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Renewable energy cosumption in india analysis

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This is a paper for the Analysis of Renewable Energy Consumption in India, using various analytical techniques.

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Renewable energy cosumption in india analysis

  1. 1. Page !1 Application of Analytics to predict Renewable Energy Consumption in India. ! Author: Arpit Patil (CIN - 304397267) Professor: Marshal Vallelunga Subject: CIS-527

  2. 2. Page !2 Abstract This research paper seeks to observe the past, present and future trends in Consumption of Renewable Energy in India. As we look at the data, we see how the consumption increased very slowly from 1980, stayed almost unchanged until 1986 and experienced a sharp increase after 1990, only to fall again sharply around 2007-08 and again increase sharply. A mathematical equation has been derived, after applying the concept of Linear Regression to the data. This equation has been used to compare the actual value of data for a particular year and the value of data derived after plugging values into the variables of the equation. There is a variation by a certain degree in these two values. The paper seeks to throw some light on the factors that affected the accuracy of the model and use these facts and assumptions to predict the future trends. Finally, having understood the data and made some significant predictions, the paper seeks to prescribe or recommend the steps that need to be taken to ensure that the consumption of Renewable Energy increases in future.

  3. 3. Page !3 Introduction Renewable Energy has today become a very important field of research. With the unabashed use of fossil fuels across the world, the supply is rapidly decreasing whereas demand for more power has been increasing exponentially. If the world continues to exploit non- renewable energy sources such as these without looking for alternatives, these sources will be completely exhausted in no time. According to a recent study by Ecotricity - Britain’s leading green energy supplier, globally - every year we currently consume the equivalent of 11 billion tonnes of oil in fossil fuels. Crude oil is vanishing at the rate of 4 billion tonnes a year - If we carry on at this rate without any increase for our growing population and our aspirations, our known oil deposits will be gone by 2052. While developed countries have already started moving to Renewable Energy sources for satisfying their energy needs, Developing countries are yet to make a significant move to Renewable Energy due to the high cost of research involved and the complex technology it demands. Among the developing countries, two countries stand out when it comes to energy consumption. India and China are one of the most rapidly growing countries in the world and are in the race to become the next Super Powers. For this to become a reality, both countries need a continuous supply of energy and are in fact among the world’s highest consumers of energy. As per the estimates from Enerdata - The Global Energy Statistical Yearbook, China ranks the highest in terms of total energy consumption all over the world, whereas India is placed third after USA.

  4. 4. Page !4 China and India, both are under tremendous pressure from the western countries to slow down the enormous consumption of energy in the name of saving the environment and help reduce carbon footprint. Various treaties such as the Kyoto Protocol have significantly enforced the decrease in consumption of Non-Renewable sources of energy. While the idea of a pollution free environment is great, it leaves the developing countries at a disadvantage as they cannot afford to slow down their growth. In light of this fact, both China and India have made significant investments in the field of Renewable Energy and have deployed many clean technologies to meet the energy needs. In fact, India ranks 6th worldwide in terms of consumption of renewable energy. This paper seeks to analyze the consumption of renewable energy in India from the early 80s until 2011. It throws light on the trend that follows and tries to predict what will happen in the coming years and explain the current trend in detail. The concluding part reflects some measures that should be taken to ensure the consumption of renewable energy increases. This paper consists of three main parts: 1- Descriptive Analysis: Seeks to apply mathematical models to discover trends and answer What Happened and Why. 2- Predictive Analysis: Seeks to analyze the results of Descriptive analysis to predict future trends by exploiting historical data and identifying future risks and opportunities. 3- Prescriptive Analysis: Advanced analysis done at the second stage, i.e: Predictive Analysis, is turned into insight and decisions are made to obtain optimal results.

