Power India 01 (1)

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1/316www.peimagazine.com March 2010 - PEi

India will remain a robust market or worldwide

providers o power plant and environmentalequipment at least until 2030. Demand

or electricity in the country is high and Indiahas aggressive targets or adding capacity.The countrys potential in the power sectoris yet to be ully realized and additions to itspower generation capacity are expected to besubstantial despite shortalls resulting rom actorsinternal and external to the country.

So what is driving Indias demand or powerand what opportunities does it open up to powercompanies and providers o environmental

services equipment?Four major economic and social drivers

characterize the energy policy o India: arapidly growing economy, increasing householdincomes, limited domestic reserves o ossil uelsand the adverse impact on the environment o

rapid development in urban and regional areas.

Rapid economic growth has created a growingneed or dependable and reliable supplies oelectricity, gas and petroleum products. Indiaseconomy has expanded by above six per centper year over the last ve years, one o the astestrates in the world. Projections are or it be morethan eight per cent per year until 2020. Supplieso electricity, gas and water must keep up withthis. Indias economy has more than tripled in realterms since economic reorms began in 1991.

Part o the reason or this growth is thecommitment successive governments have shown

to continue economic liberalization, stancethat has instilled condence in investors andpresented opportunities. The second driver othe countrys energy policy, rising house holdincomes, has pushed up demand or aordableelectricity. Consumer demand too has grown

rapidly over the decades. India has a population

o over a billion people and as a market or retailconsumer goods it is already one o the largest,whose size is expected to grow to $600 billionper year by 2012, putting it among the top vein the world. Geographically speaking India isone o the largest countries in the world. Its areacovers more than 3 million km2, or roughly a thirdthat o the United States.

India is a young nation. Some 70 per cent oits population is under the age o 36 and 20 percent under 24. It produces over 15 million reshuniversity graduates each year, about 1.5 times

as many as China and about twice as many asthe United States. It has also made considerableprogress on many socio-economic ronts. Sincethe 1950s, the raction o the population belowthe poverty line has dropped rom over 50 percent to just over 25 per cent, and adult literacy

caption

A fast growing economy and an appetite for energy to match mean India will be attractive to

power companies and providers of environmental services equipment for some time. Where do the

opportunities lie?

India: Can she make themost of her opportunities?

power

reportINDIA

Ravi Krishnan, Krishnan & Associates Inc

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rates have risen rom the high 30 per cent rangeto the mid-60 per cent range. India will need atotal capacity addition o 150-250 GW overthe next 12 years to address its goal to alleviatepoverty.

Fossil Fuel reserves

Low domestic reserves o ossil uels orm the thirdmain driver in Indias energy policy. As about 64per cent o Indias total installed capacity is ossil-uel red it has to import vast amounts o natural

gas, crude oil and petroleum products. Coalaccounts or about 53 per cent o the nationsgenerating capacity, while gas and oil accountor 10 per cent and 1 per cent respectively.

Indias domestic o coal resources areavailable in abundance. Most o these are inthe states o Bihar, Jharkhand, Orissa, MadhyaPradesh, Chhattisgarh and West Bengal.Production o coal in India has traditionally beenlow compared with its reserves. One reason isbecause the past has seen restrictions on theentry o private sector players in the mining o thisuel in the country. These restrictions have been

removed, encouraging private participation incoal mining.

Indian coal is high in silica and aluminaand is highly abrasive, with high slaggingcharacteristics. Its high ash content o 35-45 percent and the weak coal transportation system inthe country mean that it is economical to locatepower plants close to pit heads. Most o the pithead stations have their own dedicated coaltransportation system and do not depend onIndias railways.

To address the need or a higher quality o

coal many Indian power producers are nowacquiring elds in the countries o east Asia,such as Indonesia, and erecting power plantsin Indian coastal towns to tap into a moreeconomical uel supply. This should ulll someo the countrys need or higher quality coal, but

domestic supplies will still uel the bulk o thecountrys power generation.

Natural gas is in short supply in India andsupply to gas red power stations has beeninadequate, which has meant they have beenoperating at load actors o around 58-60 percent. Gas is not expected to bridge the powergeneration decits in the short-term althoughIndia has identied a ew domestic natural gasreserves and is in discussion with suppliers inQatar, Iran and Australia. Table 2 shows Indiasuel alternatives.

The nal main driver o Indias energy policyconcerns the environment, on which rapid urbanand regional development has had a negativeimpact. India aims to adopt cleaner uels andcleaner technologies to compensate. Projectionsare that coal red power generation in India is

likely expand rapidly. I this growth is uncontrolledit will be to the detriment o the environment.While Indias ocus is on generating low-costpower, the government recognizes the potentialimpact on air-quality that new coal plantswould have.

In response, India has begun various initiativesat the national level that aim to bring in morestringent regulations or nitrogen oxides (NOx),PM10, sulphur dioxide (SO2) and, potentially,mercury emissions. For example, some o theplants burning high-sulphur coal now must either

include an FGD scrubber, depending on theplant location, or make space provisions or auture retrot o SO

2removal technologies.

