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

April, 2013

Introduction

The Indian power sector is one of the most diversified sectors in the world. Power in India is generated from commercial sources like coal, lignite, natural gas, oil, hydro and nuclear power as well as other viable non-conventional sources like wind, solar, and agriculture and domestic waste. The demand for electricity in the country has been growing at a rapid rate and is expected to increase further in the years to come. In order to meet the increasing requirement of electricity, massive addition to the installed generating capacity in the country is required.

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 eighth highest in installed renewable energy capacity, according to a research report released by The Pew Charitable Trusts.

The country offers unlimited growth potential for solar photovoltaic (PV) industry as well. 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 megawatt (MW) by end of 2014, according to RNCOS research report titled, 'Indian Solar Energy Market Analysis'.

Market Size

India is the fifth largest producer and consumer of electricity in the world after US, China, Japan and Russia. Electricity production in India (excluding captive generation) stood at 876.4 terra watt hour (TWh) in FY12, a growth of 8.1 per cent over the previous fiscal. Over FY06-12, electricity production has expanded at a CAGR of 6 per cent. Electricity production for the period April to October 2012 stood at 509.4 TWh.

India's installed power generation capacity was 199.9 gigawatt (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 surge in the sector, the power sector has witnessed higher investment flows than envisaged. The power ministry has set a target for adding 76,000 MW of electricity capacity in the 12th Plan and 93,000 MW in the 13th Five-Year Plan (2017-2022).

The Working Group on Power for formulation of the 12th Five Year Plan has estimated total fund requirement of Rs 1,372,580 crore (US$ 252.4 billion) for the power sector. The main sources of financing are commercial banks, public financial institutions, dedicated infrastructure/power finance institutions, insurance companies, overseas markets, bilateral/multilateral credit, bond markets and equity markets. In addition, steps have been taken by the Government to make available funds through Credit Enhancement Schemes and Infrastructure Debt Fund etc.

The industry attracted foreign direct investment (FDI) worth Rs 36,084.54 crore (US$ 6.64 billion) during April 2000 to January 2013.

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

  • Renewable energy company Greenko has closed funding of £100 million (US$ 153.95 million) through equity participation by the Government of Singapore Investment Corporation Pte Ltd (GIC). The company, whose hydel clusters are located in Himachal, Sikkim and Karnataka, has started work on six new hydel projects with total capacity of 425 MW to its development pipeline
  • Crompton Greaves (CG), in consortium, has received a Rs 239 crore (US$ 43.96 million) order from Van Oord Offshore Wind Projects for the construction of an offshore high voltage substation for a wind farm in the Netherlands
  • Infosys has signed a five-year agreement with RWE Supply and Trading (RWEST), a leading European energy trading house, to provide technology services. The technology services will be used to power the trading platform systems of RWEST
  • National Thermal Power Corporation (NTPC) has commissioned its first 5 megawatt-peak (MWP) solar PV plant at the Dadri thermal power station in Uttar Pradesh (UP).
  • The Mahindra Group which entered the solar power sector three years ago, has said that it plans to add another 500 MW over the next two to three years. The company plans to leverage its presence in rural areas, looking at off-grid solar products as well