Power sec­tor up­date

Let’s take a look at how cer­tain power sec­tor seg­ments have fared since last year and what im­pact these de­vel­op­ments will have in the years to come, says R Srini­vasan.

Power Watch India - - COVER STORY | OVERVIEW -

The power sec­tor lime­light in the last cou­ple of years has largely been dom­i­nated by so­lar en­ergy. So, for a change comes this heart-warm­ing piece of news that In­dia by the early 2020s will re­place Rus­sia as the world’s third largest re­finer. In terms of con­ven­tional sources of en­ergy, the government has set a tar­get of gen­er­at­ing 1,229.4 bil­lion units in 2017-18 from ther­mal, hy­dro and nuclear sources, as per Cen­tral Elec­tric­ity Author­ity (CEA) data. The CEA though has warned that about 46,000 MW (30,000 MW from ther­mal and 16,000 MW from gas) of power ca­pac­ity is stranded due to poor last mile con­nec­tiv­ity. Also, as per re­ports, about half of the coun­try’s ther­mal power plants are over 25 years old, and a large num­ber of them are ap­proach­ing 40. An­a­lysts say that the gen­er­a­tion ca­pa­bil­i­ties of ther­mal plants re­duce by about 40% af­ter the op­er­a­tional age of 25 years. Keep­ing in mind the en­vi­ron­ment min­istry’s norms for coal-based power sta­tions to cut down emis­sions and im­prove the am­bi­ent air qual­ity around power plants, Power Min­is­ter Piyush Goyal re­cently said that com­pa­nies should now fo­cus on re­place­ment of old plants with en­ergy ef­fi­cient tech­nolo­gies. He said that as much as 39,710 MW ca­pac­ity based on su­per­crit­i­cal tech­nol­ogy has al­ready been added and 48,060 MW of su­per-crit­i­cal power gen­er­a­tion is in the pipe­line.

Con­ven­tional gen­er­a­tion: Queried about the con­ven­tional gen­er­a­tion sce­nario, Ru­dranil Roy Sharma, Gen­eral Man­ager and Head (En­ergy Prac­tice), Feed­back Busi­ness Con­sult­ing Ser­vices Pvt Ltd, said, “In the last one year i.e. be­tween March 2016 and Fe­bru­ary 2017, in­stalled power gen­er­a­tion ca­pac­ity of the coun­try has been in­creased by 26,762 MW. It is heart­en­ing to see that re­new­ables ac­count for 42% share of this in­stalled ca­pac­ity. When it comes to con­ven­tional power, in the time pe­riod be­tween March 2016 and Fe­bru­ary 2017, ap­prox­i­mately 13,855 MW of ther­mal gen­er­a­tion ca­pac­ity has been added in the sys­tem 13,190 MW of coal and 820 MW of gas-based power while 155 MW of diesel based power has been re­tired from the sys­tem dur­ing this pe­riod. Growth in hy­dropower in­stalled ca­pac­ity has re­mained sub­dued at 1,710 MW and there was no in­stalled ca­pac­ity ad­di­tion for nuclear power.

Dur­ing the year, the govt has de­cided that it will phase out the old non-ef­fi­cient coal based power plants and these plants will be re­placed by su­per­crit­i­cal tech­nol­ogy ther­mal power plants which is a move in the right di­rec­tion. How­ever, dur­ing the year, the plant load fac­tor of ther­mal power plants has sig­nif­i­cantly gone down to hov­er­ing be­tween 50 – 55%. These are base-load plants and there are risks of sig­nif­i­cant equip­ment dam­age if op­er­ated on par­tial loads/fluc­tu­ated loads for longer du­ra­tion. The govt needs to see how it can re­store elec­tric­ity de­mand in the coun­try and re­vive the PLF of these coal based power plants.

On the other hand, the gas sec­tor is plagued with many chal­lenges with al­most 8 GW ca­pac­ity stranded and the re­main­ing is op­er­ated with a very low PLF. The govt needs to come out with in­no­va­tive busi­ness mod­els to bring this sec­tor to life at the ear­li­est as many stake­hold­ers are af­fected due to non-per­for­mance of this sec­tor. The fra­ter­nity was ex­pect­ing a con­crete pol­icy re­lated to the hy­dropower sec­tor this year how­ever, it is yet to see that. The govt is con­sid­er­ing giv­ing re­new­able en­ergy sta­tus to large hy­dropower plants. Over­all, like many pre­vi­ous years, Coal has been the growth en­gine for the con­ven­tional power sec­tor and is likely to re­main the same for the next few years.”

