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

October, 2014

Introduction

Power or electricity is one of the most critical components of infrastructure, affecting economic growth and wellbeing of nations. The existence and development of adequate power infrastructure is essential for sustained growth of the Indian economy. With a production of 1,006 terawatt hours (TWh), India is the fifth largest producer and consumer of electricity in the world after US, China, Japan and Russia.

The Indian power sector is one of the most diversified in the world. Sources for power generation range from commercial sources such as coal, lignite, natural gas, oil, hydro and nuclear power to other viable non-conventional sources such as 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 grow 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.

Market Size

Electricity production in India (excluding captive generation) stood at 911.6 TWh in FY13, a 4 per cent growth over the previous fiscal. During FY14, electricity production stood at 967 TWh. Over FY07–14, electricity production expanded at a compound annual growth rate (CAGR) of 5.6 per cent.

The Planning Commission’s 12th Plan projects that total domestic energy production would reach 669.6 million tonnes of oil equivalent (MTOE) by 2016–17 and 844 MTOE by 2021–22.

As of April 2014, total thermal installed capacity stood at 168.4 gigawatt (GW), while hydro and renewable energy installed capacity totalled 40.5 GW and 31.7 GW, respectively. At 4.8 GW, nuclear energy capacity remained broadly constant from that in the previous year.

Indian solar installations are forecasted to be approximately 1,000 megawatt (MW) in 2014, according to Mercom Capital Group, a global clean energy communications and consulting firm.

Investment

The investment climate is positive in the power sector. Due to policy of liberalisation, the sector has witnessed higher investment flows than envisaged. The Ministry of Power has sent its proposal for the addition of 76,000 MW of power capacity in the 12th Five Year plan (2012-17), to the Planning Commission. The Ministry has set a target of adding 93,000 MW in the 13th Five Year Plan (2017-2022).

The industry has attracted FDI worth US$ 9,269.45 million during the period April 2000 to August 2014.

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

  • Three landmark initiatives for energy efficiency – Design Guidelines for Energy Efficient Multi-Storey Residential Buildings and Star Ratings for Diesel Gensets and for Hospital Buildings – were launched by Mr Dharmendra Pradhan, Minister of State with Independent Charge for Petroleum and Natural Gas, Government of India.
  • Neyveli Lignite Corporation (NLC), as part of its entry into green energy generation, has lined up renewable energy projects worth Rs 500 crore (US$ 81.51 million) to set up wind and solar energy projects of 80 MW in India.
  • Larsen & Toubro Ltd (L&T) has signed a contract worth US$ 200 million to set up a 225 MW gas-based power plant at Sikalbaha in Chittagong, Bangladesh.
  • Adani Power has bought Lanco Infratech’s Udupi power plant for Rs 6,000 crore (US$ 978.24 million), which has made it the largest acquisition in the thermal power space.
  • ReGen Powertech has forayed into solar power business as it plans to produce India’s first solar powered inverter devices.
  • Astonfield Renewables plans to set up two 2 MW solar projects in Mauritius with an investment of approximately US$ 8.2 million.

Government Initiatives

India has emerged as one of the fastest growing economies in the world. Its current economic performance reflects a healthy trend based on increased consumption, investment and exports. Over the next five years, this growth is expected to continue. The Government of India has identified the power sector as a key sector of focus to promote sustained industrial growth.

Some of the initiatives taken by the Government of India to boost the power sector of India are as follows:

  • The Government of India has planned to invest Rs 2 trillion (US$ 32.61 billion) in solar and wind power projects in the deserts to compensate for India’s depleting fossil fuel reserves.
  • Mr Narendra Modi, the Prime Minister of India, has dedicated to the nation the four laning of Pune-Solapur National Highway no 9 section and 765 kilovolt (kV) Raichur-Solapur transmission lines.
  • The Government of India has dedicated the 1,000 MW stage I of Mouda Super Thermal Power Project to the nation in Mouda, Maharashtra, on the August 21, 2014.
  • The Government plans to accelerate wind energy generation by adding an ambitious 10,000 MW every year, or five times the total new capacity that came up in the last fiscal, in order to reduce India's dependence on costly energy imports.
  • The Government of India has decided to provide automatic clearance for coal linkage to new power plants and will also be allowed to enhance capacity up to 50 per cent.
  • The Government of Andhra Pradesh (AP) plans to set up a 1,000 MW solar park in Guntur district. This move comes in the backdrop of AP seeking to offer 24x7 power supply from October 2, 2014.

Road Ahead

The government is targeting capacity addition of around 89 GW under the 12th (2012–17) and around 100 GW under the 13th (2017–22) Five-Year Plan. The expected investments in the power sector during the 12th Plan (2012–17) is US$ 223.9 billion. There is a tangible shift in policy focus on the sources of power. The government is keen on promotion of hydro, renewable and gas-based projects, as well as adoption of clean coal technology.

Wind energy is the largest source of renewable energy in India; it accounts for an estimated 87 per cent of total installed capacity (18.3 GW). There are plans to double wind power generation capacity to 20 GW by 2022.

Biomass is the second largest source of renewable energy, accounting for 12 per cent of total installed capacity in renewable energy. There is a strong upside potential in biomass in the coming years.

Exchange Rate Used: INR 1 = US$ 0.0163 as on October 29, 2014.

References: Ministry of Power, Press Information Bureau, Media Reports