elephants can dance renewable energy finance, spore - eai
TRANSCRIPT
Narasimhan Santhanam
Renewable Energy Finance, SingaporeApr 13, 2010
Elephants Can DanceRenewable Energy in India – Implications for Investment
• Leading Indian renewable energy business intelligence, market strategy consulting firm
• Work on all primary renewable energy sectors – solar, wind, biofuels/biomass, waste-to-energy and small hydro
• Work on market research, entry and diversification strategy, economic and financial modelling and pre-feasibility analysis
• Team comprises professionals from IITs and IIMs, with renewable energy, industry research and economics backgrounds
• Based out of Chennai• More from www.eai.in
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About EAI
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India Energy - Current Status India Energy – Strategy for the Future
Electricity Grid Improvements Focus on Renewables
Investments in Renewable Energy
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I’m here to talk about…
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India Energy - Current StatusThe Elephant Has Just Begun to
Roar
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GDP Growth
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Period GDP Growth (%)
1900-1950 1
1950-1980 3.5
1980-2000 6
2000-2007 8.9
India's peak power shortages are projected to worsen from 17% peak deficit in 2009 (shortfall of 23
GW), to 25% peak deficit by 2015 (shortfall of over
60 GW)
Electricity generation capacity, most of it coal fired, will more than treble from 2005 to 2030.
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Peak Electricity Shortage
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More than 60,000 villages without access to electricity
Ministry of Power has accelerated the Rural Electrification Program with a target of providing Power to All by 2012
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Villages without Electricity
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Consume 3 million barrels per day Produce 1 million barrels per day Import about 700 million barrers per year At $75 per barrel, that’s about $50 billion
outflow Easily wipes out all the gains we make from
FDI (about $30 billion per year).
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Huge Oil Import Bill
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Total primary energy usage – approx 600 MTOE (2008)
Primary energy will be more than double this by 2030.
For its electricity, transport and other industrial and domestic needs, India needs energy. Current sources of primary energy are:• Coal, Natural Gas, Oil• Renewables – Hydro, biomass• Nuclear
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Energy Sources
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Consumed 3 million barrels per day in 2009, up from about 1.2 million barrels per day in 1990.
Production - from 0.7 million barrels per day in 1990 to about 1 million barrels per day in 2009.
Recent findings of oil in Rajasthan by Cairn Energy. Cairn estimates that it will be able to achieve peak production of about 0.24 million barrels per day in 2011
India currently imports about 70% of its oil
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Oil
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Demand expected to nearly double to 320 million standard cubic meters per day by 2015 (Source: McKinsey Study)
Current demand of 166 mmscmd (million cu meter per day) made up of 132 mmscmd from domestic and rest from imported LNG
Hydrocarbon Vision 2025 – increasing proportion of natural gas in total energy consumption from 8% now to 20% by 2025. Will require investments of $40 - $50 billion across value chain.
Country currently imports 20% of its requirements
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Natural Gas
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Uses about 600 million T per annum
Coal imports will increase almost seven-fold, accounting for 28% of India's total coal needs in 2030 from 12% in 2005
In 2009-10, imported about 60 million T (10%); expected to hit 100 million T within the next three years.
This for a country which has the fourth largest coal reserves in the world – about 100 billion T of proven
reserves
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Coal
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Natural gas - imports about 15% of consumption; imports could increase with the fast growth of industrialization
Coal - imports a little over 10% of its requirements, likely to increase steeply over the next five years
Oil - pleasantly surprised by the recent oil finds in Rajasthan, but over 60% reliance on outside countries for oil for the foreseeable future.
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Fossil Summary
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Increases India’s reliance on outside countries for critical energy inputs
Makes a big hole in our $ reserves
Causes harm to the environment
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The Problem with Fossil
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India’s Energy StrategyThe Elephant Starts Thinking
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Strengthen Ties with Existing Sources – Realpolitik
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Energy Strategy
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Diversify Sources - buying up stakes in oil and natural gas fields worldwide
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Energy Strategy
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More Support from Domestic Supplies - increasing the investments and by easing the restrictive policies for private sector investments
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Energy Strategy
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Increase Efficiency – A key strategy here is to make the Indian electricity grid more efficient
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Energy Strategy
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Focus on Renewables - Increase reliance on renewable energy
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Energy Strategy
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Overhauling the Electricity Grid
The Elephant Begins to Act
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• Generation capacity of about 150 GW; 663 billion units produced; CAGR of 5% over the last 5 years
• The fifth largest electricity generation capacity in the world
• Transmission & Distribution network of 6.6 million circuit km - the third largest in the world
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Electricity Grid - Overview
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Majority of Generation, Transmission and Distribution capacities are with public sector companies or State Electricity Boards (SEBs)
Private sector participation is increasing Distribution licences for several cities
are already with the private sector Three large ultra-mega power projects
of 4000MW each have been recently awarded to private sector
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Electricity Grid - Overview
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Poorly planned distribution networks – cross country grid not good enough
Overloading of system components Low metering efficiency and bill
collection Power theft Low operational efficiency of the public
sector utilities
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Grid Problems
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Inter-regional power transfer capacity end 2009 was 20,000 MW; plan to take it to 37,000 MW by 2012.
