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Elephants CanDanceRenewable Energy in India – Implications for Investment<br />Narasimhan Santhanam<br />Renewable Energy ...
About EAI<br />Leading Indian renewable energy business intelligence, market strategy consulting firm<br />Work on all pri...
I’m here to talk about…<br /><ul><li>India Energy - Current Status
India Energy – Strategy for the Future
Electricity Grid Improvements
Focus on Renewables
Investments in Renewable Energy</li></ul>www.eai.in<br />ElephantsCanDance<br />
India Energy - Current Status<br />The Elephant Has Just Begun to Roar<br />www.eai.in<br />ElephantsCanDance<br />
GDP Growth<br />www.eai.in<br />ElephantsCanDance<br />
Electricity Demand Growth<br />www.eai.in<br />ElephantsCanDance<br />
Energy SourcesBut…the Elephant Has a Problem<br />www.eai.in<br />ElephantsCanDance<br />
Peak Electricity Shortage<br /><ul><li>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.</li></ul>www.eai.in<br />...
Villages without Electricity<br /><ul><li>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</li></...
Huge Oil Import Bill<br /><ul><li>Consume 3 million barrels per day
Produce 1 million barrels per day
Import about 700 million barrers per year
At $75 per barrel, that’s about $50 billion outflow
Easily wipes out all the gains we make from FDI (about $30 billion per year).</li></ul>www.eai.in<br />ElephantsCanDance<b...
CO2 Emissions Increase<br />www.eai.in<br />ElephantsCanDance<br />
Energy Sources<br /><ul><li>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 ene...
Oil<br /><ul><li>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 ab...
India currently imports about 70% of its oil</li></ul>www.eai.in<br />ElephantsCanDance<br />
Natural Gas<br /><ul><li>Demand expected to nearly double to 320 million standard cubic meters per day by 2015 (Source: Mc...
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. Wil...
Country currently imports 20% of its requirements</li></ul>www.eai.in<br />ElephantsCanDance<br />
Coal<br /><ul><li>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.</li></ul> This f...
Fossil Summary<br /><ul><li>Natural gas - imports about 15% of consumption; imports could increase with the fast growth of...
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 th...
The Problem with Fossil<br /><ul><li>Increases India’s reliance on outside countries for critical energy inputs
Makes a big hole in our $ reserves
Causes harm to the environment</li></ul>www.eai.in<br />ElephantsCanDance<br />
India’s Energy Strategy<br />The Elephant Starts Thinking<br />www.eai.in<br />ElephantsCanDance<br />
Energy Strategy<br /><ul><li>Strengthen Ties with Existing Sources – Realpolitik</li></ul>www.eai.in<br />ElephantsCanDanc...
Energy Strategy<br /><ul><li>Diversify Sources - buying up stakes in oil and natural gas fields worldwide</li></ul>www.eai...
Energy Strategy<br /><ul><li>More Support from Domestic Supplies - increasing the investments and by easing the restrictiv...
Energy Strategy<br /><ul><li>Increase Efficiency – A key strategy here is to make the Indian electricity grid more efficie...
Energy Strategy<br /><ul><li>Focus on Renewables - Increase reliance on renewable energy</li></ul>www.eai.in<br />Elephant...
