Power
The share of solar capacity in the renewable energy sector is likely to increase to 11 per cent in FY16.

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

Latest update: July, 2016

Thermal power continues to lead in total installed capacity

•As on October 2015, total thermal installed capacity stood at 195.6 GW, while hydro and renewable energy installed capacity totalled 42.5 GW and 36.5 GW, respectively. At 5.8 GW, nuclear energy capacity had increased considerably which otherwise remained the same from 2010 - 15

•For the 12th Five-Year Plan, a total of 88.5 GW of power capacity addition is targeted; of which, 72.3 GW constitutes thermal power, 10.8GW hydro power and 5.3 GW nuclear power

Growth

Power generation has grown rapidly

•Electricity production in India stood at 1,048.7 BU in FY15, a 8.4 per cent growth over the previous fiscal.

•Over FY10–15, electricity production expanded at a CAGR of 6.3 per cent.

•Electricity production in India reached 654.5 BU during April -October 2015.

•According to the Planning Commission’s 12th Five Year Plan, total domestic energy production would reach 669.6 million tonnes of oil equivalent (MTOE) by 2016–17 and 844 MTOE by 2021–22.

Growth

 

Last Updated: July, 2016

POWER SECTOR REPORT | September, 2016

ELECTRICAL MACHINERY SECTOR REPORT | September, 2016

Introduction

Power is one of the most critical components of infrastructure crucial for the economic growth and welfare of nations. The existence and development of adequate infrastructure is essential for sustained growth of the Indian economy.

India’s power sector is one of the most diversified in the world. Sources of power generation range from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power to viable non-conventional sources such as wind, solar, and agricultural and domestic waste. Electricity demand in the country has increased rapidly and is expected to rise further in the years to come. In order to meet the increasing demand for electricity in the country, massive addition to the installed generating capacity is required.

India ranks third, just behind US and China, among 40 countries# with renewable energy focus, on back of strong focus by the government on promoting renewable energy and implementation of projects in a time bound manner.

Market Size

Indian power sector is undergoing a significant change that has redefined the industry outlook. Sustained economic growth continues to drive electricity demand in India. The Government of India’s focus on attaining ‘Power for all’ has accelerated capacity addition in the country. At the same time, the competitive intensity is increasing at both the market and supply sides (fuel, logistics, finances, and manpower).

Total capacity of renewable energy plants in India stood at 42,850 megawatts as on April 30, 2016, thereby surpassing the 42,783 megawatts capacity of large hydroelectricity projects in the country.$ Cumulative solar installations in India crossed the 7.5 gigawatt (GW) mark in May 2016, about 2.2 GW more than all of the solar installations in 2015.%

The Planning Commission’s 12th Five-Year Plan estimates total domestic energy production to reach 669.6 Million Tonnes of Oil Equivalent (MTOE) by 2016–17 and 844 MTOE by 2021–22. As of January 2016, total thermal installed capacity stood at 200.74 Gigawatt (GW), while hydro (renewable) energy installed capacity totaled 42.66 GW. At 5.78 GW, nuclear energy capacity remained broadly constant compared with the previous year.India's rooftop solar capacity addition grew 66 per cent from last year to reach 525 Mega Watts (MW), and has the potential to grow up to 6.5 Giga watts (GW)!. India’s wind power capacity, installed in FY2016, is estimated to increase 20 per cent over last year to 2,800 Mega Watt (MW)@, led by favourable policy support that has encouraged both independent power producers (IPP) and non-IPPs. India is expected to add nearly 4,000 Megawatts (MW)## of solar power in 2016, nearly twice the addition of 2,133 MW in 2015.

India’s wind energy market is expected to attract investments totaling Rs 1,00,000 crore (US$ 14.82 billion) by 2020, and wind power capacity is estimated to almost double by 2020 from over 23,000 MW in June 2015, with an addition of about 4,000 MW per annum in the next five years.

Investment Scenario

Around 293 global and domestic companies have committed to generate 266 GW of solar, wind, mini-hydel and biomass-based power in India over the next 5–10 years. The initiative would entail an investment of about US$ 310–350 billion.

Between April 2000 and March 2016, the industry attracted US$ 10.48 billion in Foreign Direct Investment (FDI).

Some major investments and developments in the Indian power sector are as follows:

