Powering ahead

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Powering ahead

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India was once primed as one of the world’s most vibrant mar­kets for renewables, as the ener­gy-starved country of 1.25 billion started diversifying increasingly into renewable energy (RE). But the decline of this sector under the previous Congress-led regime was spurred as much by the general recession as by policy uncertainty, a disinterested and indifferent Min­istry for New & Renewable Energy (MNRE), and inexplicable withdrawal of incentives and abrupt changes in the macro-economic framework governing the industry.

The Narendra Modi government now looks to promote aggressive investment in the RE sector, commit­ting at the RE-Invest global investors’ meet in New Dehi last fortnight gen­eration of 217 gw of green energy by 2020 that entails investments of $250 billion. Modi also called for harnessing hydro, biomass, solar and wind power to unleash an “energy revolution” in the country.

The country’s renewables busi­nesses anticipate a turnaround from the enabling measures articulated in the Union budget of 28 February. Finance minister Arun Jaitley pledged to accelerate implementation of the Green Energy Corridor Project to facilitate evacuation of RE across the country. In his maiden budget last July, he had restored the Accelerated

Depreciation (ad) tax benefits in addi­tion to the existing Generation-Based Incentives (GBls) so as to rekindle growth in the wind power sector.

Wind power development in India began in the 1990s and it is now sought to be rejuvenated by the launch of the National Wind Energy Mission (NWEM) that aims to incentivise investments, ease land clearances and regulate tariffs. The Electricity Act of 2003 formalised grid-connected wind energy by pro­viding for regulatory interventions such as for facilitating grid connec­tivity, and determining tariff and renewable purchase obligation (RPO). Solar power was a slow starter and the Jawaharlal Nehru National Solar Mis­sion (jnnsm) was launched only in 2010. nwem – which will not involve bidding for projects, unlike JNNSM – has trailed the Solar Mission because while wind energy progressed well, solar had required a boost.

Hailing the budget for accord­ing top priority to wind energy, Tulsi Tanti, CMD of Pune-based wind energy major Suzlon Energy, says extending the 10-year tax holiday for power companies till 31 March 2017 will provide the much required predictability for investors in power projects. He adds that the doubling of the clean energy cess from ?50 per tonne for financing and promoting will boost wind energy in particular.

“Exempting the 4 per cent special additional duty on components for wind-operated generators will pro­vide much awaited relief,” he indi­cates. Terming capital cost as the only major cost for an RE project, he urges interest rebate for projects that source from domestic manufactur­ers. He calls for raising the $200 mil­lion cap on EXIM Bank’s line of credit to any single corporate, indicating that requirement in the RE sector alone ranges from $500 million to $1 billion.

Venkataraman Rajaraman, direc­tor, infrastructure & project finance, India Ratings & Research, Fitch group, in Chennai, says India has pushed ahead relatively successfully on RE. Most global OEMs have set up manufacturing units in the country and RE developers have been helped in land acquisition by respective state governments. But he says the sector is constrained by high costs of importing capital equipment, which is heavily debt funded. “Many devel­opers have not hedged these expo­sures, rendering them vulnerable to exchange and interest rates,” he says. “Solar power, in turn, is universally expensive and unviable but for policy support from governments, and debt availability is also generally more dif­ficult than for other renewables.”

The RE industry also seeks prior­ity status for easing access to proj­ect finance from banks and for longer amortisation. It believes the government’s ‘Make in India’ mis­sion should be dovetailed with the SME sector. As interest and energy are the major costs for SMEs, provid­ing interest rebates to them towards captive power will help lower and hedge their energy costs, rendering them more competitive as has been the case with the textile clusters in Tirupur, in Tamil Nadu.

Welcoming the higher budgetary allocation and duty rationalisation for the clean energy sector, Girish Kadam, vice-president and co-head of Corporate Sector Ratings at icra, says the accent on ultra mega solar power projects (UMSPPs) will facili­tate huge solar capacity additions. “Duty measures announced for wind and compressed bio-gas projects will

help reduce capital cost and hence tariffs,” he adds.

With unreliable coal, and gas, supplies denting capacity targets, RE has found increased favour. Grid-connected renew­able power (there is yet little off-grid renewable) accounts for as much as 31,692.14 MW – or 12.7 per cent – of the coun­try’s 249,536 MW of installed power capacities.

India is the fifth largest wind power producer, after China, the US, Germany and Spain.