Re­new­able en­ergy: Based on data from the power min­istry and min­istry of new and re­new­able en­ergy (MNRE), a report by Elara Cap­i­tal, said that ca­pac­ity ad­di­tion from re­new­able en­ergy sources sur­passed con­ven­tional sources for the first time in financial year 2017 as In­dia added 12.5 gi­gawatt (GW) of re­new­able en­ergy ca­pac­ity as com­pared to 10.2 GW from con­ven­tional sources of fuel. Of the 10.2 GW of ca­pac­ity ad­di­tion from con­ven­tional en­ergy, 74% came from ther­mal, while the rest came from hy­dro and nuclear power projects.

Also Power Min­is­ter Piyush Goyal tweeted that the so­lar power gen­er­a­tion ca­pac­ity has crossed 10,000 megawatt (MW), a more than three-time jump in less than three years. As per min­istry es­ti­mates, an­other 8.8 GW ca­pac­ity may be added in 2017, in­clud­ing about 1.1 GW of rooftop so­lar in­stal­la­tions.

In terms of a wind en­ergy de­vel­op­ment, the tar­iff re­cently dropped to a record low of Rs 3.46 per unit in an auc­tion of 1,000 MW ca­pac­ity con­ducted by So­lar En­ergy Cor­po­ra­tion of In­dia (SECI). Although SECI did not pro­vide any bench­mark tar­iff, the av­er­age fig­ure for wind power is around Rs 5. Glob­ally, In­dia is at fourth po­si­tion af­ter China, the US and Ger­many, in terms of wind ca­pac­ity in­stal­la­tion.

Re­spond­ing to a query about re­new­able en­ergy, Ru­dranil Roy Sharma, said, “The re­new­able en­ergy sec­tor has been a star per­former in the last few years. Re­new­able en­ergy in­stalled ca­pac­ity in the coun­try has in­creased to 51,361 MW by end of Fe­bru­ary 2017. Ap­prox­i­mately 5,415 MW of

re­new­able en­ergy ca­pac­ity has been added be­tween April 2016 and Fe­bru­ary 2017 – 2,374 MW of wind power, 2,804 MW of so­lar power, 73 MW of small hy­dro, 157 MW of biopower and 7.5 MW of waste-to-power. Clearly, so­lar and wind have been key growth driv­ers for the sec­tor. While wind was driv­ing this sec­tor for the last many years, so­lar has now joined hands and is likely to sur­pass wind very soon.

This year saw so­lar tar­iffs fall­ing to a record low of Rs 2.97 per unit. This hap­pened fol­low­ing com­ple­tion of the bid for three 250 MW units of Mad­hya Pradesh’s Rewa So­lar UMPP, con­tin­u­ing the steady down­ward trend in prices. Mahin­dra Re­new­ables won Unit 1 at a price of Rs 2.979 per unit, ACME won Unit 2 at Rs 2.970 per unit and Solen­berg Power won Unit 3 at Rs 2.974 per unit. Ex­perts be­lieve that this may dis­rupt the in­dus­try as a whole since projects will start be­com­ing un­vi­able at such low tar­iffs. How­ever, the Rewa project should be con­sid­ered as a sep­a­rate case where risk fac­tors were con­sid­er­ably low and as a re­sult, de­vel­op­ers could quote such a low price. The govt has now de­cided to fol­low the Rewa model and we ex­pect to see some changes in the up­com­ing bids.

In the re­cently con­cluded bud­get, the Fi­nance Min­is­ter an­nounced that the cen­tral government would take up the sec­ond phase of their de­vel­op­ment for an ad­di­tional ca­pac­ity of 20,000 MW. This was re­it­er­ated af­ter Power Min­is­ter Piyush Goyal said the Min­istry of New and Re­new­able En­ergy (MNRE) would be­gin auc­tion for an­other 20 GW of so­lar parks.

This year also saw wind power mov­ing from Feed-in-tar­iff regime to com­pet­i­tive bid­ding regime. Power Min­is­ter ear­lier this year an­nounced that wind power will also go through re­verse auc­tion process in order to dis­cover the right price. As a re­sult, af­ter a sharp drop in so­lar tar­iff to Rs 2.97 per unit, wind power tar­iff also dropped to a record low of Rs 3.46 per unit in a re­cently con­cluded auc­tion of 1,000 MW ca­pac­ity con­ducted by So­lar En­ergy Cor­po­ra­tion of In­dia (SECI). My­trah En­ergy, Green In­fra Wind En­ergy, Inox Wind In­fra­struc­ture Ser­vices, Ostro Kutch Wind and Adani Green En­ergy have emerged as the low­est bid­ders. All these five firms have quoted Rs 3.46 per unit rate for the 1,000 MW ca­pac­i­ties on block. De­vel­op­ers are fran­tic as this sec­tor used to get de­cent mar­gins un­der the feed-in tar­iff regime. Be­sides, a few states like J&K have been push­ing for SHP and will be see­ing lots of projects in the fu­ture.”