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Transcript of "Elephants can dance renewable energy finance, spore - eai"

  1. 1. Elephants CanDanceRenewable Energy in India – Implications for Investment<br />Narasimhan Santhanam<br />Renewable Energy Finance, Singapore<br />Apr 13, 2010<br />
  2. 2. About EAI<br />Leading Indian renewable energy business intelligence, market strategy consulting firm<br />Work on all primary renewable energy sectors – solar, wind, biofuels/biomass, waste-to-energy and small hydro<br />Work on market research, entry and diversification strategy, economic and financial modelling and pre-feasibility analysis<br />Team comprises professionals from IITs and IIMs, with renewable energy, industry research and economics backgrounds<br />Based out of Chennai<br />More from www.eai.in<br />www.eai.in<br />ElephantsCanDance<br />
  3. 3. I’m here to talk about…<br /><ul><li>India Energy - Current Status
  4. 4. India Energy – Strategy for the Future
  5. 5. Electricity Grid Improvements
  6. 6. Focus on Renewables
  7. 7. Investments in Renewable Energy</li></ul>www.eai.in<br />ElephantsCanDance<br />
  8. 8. India Energy - Current Status<br />The Elephant Has Just Begun to Roar<br />www.eai.in<br />ElephantsCanDance<br />
  9. 9. GDP Growth<br />www.eai.in<br />ElephantsCanDance<br />
  10. 10. Electricity Demand Growth<br />www.eai.in<br />ElephantsCanDance<br />
  11. 11. Energy SourcesBut…the Elephant Has a Problem<br />www.eai.in<br />ElephantsCanDance<br />
  12. 12. Peak Electricity Shortage<br /><ul><li>India's peak power shortages are projected to worsen from
  13. 13. 17% peak deficit in 2009 (shortfall of 23 GW), to
  14. 14. 25% peak deficit by 2015 (shortfall of over 60 GW)
  15. 15. Electricity generation capacity, most of it coal fired, will more than treble from 2005 to 2030.</li></ul>www.eai.in<br />ElephantsCanDance<br />
  16. 16. Villages without Electricity<br /><ul><li>More than 60,000 villages without access to electricity
  17. 17. Ministry of Power has accelerated the Rural Electrification Program with a target of providing Power to All by 2012</li></ul>www.eai.in<br />ElephantsCanDance<br />
  18. 18. Huge Oil Import Bill<br /><ul><li>Consume 3 million barrels per day
  19. 19. Produce 1 million barrels per day
  20. 20. Import about 700 million barrers per year
  21. 21. At $75 per barrel, that’s about $50 billion outflow
  22. 22. Easily wipes out all the gains we make from FDI (about $30 billion per year).</li></ul>www.eai.in<br />ElephantsCanDance<br />
  23. 23. CO2 Emissions Increase<br />www.eai.in<br />ElephantsCanDance<br />
  24. 24. Energy Sources<br /><ul><li>Total primary energy usage – approx 600 MTOE (2008)
  25. 25. Primary energy will be more than double this by 2030.
  26. 26. For its electricity, transport and other industrial and domestic needs, India needs energy. Current sources of primary energy are:</li></ul>Coal, Natural Gas, Oil<br />Renewables – Hydro, biomass<br />Nuclear <br />www.eai.in<br />ElephantsCanDance<br />
  27. 27. Oil<br /><ul><li>Consumed 3 million barrels per day in 2009, up from about 1.2 million barrels per day in 1990.
  28. 28. Production - from 0.7 million barrels per day in 1990 to about 1 million barrels per day in 2009.
  29. 29. 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
  30. 30. India currently imports about 70% of its oil</li></ul>www.eai.in<br />ElephantsCanDance<br />
  31. 31. Natural Gas<br /><ul><li>Demand expected to nearly double to 320 million standard cubic meters per day by 2015 (Source: McKinsey Study)
  32. 32. Current demand of 166 mmscmd (million cu meter per day) made up of 132 mmscmd from domestic and rest from imported LNG
  33. 33. 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.