  • The State Bank of India (SBI) has signed an agreement with The World Bank for Rs 4,200 crore (US$ 625 million) credit facility, aimed at financing Grid Connected Rooftop Solar Photovoltaic (GRPV) projects in India.
  • The World Bank Group has committed to provide US$ 1 billion for India’s solar energy projects and plans to work with other multilateral development banks and financial institutions to develop financing instruments to support future solar energy development in the country.
  • The Ministry of New and Renewable Energy (MNRE) has signed an agreement with Germany-based KfW Development Bank to fund the Rs 300 crore (US$ 44.47 million) floating solar projects in Maharashtra and Kerala, which is expected to generate over 310 GW of green energy.
  • CLP India, one of the largest foreign investors in India’s power sector, has acquired a 49 per cent stake in SE Solar, a Special Purpose Vehicle (SPV) set-up by Suzlon Group for building a 100 MW solar energy plant at Veltoor in Telangana, for Rs 73.5 crore (US$ 10.9 million).
  • The Ministry of New and Renewable Energy (MNRE) plans to launch an integrated bio energy mission with an investment of Rs 10,000 crore (US$ 1.48 billion) from FY 2017-18 to FY 2021-22, aimed at enhancing the use of bio-fuels like ethanol and biogas and reducing consumption of fossil fuels.
  • The world’s largest single rooftop solar power plant of 11.5 MW capacity spread across 42 acres was inaugurated in Beas Dera campus in Amritsar, which is expected to generate power for approximately 8,000 homes.
  • Canada's second largest pension fund, Caisse de depot et placement du Quebec (CDPQ), has set up its office in India and committed to invest US$ 150 million in the Indian renewable energy sector over the next three to four years.
  • Suzlon Energy Ltd, one of India’s leading wind turbine maker, plans to set up 3,000 Mega Watt (MW) power generation units of solar, wind and hybrid sources in Telangana, with an investment of Rs 1,200 crore (US$ 178 million).
  • India Power Corporation, one of the power generation companies in India, plans to expand its thermal power capacity by acquiring stake in Meenakshi Energy from French major Engie which has 89.11 per cent stake in the target company.
  • Sembcorp Industries have launched a 2,640 Mega Watt (MW) SembcorpGayatri power complex worth US$ 3 billion in Nellore, Andhra Pradesh which is the largest Foreign Direct Investment (FDI)–driven project on a single site in the thermal power industry in India.
  • Ostro Energy Private Limited, a renewable energy platform backed by private equity (PE) firm Actis, plans to invest US$ 425 million in projects in Andhra Pradesh, including two wind farms with a total capacity of 197.4 Mega Watt (MW).
  • SunEdison, world’s largest renewable energy company, plans to continue its focus on ‘Make in India’ by further reducing the cost of renewable energy and developing over 15 gigawatts (GW) of wind and solar projects in the country by 2022.
  • ThyssenKrupp India, the Indian arm of the German engineering conglomerate, plans to make high-grade environment-friendly boilers which use less fuel, for the Indian power sector by collaborating with a foreign company.
  • Aditya Birla Group has announced a partnership with the Abraaj Group, a leading investor in global growth markets, to build a large-scale renewable energy platform that will develop utility-scale solar power plants in India.
  • Sterlite Grid, India’s largest private operator of transmission systems, is joining hands with US major — Burn & McDonnell for its Rs 3,000 crore (US$ 444.72 million) power transmission project in the Kashmir valley.
  • Inox Wind Ltd, a subsidiary of Gujarat Fluorochemicals, a wind energy solutions provider, plans to double its manufacturing capacity to 1,600 MW at a total investment of Rs 200 crore (US$ 29.65 million) by the end of the next financial year.
  • The Dilip Shanghvi family, founders of Sun Pharma, acquired 23 per cent stake in Suzlon Energy, with a preferential issue of fresh equity for Rs 1,800 crore (US$ 266.83 million).
  • Reliance Power Ltd signed an accord with the Government of Rajasthan for developing 6,000 MW of solar power projects in the state over the next 10 years.
  • Hilliard Energy plans to invest Rs 3,600 crore (US$ 533.66 million) in Ananthapur district of Andhra Pradesh in the solar and wind power sector for the generation of 650 MW of power.
  • Solar technology provider SunEdison signed a definitive agreement to acquire Continuum Wind Energy, Singapore, with assets in India. The company, headquartered in Belmont, California, would take over 242 MW of operating wind assets that Continuum owns and operates in Maharashtra and Gujarat as well as 170 MW of assets under construction.
  • Japanese internet and telecommunications giant SoftBank, along with Bharti Enterprises (of Sunil Mittal) and Taiwanese manufacturing giant Foxconn, plan to invest US$ 20 billion in solar energy projects in India.

Government Initiatives

The Government of India has identified power sector as a key sector of focus so as to promote sustained industrial growth. Some initiatives by the Government of India to boost the Indian power sector:

