The Changing Face of the Power Sector

August, 2016Bengal Chamber of Commerce & IndustryKolkata

© 2015 KPMG Advisory Services Private Limited, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved 2

Disclaimer

This presentation is made for purposes of discussion and illustration only. This is not intended to be a recommendation. KPMG does not take any responsibility for actions taken on the basis of this presentation.

© 2015 KPMG Advisory Services Private Limited, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved 3

Key Messages

Renewables will rise rapidly over the next 10 years to contribute 20% to our power mix

Changing energy mix overlaps with a rise in ‘Digitalisation’ of our utilities

The rise of storage technologies will become another game changer

From a COP perspective, this will contribute over 5% reduction in our emissions target

© 2015 KPMG Advisory Services Private Limited, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved 4

The rise of renewables will be very rapid: 20% by 2025 and very rapidly thereafter

Implied break even coal price

Imported coal prices

Average domestic coal prices -

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

From 2020, solar power will influence domestic coal pricing: INR per tonne

Solar breaches import coal

Solar breaches domestic coal

Scale up and competitiveness of solar power could disrupt coal- based generators

PLFs of conventional coal generators to fall by 10-15% by 2020

Effect could be significant post 2020 with solar capacity additions in tune of ~20GW p.a

© 2015 KPMG Advisory Services Private Limited, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved 5

Storage TechnologiesDistributed solar combined with storage will be a game changer; will disrupt utilities(1/2)

350 315

250 231 213 194 175 156 138 119 100

12.6111.31

8.958.26

7.576.88

6.205.52

4.844.18

3.52

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

0

50

100

150

200

250

300

350

400

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Lithium ion-based storage costs are expected to decline rapidly: INR/kWh

Energy storage (Li ion) USD/kWh Levelised cost of storage INR/kWh

U.S. DOE targets Lithium ion battery

costs @ USD 125/kWh by 2022

© 2015 KPMG Advisory Services Private Limited, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved 6

Description Middle Income Group

High Income Group

Average Monthly Demand (kWh) 150 350Rooftop Area for a typical house (sq.ft.) 500 1000

Rooftop Suitable for Solar Installation (sq.ft.) (Assuming 30 per cent availability)

150 300

Installable Capacity of Solar (kWp) 1.5 3Average Monthly Generation from Solar (kWh) 200 400

6.90 6.97 7.07

4.534.22

3.86

8.82

7.66

6.06

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

2020 2022 2025

A grid independent solar house is likely to be a reality after 2022:

LCOE in INR/kWh

Utility cost of serviceSolar rooftop costsSolar with partial storage to be grid independent

Storage Technologies Storage to be a game changer: Example of the Solar House (2/2)

© 2015 KPMG Advisory Services Private Limited, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved 7

The utility of the future is going to look very different: digitalisation at its core

• Unregulated returns

• Value shift to consumers

• Diverse energy sources

• Power as a “service”

• “Digital tech” a key value driver

• Large number of small players

9999

NOC for Integrated Services

Distributed Generation

EV Charging Infra

Smart Grid

Grid Scale RE

Grid Scale Storage

Retail Suppliers

Clean Coal Tech

Distributed Storage

Solar RooftopNet Metering

Mature trading market

© 2015 KPMG Advisory Services Private Limited, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved 8

Demand Response AggregatorEntelios: an example of new business models enabled by digitalisation

Regulator

Transmission Service

operators

Utility

Energy Markets

Distributed generation

Equipment & Processes

Facility & building

management

Industry meters

Network Operation Centre

• Identifies and aggregates business with high potential for demand response

• Provides the necessary tools & support for customers to schedule energy consumption/generation based on dynamic energy prices

Demand Response is an established market in the U.S, is developing in Europe and is expected to be a $60 billion worldwide market.

Services provided:

• Recruiting• Sign-up consumers• Maintenance• Forecasting• Packaging• Controlling• Trading• Reporting• Balancing mechanism

© 2016 KPMG Advisory Services Private Limited, an Indian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

9

Planning needs a new paradigmStrategic Implication (1/2)

Need an integrated energy plan

1. Strengthen planning institutions

2. Guide States

3. Developprotocols for planning

4. Ancillaryservices market

Storage and Ancillary Services

Conventional Power Plants

Transmission ConnectionsVariable Renewable Energy

© 2016 KPMG Advisory Services Private Limited, an Indian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

10

Generators need to bring in flexibilityStrategic Implication (2/2)

In Germany, the optimized coal-fired power plants are able to operate at a partial-load level of less than 20 per cent of full-load capacity

Impact of solar eclipse on Germany

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© 2016 KPMG Advisory Services Private Limited, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

THANK YOUSantosh KamathPartner and Lead for Renewable EnergyKPMG in India

Contact:

skamath@kpmg.com +91 99670 16369