Unbundling State Electricity Board’s assets into separate entities for generation, transmission, and distribution - intention of eventual privatization
Improving metering efficiency Auditing to create transparency and
accountability at the state level Improved billing and collection Mandating minimum amounts of electricity from
renewables; requiring preferential tariff rates for renewables
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Grid Progress
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Policy framework: Electricity Act 2003 and National Electricity Policy 2005
100% FDI permitted in Generation, Transmission & Distribution
Incentives: Income tax holiday for a block of 10 years in the first 15 years of operation; waiver of capital goods' import duties on mega power projects
Independent regulators: Central Electricity Regulatory Commission for central PSUs and inter-state issues. Each state has its own Electricity Regulatory Commission
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Grid Progress
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Implementation of key reforms is likely to foster growth in all segments
Unbundling of vertically integrated SEBs “Open Access” to Transmission and
Distribution networks Select distribution circles to be
franchised/privatized Tariff reforms by regulatory authorities
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Grid Progress
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Mobilising resources from private sector – Two routes for private sector participation: Joint Venture (JV) Route, wherein the
CTU/STU shall own at least 26% equity and the balance shall be contributed by the Joint Venture Partner (JVP);
Independent Private Transmission Company (IPTC) Route, wherein 100 percent equity shall be owned by the private entity.
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Grid Progress
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Smart Grid
Demand-side management to selectively curtail electricity use for delinquent customers or neighbourhoods, while improving power quality for better customers.
Another driver behind the need for a smarter grid in India is its need for energy efficiency and increased use of renewables.
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Grid Progress
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Additional 60,000 circuit km of Transmission network expected for the period 2007-2012
Private sector participation possible through JV and 100% equity mode
Total investment opportunity of about US$ 150 billion over a 5 year horizon (2007-2012)
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Opportunities in Transmission Network
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RE % of RE contribution
Wind 76
Small Hydro 16
Cogeneration 4
Bio-power 2
Others 2
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Renewables Contribution to Electricity
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Less than 0.5% of total transportation fuels comprises biofuels
Total production of ethanol and biodiesel combined were less than 0.25 million T (2009)
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Renewables Contribution to Transport Fuel
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Solar Solar PV Solar CSP
Wind Biofuels
Biodiesel Ethanol Second Generation Biofuels
Hydro Small Hydro Large Hydro
Biomass-based electricity Waste to Energy
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Renewables with Short and Medium Term Potential
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Current installed capacity (grid connected) : Approx 6 MW for PV and 0 for CSP
Targets under the National Solar Mission : 20,000 MW by 2022 (for PV + CSP)
2000 MW BY 2013 10000 MW by 2017
Attractive Feed-in-tariffs and other incentives
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Solar PV + CSP
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Potential: 90000 MW Installed capacity – Approx 12,000
MW, expected to reach 17,000 MW by 2012
Investments in wind energy 2007 - $2.2 billion 2008 - $2.7 billion (63% of total RE
investments) 2009 – Over $3 billion (EAI estimate)
Accelerated depreciation benefits, or GBI
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Wind
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Potential: Significant for both biodiesel and ethanol, esp with second gen crops - Jatropha (biodiesel) and Cellulosic feedstock (ethanol)
Currently, biofuels contribute less than 0.5% of total transport fuel
Feedstock availability, prices major concerns Mandatory blending of 5% in petrol and
diesel Future depends on both government
incentives and feedstock availability
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Biofuels
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Potential of up to 15,000 MW Current installed capacity – about 2500 MW Small hydro investment in India grew by 300%
2007-08 $543 million in 2008 (15% of total RE
investments) $140 million in 2007
Concerns Delays & long timelines Poor transmission and distribution Geological and social uncertainties Regulatory challenges
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Hydro – Small Hydro
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Total potential of 150,000 MW Installed capacity – 36,000 MW Most investments are government dominated,
but private investments beginning to happen Total investments of 28,000 crores planned in the
11th five year plan (2007-12) Concerns
High capex Large gestation periods Geological surprises Societal and environmental impacts Uneven distribution of hydro resources and
possible demand-supply mismatch
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Large Hydro
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Total available potential – 19500 MW Exploited potential – 795 MW Expected installed capacity by 2012 – 1000 MW Dominated by small MW plants (1-5 MW) Feedstocks used - waste biomass such as rice
husk, cotton seed husk, crop waste Gasification/pyrolysis is the process used for
power production Incentives from government - duty exemption
on components, exemption in sales tax, depreciation benefits
Concerns - feedstock availability and price stability
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Biomass Power
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Types of waste considered – MSW, industrial waste MSW – biodegradable household waste and sewage Industrial waste – non-hazardous biodegradable waste
Potential - over 20,000 MW of power generation Typical process used is anaerobic digestion.
Gasification being explored
Concerns Collection and segregation of waste Cost and efficiency of technology
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Waste to Energy
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The most attractive renewable energy investment
opportunities for the short and medium term:
Solar PV
Wind
Small Hydro
Biomass-based Power
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Attractive RE Sectors
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Investments in Indian Cleantech ($ billion)
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2004 2005 2006 2007 2008 CAGR
0.7 0.8 1.1 3.3 3.7 50%
Over 80% of the investment through project finance, rest through VC and PE investments
Abengoa Solar – CSP Centrotherm PV – Polysilicon processing Signet Solar – thin film module
manufacturing Vestas – wind turbine manufacturing Gamesa – wind turbine manufacturing eSolar – solar CSP power plants Siemens – wind turbine manufacturing Refex Energy – Solar PV BP – Biodiesel GE – wind turbine manufacturing Biogas Nord – biogas plants www.eai.in
Foreign Companies that Have Invested in Renewable Energy
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India is likely to have about 38% of its total electricity powered by renewables, from about 33% today (including large hydro)
About 300 MW of electricity installed capacity, with a more efficient grid network
Most of its villages electrified Much larger participation from private
sector in energy Hopefully much less reliance on
foreign sources of energy
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By 2020…
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All you need to do is to look at India to see an elephant dancing, and DANCING
PRETTY WELL.
Thank you!
Narasimhan [email protected]
Mob: +91-98413-48117
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Who Says Elephants Can’t Dance?
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