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
Government Initiatives
The Government has initiated several policies to promote and garner investments in the power sector. To accelerate capacity addition, several policy initiatives have been undertaken by the Ministry of Power. The National Electricity Policy (NEP) in fact, stipulates power for all and annual per capita consumption of electricity to rise to 1,000 units by 2012.
In order to attract foreign investments in the power sector, FDI up to 100 per cent is permitted under automatic route for projects of electricity generation (except atomic energy), transmission, distribution and power trading.
Some of the initiatives taken by the Government of India to boost the power sector are:
- The Government of Meghalaya is planning a hi-tech, environment-friendly approach to meet the state's power needs besides contributing to the environment through its Meghalaya Renewable Energy Policy
- The State Government has decided to develop up to 150 MW of solar PV based projects which are to be set up on the 'chaur'/pond where pisciculture is being undertaken. Bihar Renewable Energy Development Agency (BREDA) has been designated as the nodal agency for providing necessary support to facilitate the development of solar PV projects in the state
- Hydro Projects worth 2,500 MW across various states have been given clearance by the Forest Advisory Committee (FAC) and Ministry of Environment and Forest (MoEF)
- Dr Farooq Abdullah, Union Minister for New and Renewable Energy (MNRE), Government of India and Ms Carmen Vela Olmo, Minister of State for Research, Development and Innovation, Government of Spain, have agreed to enhance research, cooperation and technologies in the field of renewable energy
- India plans to develop a forecasting model for energy demand and supply that will help in policy decisions. The proposal has in-principle approval of the Prime Minister and the task to set up a model is entrusted to the Planning Commission
Road Ahead
Renewable energy is fast emerging as a major source of power. Wind energy is the largest source of renewable energy in India; it accounts for an estimated 87 per cent of total installed capacity in renewable energy. The country aims to increase the importance of wind power even further; 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 strong upside potential in biomass in the coming years.
Solar energy accounts for 1 per cent of total renewable energy installed capacity. However, the share is not indicative of the country’s true potential, which stands at an estimated 5,000 TWh per annum.
Exchange rate used: INR 1 = US$ 0.018 (as on April 16, 2013)
References: Ministry of Power, Press Information Bureau, Media Reports, RNCOS Report
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