This is a major development or a country thathas no ocial standard or major pollutants suchas NOx, SO

2and mercury but largely regulates

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Table 1: Demand Supply Scenario in Western India for the period April 2008 to February 2009

State/UnionTerritories

Peak Demand(MW)

Peak DefcitMW

Peak Defcit(%)

Energy Require-ment (MU)

Energy Defcit(MU)

Energy Defcit(%)

Gujarat 11 841 3024 25.5 61 910 6654 10.7

Chhattisgarh 2887 57 2 13 682 395 2.9

Madhya. Pradesh 7,564 754 10 38 262 6,379 16.7

Maharashtra 18 049 4674 25.9 110 767 23 792 21.5

Daman and Diu 225 25 11.1 1630 202 12.4

Dadar and NagarHaveli

466 32 6.9 3239 132 4.1

Goa 464 51 11 2532 40 1.6

Table 2: Indias Fuel Options

Coal Domestic coal resources are in abundance

in India Private participation in coal mining expected

to result in greater production eciencies Economical imported coal is accessible for

coastal locations Coal is the most economical fuel for meeting

base load demand Clean coal technologies a priority by the

Government o India

Natural Gas Limited availability of domestic gas High price of LNG in spite of growing

production Potentially a long-term fuel source for India

Nuclear Ambitious plans for nuclear power face

many challenges Access to nuclear technology, fuel source

and saety considerations

Hydro Large amounts of hydro potential mainly in the

North and Northeast India High capital costs & long lead time Seasonality effects of snow and rainfall

Wind Not suitable for base load generation Potentially low load factors Moderate wind patterns.

Solar Abundant sunlight and ideal for solar pow -

ered generation Population density and space constraint Supplement to coal-red generation Not suitable for large base-load operations

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power

reportINDIA

on a case-by-case basis. In the case o CO2emissions, no regulations exist.

India is not expected to accept a binding

emissions reduction target as the initiative isconsidered too expensive and could double thecost of electricity generation. However, various

measures are being considered to deploy cleanercoal technologies.

Indias inrastructure has not kept up with itseconomic growth, despite progress on variousronts. Compared with western nations, thequality o the rail and road systems is poor andthey ail to oer the same connectivity. Similarlythe countrys energy inrastructure is in continuousneed o expansion to support increasing demandrom consumers and industry.

Although inrastructure investment is on the rise,the government recognizes that uture growthmay be constrained without urther improvementsto inrastructure, the inadequacy o which is akey risk to the continued growth o the Indianeconomy. Since independence in 1947,electricity generating capacity has grown rom1400 MW to about 150 GW today, the sixthhighest in the world behind the gures o the US,China, Japan, Russia, and Canada.

Over the same period, the population o Indiahas grown rom 250 million to over 1.1 billion.

The rising population, Indias high economicgrowth rate and its inadequate supply anddistribution inrastructure have caused powersupply shortages in terms o peak demandand overall energy supply. Peaking shortagehas been about 13 per cent on an all-India

basis with signicantly greater shortages inselected regions such as the west o the country,where decits are as high as 26 per cent, as

Table 1 shows.The large energy decit gaps have resultedin low per-capita consumption, so India willneed additional generating capacity to serve itspopulation and uel economic growth. To this endthe government embarked on an ambitious planto raise power generation capacity to bridge thegrowing power demand-capacity gap with low-cost power.

The Planning Commission has established ve-year plans that lay out specic targets or newgeneration capaci ty.

The tenth ve-year plan, covering 2002-2007,

had a target o 41.1 GW o additional capacity.The 11th, covering 2007-2012, is slated toadd 78 GW o capacity. Some 83 GW o newcapacity is the target or the 12th plan, covering2012-2017.

This expansion includes 14 Ultra MegaPower Projects that are awarded based ontari-based competitive bidding. The projectsare designed to be environmentally riendly.They will emit low amounts o greenhousegases, employ supercritical technology and use100 per cent o fy ash.

shortages continue

Indias power sector has traditionally aced arange o challenges in expanding generationcapacity. The country has added 30 GW in thepast 7 years whereas China has added 303

GW over the same period. India needs to add78 GW in the current ve-year plan, essentiallydoubling the 78 GW added over the last

22 years.O the targets set across the last three ve-year plans, only 50 per cent o the targetcapacity has been achieved, ailures largelyattributed to a shortage o boiler, turbine andgenerator equipment, long lead times, shortageso construction equipment, shortage o skilledmanpower, uel availability, a lack o projectnancing, rail and other inrastructure relatedissues, and delays in obtaining environmentaland governmental clearances.

To accelerate capacity additions, thegovernment has embarked on programmes to

encourage oreign participation in the supply opower generation equipment supply. The resultis that Western and Chinese manuacturersnow actively provide equipment and servicesin India.

This has signicantly eased the bottlenecksthe industry previously aced. Various trainingand manpower development programmes andexpedited processes to obtain various permitsand clearances have also been initiated toaddress external delays.

Financing or power projects rom world

capital markets a historical constraint is lesso an impediment or India today as many IndianPower Producers have started delivering resultsthat match their earlier projections.

Condence among the investment communityis on the rise.

Indias power generation by capacity Breakdown of generation assets ownership

Coal53%

Hydro25%

Diesel

1%

Gas10%

Nuclear3%

Renewable8%

Central

33%

Private

16%

State

51%

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Power India 01 (1)