  5. 5. Page !5 Descriptive Analysis From the data set, we see that the from year 1980 unto 1987, the consumption of renewable energy was more or less stable. From 1990, there is a steady increase in consumption which follows a linear curve again until 1993. The curve follows a similar trend until year 2002, but rises sharply from 2003 onwards. The curve shows a sharp rise until 2007 and a steady fall in 2008 through 2010, after which it again rises sharply. To better understand the this trend, we have the data in a tabulated format:

  6. 6. Page !6 Table - 1 Y e B il 2 0 1 6 2 0 1 3 2 0 1 2 2 0 1 2 2 0 1 3 2 0 1 2 2 0 1 0 2 0 9 0 2 0 8 0 2 0 6 8 2 0 7 7 2 0 7 6 1 9 8 2 1 9 8 3 1 9 7 4 1 9 6 9 1 9 7 2 1 9 8 2 1 9 6 9 1 9 6 9 1 9 7 2 1 9 7 0 1 9 6 1 1 9 5 7 1 9 4 7 1 9 5 3 1 9 5 0 1 9 5 3 1 9 4 9 1 9 4 8 1 9 4 9 1 9 4 6
  7. 7. Page !7 Page 6

  8. 8. Page !7 We have the exact values for energy consumption for each year. However, if we were to analyze this trend and find out the reason behind it, we will have to apply an appropriate mathematical model and derive an equation. Here, we take a set of data from the year 1980 through 2000, illustrated in Table - 2, and apply the mathematical model of Linear Regression to it: Table - 2 Y e B il 2 0 7 6 1 9 8 2 1 9 8 3 1 9 7 4 1 9 6 9 1 9 7 2 1 9 8 2 1 9 6 9 1 9 6 9 1 9 7 2 1 9 7 0 1 9 6 1 1 9 5 7 1 9 4 7 1 9 5 3 1 9 5 0 1 9 5 3 1 9 4 9 1 9 4 8 1 9 4 9 1 9 4 6
  9. 9. Page !8 Here is how Linear Regression works: The goal of Regression Analysis is to model the expected value of a dependent variable ‘Y’ in terms of the value of an independent variable ‘X’. In simple linear regression, the model: Y = a0 + a1X + e, is used, where ‘e’ is an unobserved random error. In this model, for each unit increase in the value of ‘X’ , the conditional expectation of ‘Y’ increases by ‘a1’ units. The basic idea is to find a straight line passing trough a set of ’n’ points in such a way, that the vertical distances between the points of the data set are as small as possible. It is suggested that the line must pass through a minimum of 3 points on the graph to get near accurate results. When we apply this model of Regression Analysis to our new data set, i.e: Table - 2, we get a graph which looks something like this:

  10. 10. Page !9Page 9 Bilion KW 90 y = 1.9164x - 3749.7 67.5 45 22.5 0 1970 1978 1985 1993 2000 Fig - 1 Here, the independent variable ‘X’ is the year value, from 1970 through 2000 and the dependent variable ‘Y’ is the consumption in Billion KW. Notice here, the best fit straight line passes through 6 points. Hence, we can expect fairly accurate results. Also, the line is drawn such, that the vertical distance between the points and the line is as small as possible. We get the following equation as a result of applying the Linear Regression model: y = 1.9146x - 3749.7

  11. 11. Page !10 Descriptive Analysis seeks to answer 2 basic questions: 1 - What happened. 2 - Why it happened. The 1st question can be easily answered by looking at the data. We can see that the consumption of Renewable Energy in India showed a stable trend for the years with a gradual decline in some years and a very sharp rise towards the end of 2009-10. Now, to see why this happened, we will have to take into account a number of factors and events that have directly or indirectly influenced these trends. Let us look at these in a chronological order. 1980s was a time when India had just about started to open up its market and step into the Globalization bandwagon. It was only a decade after the 1971 war with Pakistan and the birth of Bangladesh towards the end of the months long war. With this success under it’s belt, India had re- established peace in the region and could concentrate on it’s own economic development without any disturbances. During the same decade, 1974 to be precise, India had successfully completed it’s 1st Nuclear Weapons tests. But it had come under very serious sanctions from the west and the United Nations. As a result of these sanctions, the petroleum and power industries in India faced a tremendous pressure to meet the ever-growing energy demands of the nation. Eventually, India started utilizing the knowledge gained through these nuclear tests to produce power to meet it’s energy demands.