  34. 34. Country currently imports 20% of its requirements</li></ul>www.eai.in<br />ElephantsCanDance<br />
  35. 35. Coal<br /><ul><li>Uses about 600 million T per annum
  36. 36. Coal imports will increase almost seven-fold, accounting for 28% of India's total coal needs in 2030 from 12% in 2005
  37. 37. In 2009-10, imported about 60 million T (10%); expected to hit 100 million T within the next three years.</li></ul> This for a country which has the fourth largest coal reserves in the world – about 100 billion T of proven reserves<br />www.eai.in<br />ElephantsCanDance<br />
  38. 38. Fossil Summary<br /><ul><li>Natural gas - imports about 15% of consumption; imports could increase with the fast growth of industrialization
  39. 39. Coal - imports a little over 10% of its requirements, likely to increase steeply over the next five years
  40. 40. Oil - pleasantly surprised by the recent oil finds in Rajasthan, but over 60% reliance on outside countries for oil for the foreseeable future.</li></ul>www.eai.in<br />ElephantsCanDance<br />
  41. 41. The Problem with Fossil<br /><ul><li>Increases India’s reliance on outside countries for critical energy inputs
  42. 42. Makes a big hole in our $ reserves
  43. 43. Causes harm to the environment</li></ul>www.eai.in<br />ElephantsCanDance<br />
  44. 44. India’s Energy Strategy<br />The Elephant Starts Thinking<br />www.eai.in<br />ElephantsCanDance<br />
  45. 45. Energy Strategy<br /><ul><li>Strengthen Ties with Existing Sources – Realpolitik</li></ul>www.eai.in<br />ElephantsCanDance<br />
  46. 46. Energy Strategy<br /><ul><li>Diversify Sources - buying up stakes in oil and natural gas fields worldwide</li></ul>www.eai.in<br />ElephantsCanDance<br />
  47. 47. Energy Strategy<br /><ul><li>More Support from Domestic Supplies - increasing the investments and by easing the restrictive policies for private sector investments</li></ul>www.eai.in<br />ElephantsCanDance<br />
  48. 48. Energy Strategy<br /><ul><li>Increase Efficiency – A key strategy here is to make the Indian electricity grid more efficient</li></ul>www.eai.in<br />ElephantsCanDance<br />
  49. 49. Energy Strategy<br /><ul><li>Focus on Renewables - Increase reliance on renewable energy</li></ul>www.eai.in<br />ElephantsCanDance<br />
  50. 50. Overhauling the Electricity Grid<br />The Elephant Begins to Act<br />www.eai.in<br />ElephantsCanDance<br />
  51. 51. Electricity Grid - Overview<br />Generation capacity of about 150 GW; 663 billion units produced; CAGR of 5% over the last 5 years<br />The fifth largest electricity generation capacity in the world <br />Transmission & Distribution network of 6.6 million circuit km - the third largest in the world <br />www.eai.in<br />ElephantsCanDance<br />
  52. 52. Electricity Grid - Overview<br /><ul><li>Majority of Generation, Transmission and Distribution capacities are with public sector companies or State Electricity Boards (SEBs)
  53. 53. Private sector participation is increasing
  54. 54. Distribution licences for several cities are already with the private sector
  55. 55. Three large ultra-mega power projects of 4000MW each have been recently awarded to private sector</li></ul>www.eai.in<br />ElephantsCanDance<br />
  56. 56. Grid Problems<br /><ul><li>Poorly planned distribution networks – cross country grid not good enough
  57. 57. Overloading of system components
  58. 58. Low metering efficiency and bill collection
  59. 59. Power theft
  60. 60. Low operational efficiency of the public sector utilities</li></ul>www.eai.in<br />ElephantsCanDance<br />
  61. 61. Grid Progress<br /><ul><li>Inter-regional power transfer capacity end 2009 was 20,000 MW; plan to take it to 37,000 MW by 2012.
  62. 62. Unbundling State Electricity Board’s assets into separate entities for generation, transmission, and distribution - intention of eventual privatization
  63. 63. Improving metering efficiency
  64. 64. Auditing to create transparency and accountability at the state level
  65. 65. Improved billing and collection
  66. 66. Mandating minimum amounts of electricity from renewables; requiring preferential tariff rates for renewables</li></ul>www.eai.in<br />ElephantsCanDance<br />
  67. 67. Grid Progress<br /><ul><li>Policy framework: Electricity Act 2003 and National Electricity Policy 2005
  68. 68. 100% FDI permitted in Generation, Transmission & Distribution
  69. 69. 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
  70. 70. Independent regulators: Central Electricity Regulatory Commission for central PSUs and inter-state issues. Each state has its own Electricity Regulatory Commission </li></ul>www.eai.in<br />ElephantsCanDance<br />
  71. 71. Grid Progress<br /><ul><li>Implementation of key reforms is likely to foster growth in all segments
  72. 72. Unbundling of vertically integrated SEBs
  73. 73. “Open Access” to Transmission and Distribution networks
  74. 74. Select distribution circles to be franchised/privatized
  75. 75. Tariff reforms by regulatory authorities </li></ul>www.eai.in<br />ElephantsCanDance<br />
  76. 76. Grid Progress<br /><ul><li>Mobilising resources from private sector – Two routes for private sector participation:
  77. 77. 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);
  78. 78. Independent Private Transmission Company (IPTC) Route, wherein 100 percent equity shall be owned by the private entity.</li></ul>www.eai.in<br />ElephantsCanDance<br />
  79. 79. Grid Progress<br /><ul><li>Smart Grid
  80. 80. Demand-side management to selectively curtail electricity use for delinquent customers or neighbourhoods, while improving power quality for better customers.