  • The Government of India plans to set up a trading platform for clean energy, which will be jointly developed by the Ministry of New and Renewable Energy (MNRE) and Power Trading Corporation of India (PTC), to help states buy, sell and trade renewable-based power.
  • The Government of India and the Government of the United Kingdom have signed an agreement to work together in the fields of Solar Energy and Nano Material Research, which is expected to yield high quality and high impact research outputs having industrial relevance, targeted towards addressing societal needs.
  • Mr Piyush Goyal, Minister of State (Independent Charge) for Power, Coal, New and Renewable Energy, has stated that the Government of India has set a target to electrify all un-electrified villages in the country by the end of 2016.
  • The Ministry of Petroleum and Natural Gas is seeking to enhance India's crude oil refining capacity through 2040 by setting up a high-level panel, which will work towards aligning India's energy portfolio with changing trends and transition towards cleaner sources of energy generation.
  • The Government of India plans to start as many as 10,000 solar, wind and biomass power projects in next five years, with an average capacity of 50 kilowatt per project, thereby adding 500 megawatt to the total installed capacity.
  • Mr Piyush Goyal, Minister of State (Independent Charge) for Power, Coal and New & Renewable Energy outlined Government of India’s goal to provide electricity to every home in India by 2020, while also focussing on ensuring the cost of power is affordable to everyone.
  • Government of India has asked states to prepare action plans with year-wise targets to introduce renewable energy technologies and install solar rooftop panels so that the states complement government's works to achieve 175 Gigawatts of renewable power by 2022.
  • Under the Deen Dayal Upadhyaya Gram Jyoti Yojna (DDUGJY), the Government of India has electrified 258 villages across the country between February 15, 2016 and February 21, 2016 and has decided to electrify remaining 18,452 unelectrified villages by May 01, 2018.
  • The Government of India plans to sell another 5 per cent stake in the country's largest power producer National Thermal Power Corporation (NTPC), at a floor price of Rs 122 (US$ 1.78) per share, which will help the government raise over Rs 5,000 crore (US$ 733.6 million), thereby helping to raise funds as part of the divestment plan.
  • The Ministry of New and Renewable Energy (MNRE) has outlined new guidelines which allow state government to use its unproductive and non-agricultural land for solar parks, thereby minimising the use of private land and reducing the problems faced and costs incurred for land acquisition for solar park projects.
  • The Government of India plans to auction large sized hydropower projects, similar to the auction of Ultra Mega Power Projects (UMPPs) for thermal power plants of capacity 4,000 megawatt (MW) in Sasan in Madhya Pradesh and Mundra in Gujarat, which have been setup in a cost effective manner.
  • The Union Cabinet has approved amendments to the new power tariff policy under the Electricity Act that aims to improve regulations for setting rates, promote clean energy and ensure uninterrupted supply to all consumers by FY 2021-22.
  • The Union Cabinet has approved the Ujwal DISCOM Assurance Yojna (UDAY) for financial turnaround and revival of power distribution companies (DISCOMs), which will ensure accessible, affordable and available power for all.
  • The Government of India has resolved the issues regarding transfer of mining leases and grant of forest clearances to the winning bidders of coal blocks. It expects operations to start in about 10 more mines by March 2016, easing coal availability to the projects attached to these mines.
  • The Ministry of Power has planned to provide electricity to 18,500 villages in three years under the Deendayal Upadhyaya Gram Jyoti Yojana (DUGJY). Out of these, 3,500 villages would receive electricity through off-grid or renewable energy solutions.
  • The Ministry of New & Renewable Energy is implementing two national level programmes, namely Grid Connected Rooftop & Small Solar Power Plants Programme and Off-Grid & Decentralised Solar Applications, in order to promote installation of solar rooftop systems, as per Mr Piyush Goyal, Minister of State (Independent Charge) for Power, Coal & New and Renewable Energy.
  • The Government of Odisha plans to set up a large 1,000-MW solar power park under public-private partnership (PPP) mode involving an investment of about Rs 6,500 crore (US$ 953.67 billion).
  • The Government of Telangana plans to set up an incubator centre, in collaboration with University of Austin, Texas, for start-ups in the renewable energy sector, to support new companies entering the renewable energy market.
  • A Joint Indo-US PACE Setter Fund has been established, with a contribution of US$ 4 million from each side to enhance clean energy cooperation.
  • The Government of India announced a massive renewable power production target of 175,000 MW by 2022; this comprises generation of 100,000 MW from solar power, 60,000 MW from wind energy, 10,000 MW from biomass, and 5,000 MW from small hydro power projects.
  • The Union Cabinet of India approved 15,000 MW of grid-connected solar power projects of National Thermal Power Corp Ltd (NTPC).

The Road Ahead

The Indian power sector has an investment potential of Rs 15 trillion (US$ 222.36 billion) in the next 4–5 years, thereby providing immense opportunities in power generation, distribution, transmission, and equipment, according to Union Minister Mr Piyush Goyal.

The government’s immediate goal is to generate two trillion units (kilowatt hours) of energy by 2019. This means doubling the current production capacity to provide 24x7 electricity for residential, industrial, commercial and agriculture use.

The Government of India is taking a number of steps and initiatives like 10-year tax exemption for solar energy projects, etc., in order to achieve India's ambitious renewable energy targets of adding 175 GW of renewable energy, including addition of 100 GW of solar power, by the year 2022. The cumulative installed capacity of solar power in India has crossed the 4 Gigawatt mark as of June 30, 2015. The government has also sought to restart the stalled hydro power projects and increase the wind energy production target to 60 GW by 2022 from the current 20 GW.

Exchange Rate Used: INR 1 = US$ 0.0148 as on July 11, 2016

References: Media Reports, Press Releases, Press Information Bureau (PIB)

Note: # - EY’s Renewable Energy Country Attractiveness Index, ! - by 2020 as per ‘India Solar Rooftop Map | 2016 Edition’ by ‘Bridge to India’, @ - as per rating agency ICRA, ## - as per global clean energy communications and research firm Mercom Capital Group, $- as per data from Central Electricity Authority, % - according to a report by Mercom Capital

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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