  12. 12. Page !11 The very 1st Nuclear Power reactor was set up in 1969 at Tarapur, Mumbai. Significant signs of a widespread consumption of this renewable and clean source of energy started to show towards the end of the 70s. As can be seen in the graph, the consumption of renewables was pretty stable until 1990, with only a slight dip in 1987. In the 90s decade, there was a gradual increase in consumption of renewables. This was a time when India had slowly started making a mark at the global stage and most of the IT and Services jobs were beginning to get outsourced to major cities in the country. With this, big multinationals started investing heavily in India and it’s economy started to boom. As the GDP grew, the government started investing more into research. As a result, more nuclear plants were being set up to generate energy and other renewable sources like water, wind, tides and solar power etc were just about beginning to be tapped. As the economy became more global, it started getting affected by the world economy. During the 90s decade, the economy was going through a shaky patch. As a result of this, spending on research projects was slowed down as a precautionary measure. This is the reason why the curve from 1990 through 2000 is somewhat uneven. After the year 2000, we see a very sharp rise in the consumption of renewables. This was the time when India’s presence was being truly felt world over, with almost 70% of skilled jobs in IT and Services being outsourced to major IT hubs in India from the US. Foreign Direct Investment increased manifold and India was being recognized as an Information Technology Superpower. With the Rupee strengthening against the Dollar, Indian economy became one of the top 5 fastest growing economies in the world.

  13. 13. Page !12 On the other hand, crude oil prices around the world were becoming very unstable. There was prevailing fluctuation on a regular basis. The effect of this was seen in India too, with Petroleum prices going up one day and falling the other. Eventually, Government started to shift to the use of Compressed Natural Gas in public transportation vehicles. There were also very significant investment in Hydroelectric Power generation and Solar Power generation. Soon, there were many Hydroelectric Power Plants set up and they started producing a significant amount of power help bridge the gap between demand and supply. Solar Power systems were implemented in many Tier-2 and Tier-3 cities on pilot basis and later were implemented on a full scale. The slight slump that we can see from 2007 through 2009, is because of the great recession of 2008. The US economy was going through one of it’s worst phases. Many of it’s very reputed financial organizations declared bankrupt and shut shop. This had a ripple effect on all major economies of the world and India too had to bear the brunt of this. There was a severe strain on the economy and serious precautionary measures had to be taken. This is reflected by the slight decline in the consumption of renewables during that period. The cost of maintaining the Renewable Energy production plants and keeping them up-to-date is very high. Hence, every time the economy took a hit, the investment and funding for these was slowed down. This trend is clearly reflected in the graph, where we can see the curve going down whenever there was a strain on the economy.

  14. 14. Page !13 Predictive Analysis Now that we know what happened and the reasons behind it, we can use this analysis to predict what may happen in the future, taking into consideration the risks, threats and opportunities that would be encountered in the long run. For this analysis, we make use of the equation that we derived as a result of applying Linear Regression and conducting descriptive analysis on the data. The equation we have is: y = 1.9146x - 3749.7 Now, we have the data as in Table - 2, from 1980 till 2000. The above equation has been derived from this data. We can use this equation to predict the energy consumption in any year after 2000. Let’s say we want to predict the consumption of energy in the year 2005. Here, we have ‘x’ as the year value, i.e: 2005. Let us replace this in the equation and find out what the result is: y = 1.9146 (2005) - 3749.7 => y = 3838.773 - 3749.7 => y = 89.073

  15. 15. Page !14 Let us compare this value of ‘y’ that we just got, with the actual value for that year: The Actual value is: 109.26. So we see that there is a large deviation in the 2 values. This should not come as a surprise at all, since the data we are looking at is anything but linear. It forms a sinusoidal wave with highs and lows. Now let us try to reflect on the factors that led to this deviation in the 2 values. Here, we will have to take into account the risks involved and what may have happened to reflect such a huge variation in the data. As we have discussed earlier, the health of the economy directly affects the the consumption of renewables. As the economy was not very stable, consumption patterns also varied in a similar manner with the economy. It is important to note here, that none of the mathematical models guarantee a 100% accuracy. This is because there are several external factors that influence the data. Now, considering the degree of variation we have seen here, we should be able to predict what will happen in the near future. Let us predict the value of ‘y’ for the year 2011 and see how by what degree the actual value and the one we have got from the equation varies.

  16. 16. Page !15 Substituting the value ‘2011’ in ‘x’ for the above equation, we have: y = 1.9146 (2011) - 3749.7 => y = 3850.2606 - 3749.7 => y = 100.5606 Comparing this value with the actual value: 162, we see that the degree of variation has increased. Let us take a look at the current trends in energy generation and energy capacities: Total Renewable Energy Installed Capacity (May 2014)[3] Table - 3
 S o T o W i 2 1 S o 2 , S m 3 , B i 1 , B a g 2 , W a 1 0 T o 3 1
  17. 17. Page !16 ! Fig - 2 The above diagrams show the most recent data for energy capacity in India. We see that Wind Power is the largest source of renewable energy in India at present, followed by Hydro Power and Solar Power. If India made the massive switch from coal, oil, natural gas and nuclear power plants to renewable energy, it is possible that 70 percent of India’s electricity and 35 percent of its total energy could be powered by renewable resources by 2030. I personally think there are no technological or economic barriers to supplying almost 100 percent of India’s energy demand through the use of clean renewable energy from solar, wind, hydro and biogas by 2050.

