India Power Crisis: To Go With The Wind Or To Black Out?
Posted in Finance Articles, Total Reads: 4925
, Published on 27 September 2012
You know alternative energy is a concern when Batman decides to take it upon himself to invest in research for clean energy technology! It’s another matter that the plot gets convoluted and the same project has been hijacked to create a weapon of mass destruction. In our mundane real world, energy crises are as real and we need a Bruce Wayne to invest in such technologies and make it economically viable.
India is currently facing an energy/ electricity crisis; with the entire electric grid tripping and blacking out 21 states for over two days, it definitely needs to look forward into the future for sustainable energy sources. With a growing economy and supporting the aspirations of the growing middle class, our country is facing an enormous burden of providing for our energy needs. India Inc. needs to come up with sustainable solutions and shift to a clean tech economy to generate sustainable profits. As Ram Nidumolu, C.K.Prahlad and M.R.Rangaswami put it succinctly in their recent article in HBR, ‘There is no alternative to sustainable development’. It needs to be done and it needs to be done now.
Today the focus needs to be on alternative sources of energy which provide clean energy or sustainable energy or renewable energy. Hydroelectricity, solar energy, wind energy, geothermal energy, tidal power and wave power are all considered to be sustainable energies; which would address the needs of the present generation without affecting the needs of the future generations.
Electricity Production from Renewable Sources
Renewable Energy Production is going strong and growing at a steady rate all over the world with the biggest contributors being hydropower, wind and solar power. The total global renewable electricity production amounted to 4158.5 Twh in 2010 and most of it was generated in East and South-East Asia.
Renewable electricity production in 2010 – 4158.5 TWh – 19.6% of global electricity production.
Wind Energy is the number two renewable energy after hydraulic power contributing 1.6% of global electricity production.
India is among the top five wind power producers including United States, China, Spain and Germany producing 6% of the global wind power production.
Is Wind Energy the new big thing in India?
India is traditionally a fossil fuel run economy with 85% of all electricity being generated by coal and other sources. Nuclear energy follows with a minuscule 2.5%, and among renewable sources hydropower is the most popular with 12.5% of energy produced. India has more than 35 dams over its rivers including the large capacity Tehri Dam, Srisailam Dam, SardarSarovar, Bhakra Dam, Sharavathi Dam, Kalinadi Dam, Indira Sagar and Koyna Dam with capacity more than 1000 MW.
Since the 1990’s wind power generation has taken root in India and with recent developments worldwide in technology as well as support from the Government it has become the 5th largest wind energy producer in the world. At the end of 31st march 2010, the total installed capacity of Wind Power was 12125.8 MW with wind energy installations across –
STATE WISE GENERATION AND INSTALLED CAPACITY
Cumulative generation (MU)
Cumulative Installed capacity(MW)
Source – WISE, January 2011
Major Players in the WTG Manufacturing Market
Emergya Wind Technologies
Global Wind Power Ltd.
Inox Wind Ltd.
Xyron Technologies Ltd.
Where does the Wind Energy Sector go from here?
Wind Energy in India has been growing at a steady 25% increase in production. It needs several inputs and factors to turn into a major producer of electricity. In their article, ‘How to Jump-Start the Clean-tech Economy’, Mark.W.Johnson and Josh Suskewicz have given a comprehensive strategy for clean tech companies to work on. It involves four interdependent and mutually reinforcing components:
Innovative Business Model
Careful market-adoption strategy
Favorable Government Policy
But would it work for a Wind Energy Company in India??
Technology is no success if it works only in R&D labs, it needs to be brought out to the market and worked upon to be termed a success. Ground breaking technologies are often great but their impact can be felt only after entire systems have been created around it to utilize them effectively. It cannot be a standalone and to be of maximum impact needs to be a perfect amalgamation of old and new technologies to create workable models.
In India, the major constraint for developing wind power is grid integration. The inherent variability in wind power creates fluctuations in power outputs, which can create problems in the traditional grids in maintaining demand and supply balance. Most wind farms are located in remote areas and it is difficult to transmit power from wind farms to local dispatch centers.
The Central Electricity Regulatory Commission (CERC) has formulated the Indian Electricity Grid Code in May 2010 which is expected to address some of the major problems in integrating renewable energy in the grid. Some of the challenges it expects to meet are –
Grid Transmission Planning – Wind Farms are located in remote areas with high wind potential and since grid infrastructure is insufficient to transport the power it needs to be consumed within the region. For development of large capacity wind farms GTP or Grid Tranmission Planning needs to be undertaken.
Interconnection Standards – The variability in output of wind power creates this issue and inte-rconnectivity in the grid between traditional sources and wind power needs to be solved.
Smart Grid – This could be the most defining change for Wind Power in India. Smart grid simply means intelligent power generation, transmission, distribution and management. It essentially creates responsible customers too as they get to decide the timing and amount of power consumption based upon the price of the power at that moment. Ministry of Power in India has set up the ‘India Smart Grid Taskforce’ in June 2010 to set this into motion.
Innovative Business Model
In India, most existing WTG (Wind Turbine generator) manufacturers provide end to end turnkey solutions.
In India with the lack of other ancillary industries to support WTG manufacturers, the turnkey approach works best.
Market Adoption Strategy
In India electricity is a government utility and consumers purchase electricity from the central grid. Though, in India wind energy is picking up mostly in the Business and industry segments where remote industries set up their own wind farms to provide for their energy needs. This works best for industries but for the entire country to reap the benefits of clean tech, Wind Energy needs to be developed by the government as well as made accessible to all. With the development of technology as well as its successful implementation this issue would soon be addressed.
Favorable Government Policy
Developing renewable energy is a win-win situation for India; it has several advantages apart from the obvious advantage of sustainable energy sources.
UN Climate talks and Cancun Agreement – Being a signatory to the Kyoto protocol, reducing our carbon footprints and being an active participant in the carbon markets would leverage India’s position despite being in a disadvantageous position of being a developing country.
Green House Gas (GHG) Emissions – India will reduce its carbon footprints and create an extremely good energy balance by switching on to Wind power.
Energy Security – Currently 30% of India’s energy needs are imported from abroad and in a future when the world’s resources are turning even scarcer it’s a scary proposition for India to remain nonchalant. Unlike oil or coal, wind is not dependent on price or supply fluctuations and is completely reliable.
The government has provided impetus to the industry by providing incentives from the Ministry for New and Renewable Energy (MNRE). Some of the fiscal and tax incentives provided are –
Concession on import duty on specified wind turbine components
10 year income tax holiday for wind power generation projects
100% exemption from excise duty on certain wind turbine components
Guaranteed marketthrough a specified renewable portfolio standard in some states, as decided by the state electricity regulator
Special incentives provided for promotion of exports from India for various renewable energy technologies under renewable sector specific Special Economic Zones (SEZ).
100% FDI investment allowed in renewable energy generation projects
Wind Power Industry certainly seems like a growth industry and on its way for a sustainable future for both the country as well the market players!