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Power Sector in India - Renewable Energy, Wind Energy, Solar Power

January, 2013

Introduction

India, being one of the fastest growing economies with ever increasing demand represents an attractive destination for the power industry. The Indian power sector will add nearly 45,000 megawatt (MW) to its total installed capacity by 2013-14 to the existing production, according to a RNCOS research report, 'Indian Power Sector Analysis'.

Renewable energy is the new keyword in the Indian power sector and most of public and private players are coming up with plans to tap the potential market, on back of favourable government policies and initiatives. To tap the underlying potential, the States are focussing on those aspects of energy in which they have an edge, such as solar power, wind power, hydro power etc.

India has been one of the top performing clean energy economies in the 21st century, registering the fifth highest five-year rate of investment growth and the eighth highest in installed renewable energy capacity, according to a research report released by The Pew Charitable Trusts.

According to RNCOS research report titled, 'Indian Solar Energy Market Analysis', the country portrays unlimited growth potential for solar photovoltaic (PV) industry in future. India is endowed with vast potential of solar energy and is quickly developing itself as a major manufacturing hub for solar power plants. Besides, it is expected that the annual PV-installed capacity will grow at a compound annual growth rate (CAGR) of around 49.5 per cent during 2010-2014 to reach 1,500 MW by end of 2014.

Market Size

With a large swathe of rivers and water bodies, India has enormous potential for hydro power. Twelfth Five Year Plan (2012-2017) includes additional 30,000 MW of hydro-electric power generation. India currently has 4.4 gigawatt (GW) of net electricity generation capacity using nuclear fuels (across 20 reactors) and aims to increase it up to 20 GW by 2020; with one of the world's largest reserves of thorium, India has huge potential in nuclear energy.

Wind energy is the largest renewable energy source in India; projects like the Jawaharlal Nehru National Solar Mission (which aims to generate 20,000 MW of solar power by 2022) is creating a positive environment among investors keen to exploit India's potential. India has large reserves of coal; estimates for FY11 put the figure at about 285.8 billion tonnes. India's proven natural gas reserves measure about 1,074 billion cubic meters.

India's installed power generation capacity was 199.9 GW at the end of March 2012. India is set to become a global manufacturing hub with investments across the value chain. About 82 GW worth of generation capacity is set to be added during FY11-FY15; future investments will benefit from strong demand fundamentals, policy support, and increasing government focus on infrastructure.

Investments

The investment climate is very positive in the power sector. Due to the surge in the sector, it has witnessed higher investment flows than envisaged. The Ministry of Power has sent its proposal for addition of 76,000 MW of power capacity in the Twelfth Five Year plan (2012-2017) to the planning commission. The ministry has set a target for adding 93,000 MW in the Thirteenth Five Year Plan (2017-2022).

The industry attracted foreign direct investment (FDI) worth Rs 172.80 crore (US$ 31.57 million) in the month of May 2012.

Some of the major investments made into the Indian power sector are as follows:

  • National Aluminium Co Ltd (Nalco) has commissioned its first wind power project at Gandikota in Kadapa district of Andhra Pradesh (AP). The company has invested Rs 275 crore (US$ 50.25 million) for the 50 MW project
  • KEC International, an RPG Group company, has secured orders worth Rs 1,511 crore (US$ 276.13 million) in transmission, power system and cable businesses in India, Oman, Nepal and the US
  • Essar Power has commissioned the first phase of 600 MW, of its 1,200 MW, Mahan I power project in Madhya Pradesh (MP). The project entails an investment worth US$ 1.2 billion. The Mahan unit in MP will be Essar's eighth operational power plant
  • Lanco Infratech Ltd has signed a long-term sale contract of 300 MW power from its Unit 1 of Lanco Amarkantak Thermal Power Station to MP
  • Thermax has won a Rs 503 crore (US$ 91.92 million) turnkey contract from a Government enterprise to set up a captive power plant for a new three million tonnes per annum (MTPA) integrated steel plant