Installable wind power potential in India for 50-metre mast is estimated at 49,130 MW and for 80 metres, 102,788 MW. Solar energy potential is also enormous, with about 5,000 trillion kWh per year energy incident over India, with most parts receiving 4-7 kWh per sq m per day.

Timely intervention

With an investment of about $1 bil­lion, CLP India is the largest investor in India’s wind sector, having built up a portfolio of 12 wind farms of a cumulative capacity of 1,051 MW. It is investing an additional $1 billion to $1.2 billion to raise the total capacity to 2,000 MW by end 2016.

“The re-introduction of GBI and AD is a timely intervention for the wind industry,” says Ramesh Kymal, CMD, Gamesa Wind Turbine Pvt Ltd, the India subsidiary of Spain’s Gamesa Corporacion Tecnologica SA. “This will certainly rejuvenate the sector with more investments and I am confident the industry will bounce back.”

Gamesa entered India in 2009 and is now a credible player among the other wind turbine generator (WTG) manufacturers like Suzlon, Vestas, Enercon (renamed Wind World), Regen and GE. In 2013-14, Suzlon regained its top spot in the country, with a share of 19.4 per cent, edg­ing past Gamesa’s 19.1 per cent. The shares of Wind World were 17.03 per cent, Regen, 15.9 per cent, GE India, 9.6 per cent, INOX Wind, 7.2 per cent, and Vestas, 3.9 per cent.

Foreseeing solar becoming a mainstream energy source in India, Ajay Goel, CEO of Bangalore-based

Tata Power Solar, says the build-up of solar power capacities was hampered by the disinclination of companies to invest in manufacturing in the absence of long-term policy support that could have made these capacities viable, as well as increased demand and access to financing options. Tata Power Solar, a subsidiary of Tata Power Ltd, is one of India’s largest private sector power utilities.

Amit Kumar, executive direc­tor, energy & utilities, Pricewater- houseCoopers (PwC), expects the shift from tax benefit-based invest­ment to the iPP-based model for wind power to represent the next genera­tion growth phase. “IPPs are now keen to invest in this matured market that also has access to proven technology and skill-sets,” he notes. “They have low risk investment options now and are increasingly developing wind farms, each of an installed capacity of 50 MW and above.”

Ashwin Gambhir, senior research associate, Prayas Energy Consul­tancy, Pune, also sees India entering the next phase of renewable power development where installations will pick up mainly on commercial con­siderations and not on incentives.

Renewable power
Wind power

Solar PV (photo-voltaic) power

(in MW) 21,136.40


Small hydro power (s 25 MW) 3,803.68

Biomass /Cogenerated power

Waste to Energy 106.58
[Capacity total 31,692.141


For wind, there is no com­petitive bidding involved and projects may be installed through the FiT or RE Certi­fication (REC) route as long as the utilities off-take that power to meet their RPOs. Countries like the US, China and Brazil have such bidding in wind. Solar power projects are selected through compet­itive bidding for pre-decided capacities.

Solar projects up to 500 kW are provided 30 per cent of their capital costs by MNRE. The Viabil­ity Gap Funding (VGF), a capital sub­sidy, is expected to reward ‘genuine solar developers’, who maintain the cost-quality balance. “Investments in RE are also being motivated by con­cessional excise and custom duties, as also FiT norms, the best example being Gujarat,” says Bikesh Ogra, pres­ident, solar, Sterling & Wilson, Mum­bai. “One of the drivers for investment in RE in future will be the build, operate, transfer (BOT) model.”

Sterling & Wilson, an associate company of the $2.5 billion 148- year-old Shapoorji Pallonji group, is the largest solar EPC in India and 20th globally. It has commissioned over 200 MW of solar projects in India and is building about 200 MW of solar PV across the world.

Ashish Rajvanshi, principal, and Raghav Iyer, senior associate (engagement manager), Booz & Co (India) Pvt Ltd, now part of PwC and renamed ‘Strategy &’, explain that RE projects are awarded in two catego­ries, commercial and pilot. Pilot proj­ects are generally given through FiT, commercial through reverse bidding, where IPPs bid the amount they need to set up and operate the plants. In case of conventional power projects, they are typically driven through ppps or off-take agreements with built-in escalation for fuel prices.

Renewable energy is destined to take its place alongside conventional power in India and penetrate ever deeper into the country. After all, the nation’s, and its 1.2 billion people’s, energy security depends on it.

♦ SAROSH BANA [email protected]


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