported coal from Indonesia – rising coat and decreased availability. Restrictions on foreign ownership of coal mines & export of thermal coal – how long will the party last? • 60% of power generated in India comes from burning coal. Isn’t over dependence on thermal coal for power a dangerous situation? • Many delayed projects due to lack of coal ….
  30. 30. 9 July 2013 / Prabhash Gokarn 30 Delayed Indian Industrial Projects Source : FT 31-May-13 Power 51% Metals 20% Roads 18% Oil & Gas 7% Mining 3% Others 1% Where is the coal?
  31. 31. 9 July 2013 / Prabhash Gokarn • Despite abundant reserves of coal, India faces a severe shortage of coal - India isn't producing enough to feed its power plants. • Coal India, is constrained by primitive mining techniques and is rife with theft and corruption; Coal India has consistently missed production targets and growth targets. • Poor coal transport infrastructure has worsened these problems. • Most of India's coal lies under protected forests or designated tribal lands. Any mining activity or land acquisition for infrastructure in these coal-rich areas of India, has been rife with political demonstrations, social activism and public interest litigations. Coal Problems .... 31
  32. 32. 9 July 2013 / Prabhash Gokarn • Poor pipeline connectivity and infrastructure to harness India's abundant coal bed methane and shale gas potential. • The giant new offshore natural gas field has delivered less fuel than projected. India faces a shortage of natural gas. • Hydroelectric power projects in India's mountainous north and northeast regions have been slowed down by ecological, environmental and rehabilitation controversies, coupled with public interest litigations. • India's nuclear power generation potential has been stymied by political activism since the Fukushima disaster in Japan. • Average transmission, distribution and consumer-level losses exceeding 30% which includes auxiliary power consumption of thermal power stations, etc. Other Problems of the Power Sector 32
  33. 33. 9 July 2013 / Prabhash Gokarn Power has the greatest impact on FerroAlloy Production Cost …..and India has the highest power cost 33
  34. 34. 9 July 2013 / Prabhash Gokarn THE POWERLESS FERROALLOY INDUSTRY OF INDIA PART - 4
  35. 35. 9 July 2013 / Prabhash Gokarn 35 FerroalloyIndustry–PowerlessinIndia? Power Cuts Reduces Production – increases cost UNEMPLOYMENT
  36. 36. 9 July 2013 / Prabhash Gokarn Ways Out • Renewal Power Generation : Wind, Solar, Tidal : Power generation from renewable sources worldwide will exceed that from gas and be twice that from nuclear by 2016 • Hydraulic fracturing technology and shale gas production – applications in India? • Coal Bed Methane and power from low rank coals, semi coals etc. • Energy Conservation : better technology, more efficient furnaces, reduction in transmission losses 36 Pillars of Energy Management Renewable energy Energy Conservation Planning Awareness & Capacity Building 36
  37. 37. 9 July 2013 / Prabhash Gokarn 37 is there light at the end of the tunnel?
  38. 38. 9 July 2013 / Prabhash Gokarn ANNEXURES PART - 5
  39. 39. 9 July 2013 / Prabhash Gokarn Annexures Sl No Content Page 1 Inputs to Steel Making 33 2 Inputs to Steel Making – Cost 34 3 80% of Ferroalloys go into Steelmaking 35 4 Rising Proportion of Steel is Made in India 36 5 Steel Use & Economic Growth 37 6 Indian FerroAlloy Industry 38 39
  40. 40. 9 July 2013 / Prabhash Gokarn Inputs to Steel Making 40
  41. 41. 9 July 2013 / Prabhash Gokarn Inputs to Steel Making - Cost 41
  42. 42. 9 July 2013 / Prabhash Gokarn 80% of Ferroalloys go into Steelmaking 42
  43. 43. 9 July 2013 / Prabhash Gokarn Rising Proportion of Steel is Made in India 43
  44. 44. 9 July 2013 / Prabhash Gokarn Steel Use & Economic Growth 44
  45. 45. 9 July 2013 / Prabhash Gokarn 45 Indian FerroAlloy Industry
  46. 46. 9 July 2013 / Prabhash Gokarn 4 Investment in Sustainable Energy 46
  47. 47. 9 July 2013 / Prabhash Gokarn 4 Investment in Low Carbon Growth 47
  48. 48. 9 July 2013 / Prabhash Gokarn 48

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