  81. 81. Another driver behind the need for a smarter grid in India is its need for energy efficiency and increased use of renewables.</li></ul>www.eai.in<br />ElephantsCanDance<br />
  82. 82. Opportunities in Transmission Network<br /><ul><li>Additional 60,000 circuit km of Transmission network expected for the period 2007-2012
  83. 83. Private sector participation possible through JV and 100% equity mode
  84. 84. Total investment opportunity of about US$ 150 billion over a 5 year horizon (2007-2012)</li></ul>www.eai.in<br />ElephantsCanDance<br />
  85. 85. Focus on Renewables<br />A New Elephant<br />www.eai.in<br />ElephantsCanDance<br />
  86. 86. Renewables Contribution to Electricity<br />www.eai.in<br />ElephantsCanDance<br />
  87. 87. Renewables Contribution to Transport Fuel<br /><ul><li>Less than 0.5% of total transportation fuels comprises biofuels
  88. 88. Total production of ethanol and biodiesel combined were less than 0.25 million T (2009)</li></ul>www.eai.in<br />ElephantsCanDance<br />
  89. 89. Renewables with Short and Medium Term Potential<br /><ul><li>Solar
  90. 90. Solar PV
  91. 91. Solar CSP
  92. 92. Wind
  93. 93. Biofuels
  94. 94. Biodiesel
  95. 95. Ethanol
  96. 96. Second Generation Biofuels
  97. 97. Hydro
  98. 98. Small Hydro
  99. 99. Large Hydro
  100. 100. Biomass-based electricity
  101. 101. Waste to Energy</li></ul>www.eai.in<br />ElephantsCanDance<br />
  102. 102. Solar PV + CSP<br /><ul><li>Current installed capacity (grid connected) : Approx 6 MW for PV and 0 for CSP
  103. 103. Targets under the National Solar Mission : 20,000 MW by 2022 (for PV + CSP)
  104. 104. 2000 MW BY 2013
  105. 105. 10000 MW by 2017
  106. 106. Attractive Feed-in-tariffs and other incentives</li></ul>www.eai.in<br />ElephantsCanDance<br />
  107. 107. Wind<br /><ul><li>Potential: 90000 MW
  108. 108. Installed capacity – Approx 12,000 MW, expected to reach 17,000 MW by 2012
  109. 109. Investments in wind energy
  110. 110. 2007 - $2.2 billion
  111. 111. 2008 - $2.7 billion (63% of total RE investments)
  112. 112. 2009 – Over $3 billion (EAI estimate)
  113. 113. Accelerated depreciation benefits, or GBI</li></ul>www.eai.in<br />ElephantsCanDance<br />
  114. 114. Biofuels<br /><ul><li>Potential: Significant for both biodiesel and ethanol, esp with second gen crops - Jatropha (biodiesel) and Cellulosic feedstock (ethanol)
  115. 115. Currently, biofuels contribute less than 0.5% of total transport fuel
  116. 116. Feedstock availability, prices major concerns
  117. 117. Mandatory blending of 5% in petrol and diesel
  118. 118. Future depends on both government incentives and feedstock availability</li></ul>www.eai.in<br />ElephantsCanDance<br />
  119. 119. Hydro – Small Hydro<br /><ul><li>Potential of up to 15,000 MW
  120. 120. Current installed capacity – about 2500 MW
  121. 121. Small hydro investment in India grew by 300% 2007-08
  122. 122. $543 million in 2008 (15% of total RE investments)
  123. 123. $140 million in 2007
  124. 124. Concerns
  125. 125. Delays & long timelines
  126. 126. Poor transmission and distribution
  127. 127. Geological and social uncertainties
  128. 128. Regulatory challenges</li></ul>www.eai.in<br />ElephantsCanDance<br />
  129. 129. Large Hydro<br /><ul><li>Total potential of 150,000 MW
  130. 130. Installed capacity – 36,000 MW
  131. 131. Most investments are government dominated, but private investments beginning to happen