  18. 18. Page !17 Challenges faced by Renewable Energy Industry in India: The single, most significant problem faced by this industry is funding. Renewable energy production is a very broad field and requires extensive R&D and use of sophisticated technologies and materials. This requires a very large scale investment and the government is often reluctant to invest in this sector. The other problem is that the energy demand has been shooting through the sky. In order to meet the ever growing demand, traditional method of using fossil fuels etc to generate energy are given more attention as the technology for harnessing these is already established and running. Hence, the renewable sector is often neglected. Risks that may be encountered by the sector in the years to come: As we now know, the Renewable Energy sector is largely dependent on the economy. If the economy is stable, the sector will also remain stable. However, the economy remains largely unpredictable and there is always a risk that it may slow down. Unless the economy becomes satisfyingly stable, there can never be a satisfying answer to how the Renewable Energy sector will fare in the coming years. At least, looking at the current trends, this seems to be an obvious observation.

  19. 19. Page !18 A major issue in renewable energy projects is their costliness. The projects are often capital-intensive and highly leveraged, with unto 70-80% financed through debt. As companies seek to scale up investments, overcoming financial risks is one of the biggest challenges. Beyond financial risk, a significant concern for plant investors, owners and operators is political and regulatory risk (62%) while weather- related volume risk comes in third for wind power producers (66%). These risks increase further as projects grow in scale and complexity. Now, assuming that these challenges remain unchanged and the risks are not minimized, we can predict that in the near future, the same trend will follow. Let us find out what will be the value of consumption in the year 2020, using the same equation and assuming that the same trend continues: y = 1.9146 (2020) - 3749.7 => y = 3867.492 - 3749.7 => y = 117.792 So, according to our equation, the consumption of renewable energy should be 117.792 Billion KW. However, the actual value may vary by a very large margin. This is how Predictive Analytics works. It uses the results of Descriptive Analysis and answers the question: ‘what will happen’ by taking into consideration the prevalent risks and challenges at present.

  20. 20. Page !19 Prescriptive Analysis Once we have made predictions, we can derive insights from it and use them to make informed decisions. This is what Prescriptive Analysis is used for. In this stage, the predictions arrived at after predictive analysis are given a serious thought and a decision is arrived at. It is decided as to what measures need to be taken to get a better result. From our predictive analysis, we see that if the same trend follows and the challenges and risks are not eliminated or minimized, the growth of the Renewable Energy sector will remain slow and largely dependent on the economy. There needs to be a plan in place to make renewable power generation independent of the economy and find easier and cheaper ways to generate power from the renewable sources. Here are some ways in which this can be achieved: Reducing Costs The challenge before us in the renewable energy sector generally, and in India particularly, is to reduce the per-unit cost of renewable energy. Hence, there is a continuous need to innovate to increase efficiencies and bring down costs. Innovations can be brought about in various ways – it is possible to harness lower wind speeds; the energy of tides and waves can be channeled to produce electricity; alternate transport fuels can make our journeys less carbon intensive; hydrogen can be an ideal energy storage and carrier; and it is possible to have a larger grid with lower losses of electricity.

  21. 21. Page !20 Innovations need not always be technology-based. Insightful policy interventions can also significantly increase the use of renewable energy. For instance, in India we need to work with the regulators to lay down the framework for tradable renewable energy certificates. While this will enable us to achieve a larger share of renewable energy in our electricity mix, the federal regulator’s recent announcement of normative guidelines for provincial regulators to fix tariffs for renewable energy will provide a mechanism for better returns for renewable energy developers. We should be hopeful that all these policy interventions will further boost investments in the sector. We must also work towards closer engagement with the banks and lending agencies to help developers gain access to easy and cheaper sources of finance. Let us look at some of the measures that can be taken to harness Renewable Energy: 1 Aggressively expand large-scale deployment of both centralized and distributed renewable energy including solar, wind, hydro, biomass, and geothermal to ease the strain on the present transmission and distribution system – and reach more off-grid populations. Facilitate growth in large- scale deployment by installing 100 million solar roofs and large utility-scale solar generation, through both centralized and distributed energy within the next 20 years. 2 Enact a National Renewable Energy Standard/Policy of 20 percent by 2020 – to create demand, new industries and innovation, and a new wave of green jobs.