Equip­ment/T&D: In terms of equip­ment, as per re­ports, China is close to cap­tur­ing at least 60% of the global lithium ion-based bat­ter­ies mar­ket by 2020, over­tak­ing Ja­pan and South Korea and an­a­lysts warned that China may swamp In­dia’s lithium ion large stor­age bat­tery mar­ket if the government does not usher in the nec­es­sary re­search and poli­cies. This is sig­nif­i­cant since stor­age is an im­por­tant part of rooftop so­lar and elec­tric ve­hi­cles (EVs). With en­ergy stor­age costs in In­dia be­com­ing af­ford­able in the com­ing years, there may be a surge in their use, which will also be in line with the government’s plan for six mil­lion elec­tric and hy­brid ve­hi­cles on Indian roads by 2020. Any such shift to EVs will also be in keep­ing with our COP 21 com­mit­ment and is sig­nif­i­cant in view of In­dia’s en­ergy im­port bill of around $150 bil­lion, which is ex­pected to reach $300 bil­lion by 2030. To put the po­ten­tial of EVs in per­spec­tive, Tata Power Delhi Distribution Ltd (TPDDL) re­cently said that it is plan­ning to in­stall 1,000 elec­tric ve­hi­cle charg­ing sta­tions in the next four to five years in Delhi. Also many com­pa­nies are eye­ing the EV seg­ment in dif­fer­ent cat­e­gories.

In terms of distribution com­pany (dis­com) is­sues, a Mer­com report said that pay­ment de­lays by dis­coms con­tinue to pose a chal­lenge for the grow­ing re­new­able en­ergy sec­tor in In­dia as it tries to achieve 175 GW of re­new­able in­stal­la­tions by 2022. Tar­iffs have come down by 73 per cent since 2010 and the re­cent REWA auc­tion recorded the low­est so­lar tar­iff in the coun­try - Rs.3.30 (~$0.494)/ kWh (lev­elised tar­iff over 25 years). Raj Prabhu, CEO and co-Founder of Mer­com Cap­i­tal Group said, “At the end of the day states can­not pay de­vel­op­ers if they don’t raise power tar­iffs and bring in rev­enues. A lot de­pends on the suc­cess of UDAY and ev­ery­thing is com­ing to a head at a cru­cial time when Indian so­lar in­stal­la­tions are on a path to more than dou­ble from 4 GW in­stalled last year. As in­stal­la­tions dou­ble, power pur­chase bills will also jump. If states can­not up­grade their financial sit­u­a­tion quickly and im­prove their abil­ity to make pay­ments to de­vel­op­ers and take care of other bot­tle­necks, in­stal­la­tions will stall and so will the goal of reach­ing 100 GW by 2022.”

EPC: In one of the most dy­namic so­lar mar­kets in the world, engi­neer­ing, pro­cure­ment and con­struc­tion (EPC) con­trac­tors face an is­sue since some in­ter­na­tional and do­mes­tic in­vestors and de­vel­op­ers are bid­ding ag­gres­sively, lead­ing to a fall in unit prices to as low as Rs 2.97/kWh as in the case of the re­cently con­cluded Rewa so­lar park re­verse bid­ding auc­tions in Mad­hya Pradesh. As per re­ports, this is marginal­is­ing some EPC play­ers and cre­at­ing a sit­u­a­tion where only big play­ers with MW scale busi­nesses may sus­tain them­selves in the long run. Here the govt could take note of cer­tain

con­cerns faced by EPC con­trac­tors and cre­ate a sus­tain­able en­vi­ron­ment for them.

En­ergy ef­fi­ciency: The Power Min­is­ter said that the government’s pro­mo­tion of light emit­ting diodes (LED) will help re­duce car­bon diox­ide emis­sions by 80 mil­lion tonnes per an­num and save around Rs 40,000 crore in power bills an­nu­ally. In this con­text, En­ergy Ef­fi­cient Ser­vice Ltd (EESL) had set a tar­get of sell­ing 77 crore LED bulbs by 2018 un­der its Un­nat Jy­oti by Af­ford­able Lamps for All (UJALA) scheme.

