INDIA IS 3rd MOST FAVOURED DESTINATION FOR INVESTMENT IN GREEN ENERGY

In a recently released report titled Green Power 2011 by KPMG a global firm has termed India as the third most favoured destination for investment in renewable energy in the world with 35% respondents behind only US (53%) & China (38%), I believe it won’t be long before we take over the dragon. The other countries in top five are Germany (34%) and UK (33%), I feel India has an edge over others as European markets are fast reaching maturity while Indian market is still evolving and has great potential, further Chinese manufacturer are dependent on European market we have a very potential domestic market. Report adds that "Some 78 per cent of all survey respondents expect new players to come from China, followed by North America (59 per cent), India (42 per cent) and Western Europe (41 per cent)," it added.

Indian renewable energy market has become increasingly dynamic in recent years as a result of strong natural resources, greater accommodation to international investments and a variety of government incentives. "In India, we see increasing trends towards sustained M&A activity in the renewable space, specifically wind, small hydro, and solar sub-segments going forward. With clear thrust on this space, and a supportive policy and regulatory environment, we see this activity picking up slowly but steadily," said Richard Rekhy, Head of Advisory, KPMG in India. "The deal sizes, however, may be smaller (as compared to global benchmarks) to start with," he added.

The government is playing its own part by providing an array of incentives to firms in the renewable energy sector including setting up of renewable energy generating standards for utilities, creating a structure for trading renewable energy certificates. On the tax incentives front, the government has allowed project developers to take 80 per cent accelerated depreciation on assets deployed in renewable energy generation and given a ten year tax holiday to the sector and concessional duties for imports.

Solar and wind energy will be the driving India Renewable Energy Market in terms of investments and acquisition. The Indian wind market has experienced rapid growth in recent months."Some $586 million of project financing flowed into Indian onshore wind farms in the first quarter of 2011, which is already over 60% of the $934 million that was allocated to the sector throughout 2010," said the survey. Though majority took US as most preferred market, about a third said they would seek deals in other countries like India.

Siobhan Smyth, head of renewable at HSBC said, “With India it is a combination of factors. There is a portfolio standard on a state by state basis. Developers have the ability to get power purchase agreements due to utility obligations. Then there are the Generation Based Incentive (GBI) and tax depreciation incentives,"

Asia Pacific PV Market Overview

Asia Pacific photovoltaic markets are poised to make a significant contribution to global photovoltaic market growth in 2010 following improvements in the policy environment in most of the key countries in this region in 2009.  The key emerging country markets of China, India, South Korea and Australia, together with the long established Japanese market, contributed 0.9 GW of installations in 2009, or 12% of world demand. After a policy-led reduction in demand in South Korea last year, all five of these country markets are now expected to return to growth in 2012.

India’s off-grid rural segment the largest PV market segment in the country

• The India PV market grew 22% Y/Y, reaching 44 MW in 2009. Despite this, the growth was lower than expected, with incentive programs lacking success.  
• The Ministry of New and Renewable Energy (MNRE) released its National Solar Mission, outlining planned growth of the PV market to 20-22 GW by 2022.
• While the global financial crisis had a moderate affect upon government funds allocation, national elections during 2010 slowed several government bureaus to a halt, delaying procurement and distribution activities until later in the year. Nonetheless, the project pipeline stands at 5.9 GW at June 2011.

India to add 67,000 MW solar power capacity by 2022

International consultancy firm KPMG in its latest report,  releasing next , has said that technological breaklthrough and economics of scale will make solar power competitive in sex years and help India add 67,000 MW of solar generation capacity by 2022- more than thrice the country’s target. A senior official of MNRE added,  “ The present trends indicate that the prospects are very bright for solar power to be equal to conventional electricity any time after 2017”.

The report also states that solar energy can contribute 7% of the total power needs of the country by 2022, that will translate to a cut of 30% in coal imports approx. 71 Million tons annually. This will result in a saving of $5.5 billion in imports per year from 2022 onwards.

Well “$5.5 Bbillion ?”, looks like our politicians have a new scheme coming up.