  22. 22. Page !21 3 Develop favorable government policies to ease the project permitting process, and to provide startup capital to promote the exponential growth of renewable energy. Create and fund a national smart infrastructure bank for renewable energy. 4 Accelerate local demand for renewable energy by providing preferential Feed-in-Tariffs (FIT) and other incentives such as accelerated depreciation; tax holidays; renewable energy funds; initiatives for international partnerships/collaboration incentives for new technologies; human resources development; zero import duty on capital equipment and raw materials; excise duty exemption; and low interest rate loans. 5 Establish R&D facilities within academia, research institutions, industry, government and civil society to guide technology development. 6 Accelerate the development and implementation of solar and wind farms; utility-scale solar and wind generation nationwide. 7 Initiate a move to electrify automotive transportation or develop electric vehicles and/or plug-in hybrids – such as the Nissan Leaf or Chevy Volt, etc. Develop and implement time-of-day pricing to encourage charging of electric vehicles at night. Adopt nationwide charging of electric cars from solar panels on roofs, and solar-powered electric vehicle charging stations around the country. Thousands of these solar-powered recharging stations could spread across India just like the present public call offices (PCO), giving birth to the “Green Revolution.” These recharging connections could be deployed in highly-concentrated areas, including shopping malls, motels, restaurants, and public places where cars are typically parked for long periods.

  23. 23. Page !22 8 Aggressively invest in a smart, two-way grid (and micro-grid). Invest in smart meters, as well as reliable networks that can accommodate the two- way flow of electrons. Such networks need to be resilient enough to avoid blackouts and accommodate the advanced power generation technologies of the future. 9 Develop large-scale solar manufacturing in India (transforming India into a global solar manufacturing hub). 10 Work towards a Hydrogen Economy development plan. Hydrogen can be fed into fuel cells for generating heat and electricity – as well as for powering fuel cell vehicles. Produce hydrogen using renewable energy with solar and wind power. If done successfully, hydrogen and electricity will eventually become society’s primary energy carriers of the twenty-first century. India can ramp up its efforts to develop and implement large utility- scale solar and wind energy farms to meet the country’s economic development goals, while creating energy independence and realizing potentially enormous environmental benefits. Both issues have a direct influence on national security and the health of the Indian economy. These are some of the very important measures that can be taken to bring about a positive change in the current trends and make renewable energy an independent sector.

  24. 24. Page !23 Conclusion Today’s technology provides us with a real opportunity to transform the promise of boundless and clean energy into reality. From rooftop solar power in urban agglomerations, to decentralized and off-grid solutions in remote rural communities – the opportunities in renewable power are immense. I believe that governments, in their facilitative role, have to create enabling ecosystems, which will, in turn, facilitate the healthy unleashing of the entrepreneurial spirit of the private sector and lead to the rapid development and deployment of renewable energy. A renewable, energy-powered future is already here, not decades away. Newly built solar plants are already considerably cheaper than new nuclear plants per kilowatt hour of electricity produced, and solar energy will compete head on with conventional energy generation. In places such as California and Italy it has already reached so-called “grid parity.” India needs a radical transformation of its energy system to the use of renewable energy, especially solar and wind, to end the “India’s addiction to oil,” lift its massive population out of poverty and combat climate change. India can’t afford to delay renewable energy deployment to meet its future energy needs. So, we have seen how analytics can be applied to some very critical problems and hope to find an appropriate solution.

  25. 25. Page !24 Citations Websites: CSULA/Library: Articles and Databases/Data Planet: Renewable energy consumption in India. ecotricity.co.uk: Supply of Fossil Fuels. yearbook.enerdata.net: Share of renewables in primary consumption. en.wikipedia.org: Linear Regression, Total Renewable Energy by Installed capacity. theactuary.com: Risks in renewable energy industry. triplepundit.com: Challenges and Opportunities for renewable energy, steps taken to improve the renewable energy sector in India. eia.gov: Overview of renewable energy consumption in India.

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