  132. 132. Total investments of 28,000 crores planned in the 11th five year plan (2007-12)
  133. 133. Concerns
  134. 134. High capex
  135. 135. Large gestation periods
  136. 136. Geological surprises
  137. 137. Societal and environmental impacts
  138. 138. Uneven distribution of hydro resources and possible demand-supply mismatch</li></ul>www.eai.in<br />ElephantsCanDance<br />
  139. 139. Biomass Power<br /><ul><li>Total available potential – 19500 MW
  140. 140. Exploited potential – 795 MW
  141. 141. Expected installed capacity by 2012 – 1000 MW
  142. 142. Dominated by small MW plants (1-5 MW)
  143. 143. Feedstocks used - waste biomass such as rice husk, cotton seed husk, crop waste
  144. 144. Gasification/pyrolysis is the process used for power production
  145. 145. Incentives from government - duty exemption on components, exemption in sales tax, depreciation benefits
  146. 146. Concerns - feedstock availability and price stability</li></ul>www.eai.in<br />ElephantsCanDance<br />
  147. 147. Waste to Energy<br /><ul><li>Types of waste considered – MSW, industrial waste
  148. 148. MSW – biodegradable household waste and sewage
  149. 149. Industrial waste – non-hazardous biodegradable waste
  150. 150. Potential - over 20,000 MW of power generation
  151. 151. Typical process used is anaerobic digestion. Gasification being explored
  152. 152. Concerns
  153. 153. Collection and segregation of waste
  154. 154. Cost and efficiency of technology</li></ul>www.eai.in<br />ElephantsCanDance<br />
  155. 155. Attractive RE Sectors<br />The most attractive renewable energy investment <br />opportunities for the short and medium term:<br /><ul><li>Solar PV
  156. 156. Wind
  157. 157. Small Hydro
  158. 158. Biomass-based Power</li></ul>www.eai.in<br />ElephantsCanDance<br />
  159. 159. Investments in Indian Cleantech($ billion)<br />Over 80% of the investment through project finance, rest through VC and PE investments<br />www.eai.in<br />ElephantsCanDance<br />
  160. 160. Foreign Companies that Have Invested in Renewable Energy<br /><ul><li>Abengoa Solar – CSP
  161. 161. Centrotherm PV – Polysilicon processing
  162. 162. Signet Solar – thin film module manufacturing
  163. 163. Vestas – wind turbine manufacturing
  164. 164. Gamesa – wind turbine manufacturing
  165. 165. eSolar – solar CSP power plants
  166. 166. Siemens – wind turbine manufacturing
  167. 167. Refex Energy – Solar PV
  168. 168. BP – Biodiesel
  169. 169. GE – wind turbine manufacturing
  170. 170. Biogas Nord – biogas plants</li></ul>www.eai.in<br />ElephantsCanDance<br />
  171. 171. By 2020…<br /><ul><li>India is likely to have about 38% of its total electricity powered by renewables, from about 33% today (including large hydro)
  172. 172. About 300 MW of electricity installed capacity, with a more efficient grid network
  173. 173. Most of its villages electrified
  174. 174. Much larger participation from private sector in energy
  175. 175. Hopefully much less reliance on foreign sources of energy</li></ul>www.eai.in<br />ElephantsCanDance<br />
  176. 176. Who Says Elephants Can’t Dance?<br />All you need to do is to look at India to see an elephant dancing, and DANCING PRETTY WELL.<br />Thank you!<br />NarasimhanSanthanam<br />narsi@clixoo.com<br />Mob: +91-98413-48117<br />www.eai.in<br />ElephantsCanDance<br />
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