Indian energy facts

We are one of the biggest economies of the world with second fastest rate of increase in GDP @7.1% in 2008. Even then, ironically, we account for a third of the world’s population with access to electricity. In spite of several initiative and policies by NGOs and government to support weaker section of the society, the situation has not changed to a rosy one, even after having about five ministries that have structurally handled the India energy sector one of them is Ministry of New and Renewable Energy. We are probably the only country in the world with a dedicated ministry for alternative power but we are nowhere in terms harvesting the potential we have. India ranks sixth in the world in terms of total energy consumption and urgently needs to accelerate development of the energy sector to meet its growth aspirations. Though rich in coal and abundantly endowed with renewable energy in the form of solar, wind, hydro and bio-energy, India has very small hydrocarbon reserves (0.4% of the world’s total). Being a net importer of energy, more than 35% of the country’s primary energy needs are ensured through import. Similar was the situation a few decades ago when we have to import food grains to meet domestic demand, but green revolution has changed all that and we are now among biggest exporters of the commodity that we imported, INDIA needs a second “GREEN REVOLUTION”, this time for energy.

LED USES in RENEWABLE ENERGY

What is off-grid lighting?

Off grid lighting means lights that run on non-conventional energy which is also called green energy (example solar and wind). LED lights make usage of non-conventional means of energy a viable solution. Capex for per watt power generation through off-grid methods are high. Usage of LED reduces requirement of usage of power thus, directly reducing the capital expenditure.

Usage
Currently off grid lightnings are used for emergency purposes (example solar lantern). But it can be used at every place. Capital expenditure on source of generation is a major issue. Off grid power requires storage in the form of batteries which are charged using non-conventional form of energy (Solar and wind). Equipments required for solar and wind energy are costly.
Benefits
Usage of off grid lighting will certainly reduce demand of power and emission of carbon.

Can I start this biz?Roughly equipments for off grid power generation cost about Rs.130/ per watt plus batteries to store the generated power (as per requirement). Approximately Rs.1 crore. is the initial investment required for off grid lighting solution business to start on a small scale.

What the future holds ?
LEDs are complimentary to off grid systems. Thus, one who is looking to adapt off-grid means as source of power will definitely be bullish in adapting LED lights. This will save capex of off-grid system which can be employed to adapt LED lights!

Ways to support domestic Solar market growth

"Indian PV market is still nascent, but the good thing is that market in different parts of the world has already developed and we can take cue from there. We have seen that in countries like Germany prudent government involvement has done wonders & today Germany is leader in Solar energy applications and time has now come there that government is stepping back & market will take over on its own.

India is all set to introduce “Reverse Metering” which would be a revolutionary step in the right direction, we also have a very strong banking system which has proven itself many times during financial crises across the world, but banks are hesitant and solar projects is definitely not in the list of ventures at the top of their minds, the initial investments are high and returns though secured and good take time to realize. Solar in India at least has yet to prove itself on returns factor.

I reckon we need to introduce a couple of measures so as to simulate the market.

An extension of the proposed feed-in tariff to more than the current 10 years, and higher rates, would be good first steps. The feed-in tariff presented does not currently promise a convincing ROI. That will make the risks too high for banks to provide financing. And project financing is nowadays the most crucial issue in getting projects moving.

Another move could be to guarantee funds for financing new solar projects, this would counter bank’s hesitation and it will be a win-win situation as people are willing to pay interest of 10% or even more.

This would be a great thing in Indian market. No subsidies are needed so government can marvel on having developed something for the common man without including an element of “Charity”, no government handout is required just the provision of finance will suffice. It could be either private or government (micro of macro).

The benefits are going to be huge, saving solar energy, bringing down power shortage and all that for attractive returns, I’d in fact go on to say that energy sector hold the key in accelerating the economic growth in India, with the targeted growth rate of 8%, energy requirements in India are expected to grow by approx. 6% per annum which is four fold in next 25 yrs, think of all the opportunities it would bring in. It seems only a matter of time before Indian PV market flourishes, believe me when I say its going to India’s next “Slumdog millionaire”.