About en­ergy ef­fi­ciency (UJALA, etc) in terms of car­bon foot­print, Ru­dranil Roy Sharma said, “En­ergy ef­fi­ciency has been one of the key pil­lars of the present government since 2014. EESL has been highly proac­tive in this space. The flag­ship pro­gramme of LED lamp distribution has touched mul­ti­ple mil­lions of the Indian pop­u­la­tion. EESL has more than dou­bled their num­bers in this field. As of date, they have dis­trib­uted more than 225 mil­lion LED lamps, which stood at a lit­tle over 100 mil­lion at the same time last year. Since the LED lamp busi­ness has found a strong foot­ing in the Indian mar­ket, EESL is now spread­ing its reach into dif­fer­ent mar­kets like tube lights and ceil­ing fans. As of date, 1.6 mil­lion tube lights and more than 600,000 en­ergy ef­fi­cient fans have found tak­ers by EESL. And, thanks to the path break­ing con­cepts and im­ple­men­ta­tion, progress in this field is largely trans­par­ent through the UJALA plat­form at www.ujala.gov.in and through mo­bile apps for hand­held de­vices. The or­gan­i­sa­tion would soon also be en­ter­ing the AC mar­ket through the same route and same strat­egy. Highly en­ergy ef­fi­cient ACs work­ing on in­verter tech­nol­ogy would be the prod­ucts on fo­cus. These highly ef­fi­cient in­verter ACs work at EERs start­ing at 5.2, and would re­place con­ven­tional 5-star ACs which would only have an EER be­tween 3.5 and 3.7. This ex­change scheme of the or­gan­i­sa­tion would be made avail­able only to in­sti­tu­tions and or­gan­i­sa­tions, which would open up a new facet for EESL of sell­ing fast mov­ing equip­ment from a B2B an­gle.”

Make in In­dia ini­tia­tives: Eight out of the top 10 so­lar mod­ule sup­pli­ers in the Indian mar­ket are now from China as against four last year, as per con­sult­ing firm Bridge to In­dia. Also in 2015, 80 per cent of the ap­prox­i­mately 161 mil­lion im­ported so­lar pan­els were from China. To achieve its re­new­able en­ergy (RE) tar­get, In­dia must add 130.76 GW of RE over the next six years, an av­er­age of 21.7 GW per year or three times the ca­pac­ity it added in 2016. It is felt that the govt should en­cour­age in­dige­nous man­u­fac­tur­ing of so­lar pan­els, as per the Make in In­dia cam­paign, so as to re­duce de­pen­dence on im­ports by ex­tend­ing spe­cial con­ces­sions to do­mes­tic man­u­fac­tur­ers so that they can over­come con­straints such as lim­ited man­u­fac­tur­ing ca­pac­i­ties and high cost of financing. Here low-cost fi­nance op­tions can go a long way in pro­mot­ing the so­lar panel in­dus­try.

Sim­i­larly, since an es­ti­mated 28% of en­ergy gen­er­ated in In­dia is lost dur­ing trans­mis­sion or stolen and frequent power out­ages last for hours in many re­gions of the coun­try, com­pa­nies should view this chal­lenge as an op­por­tu­nity and come up with in­no­va­tive in­dige­nous sus­tain­able tech­nolo­gies, es­pe­cially for off-grid ar­eas which are ex­pected to drive fu­ture growth of the mar­ket. This brings to mind a report where as per IBM’s re­search, UrJar, a back-up power de­vice reuses bat­ter­ies from dis­carded com­put­ers, which could be used to aid mil­lions of peo­ple in In­dia who lack ac­cess to re­li­able elec­tric­ity sup­ply. This so­lu­tion can si­mul­ta­ne­ously ad­dress the twin is­sues of bat­tery e-waste as well as en­ergy ac­cess and the mag­ni­tude of the so­lu­tion can be un­der­stood in the back­drop of the fact that the coun­try, ac­cord­ing to IBM, gen­er­ates eight mil­lion tons of e-waste per year. So in­no­va­tions like these for ru­ral house­holds are the need of the hour. Also it is said that ef­forts to­wards ru­ral elec­tri­fi­ca­tion led to a fall in poverty in In­dia from 21% in 2012 to 12.4% in 2015.

In­ter­net of things (IoT) The tech­nol­ogy has great po­ten­tial, es­pe­cially in cre­at­ing ef­fi­cien­cies and re­duc­ing op­er­a­tional costs. Ac­cord­ing to tech­nol­ogy con­sult­ing firm Gart­ner, 6.4 bil­lion ‘things’ will be in use world­wide in 2016 and the firm ex­pects this num­ber to grow to 21 bil­lion by 2020. That’s a mas­sive amount of data and de­vices to man­age and in­te­grate into the cloud. As the IoT mar­ket ex­pands and IoT data us­age in­creases with the pas­sage of time, or­gan­i­sa­tions will in­creas­ingly be vul­ner­a­ble to security chal­lenges and hack­ers may ac­cess the Cloud to sab­o­tage data or launch cy­ber-at­tacks. A case in point is the Septem­ber 2016 at­tack wherein 152,000 hacked IoT de­vices, in­clud­ing potentially smart re­frig­er­a­tors were used to launch the record-break­ing at­tack. By in­cor­po­rat­ing cer­tain security mea­sures into the cloud in­fra­struc­ture, busi­nesses can re­duce the risk of such at­tacks.

To sum­marise, in the years to come, there is clearly plenty of growth to come from In­dia and we hope to see our coun­try be­com­ing the fo­cus of at­ten­tion and to take its much-de­served place at the cen­tre-stage of global en­ergy.

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