Speech of Keshav C Das in the Clean-tech India Conference 2010. Theme- Technological Development of Clean Energy-Trends & Opportunities: “Cleantech India 2010 – The Roadmap for Indian Industry”- 15th February 2010. Organized by-Maharashtra Economic Development Council and GSNA Worldwide.
The objective of this discussion is to examine the broad overview of clean energy technology market for India, with two primary objectives: to analyze the clean energy markets in India and secondly, to identify opportunities for trade and investment through 2020.
For clarity in discussion, I would like to highlight a few critical points focusing on the existing infrastructure of clean energy technologies and market opportunities in India through 2020 including market forecasts, market drivers and market segment analysis. At the same time, it would also be worth attempting to make an analysis of barriers and obstacles to clean energy technologies trade and investment in India.
How do I see at Clean Energy?
Clean energy technologies include renewable energy, hybrid and co-generation, and energy efficiency technologies for power generation; alternative fuels; and advanced technologies for transportation. They produce power for a wide range of applications using no fuel or less fuel than fossil-fuel-based technologies, produce no or fewer pollutants than conventional technologies and can use renewable energy sources, which, unlike fossil fuels, are not depleted over time.
India: Energy Overview-
Clean energy technologies have received unprecedented attention in the last few years in India as its energy demand grows every year. This is largely a result of India’s economy, which has steadily advanced over the last 30 years, averaging a 7 percent per year growth since 2000.
During 2008 and 2009, only China’s economy grew faster. With 1.1 billion people, India is the world’s second most populous country behind China and is expected to have the world’s largest population by 2030. Further population increases and the country’s continued economic growth are expected to increase India’s energy demand from 537 million tons of oil equivalent [Mtoe] in 2008 to 770 Mtoe in 2015 and to 1,299 Mtoe by 2030. Coal is the dominant fuel in India’s energy mix, a condition that is expected to persist for at least the next 25 years. India has vast coal resources, but most are of low quality. Oil imports are projected to increase even more going forward, leaving the country more vulnerable to international price spikes and potentially unreliable supplies. Recently, India ranked fourth in energy consumption, after the United States, China, and Russia. By 2030, India is expected to surpass Russia and be the third-largest energy consumer.
Energy demand grew by 3.5 percent per year during the period 1991–2009. Supply has not kept up, and a deficit of 11,463 megawatt (MW), equivalent to 12.3 percent of peak demand, was recorded in peak hours in India. India has an installed base of about 124,287 MW of electricity as of the year 2006, which includes about 66 percent thermal energy (85 percent of which is coal based) followed by hydro with 26 percent, nuclear with 3 percent, and renewable energy with 5 percent. Of the current total installed renewable energy base, wind constitutes 69 percent, followed by small hydro (19 percent), biomass (co-generation, 11.5 percent), waste-to energy (0.42 percent), and solar (0.03 percent).
Market assessments indicate that India could eventually be the largest renewable market in the world, given its abundance of renewable energy resources. The country has already developed electricity from small hydro, wind, and biomass (co-generation), but the contribution of waste-to-energy and solar energy is very small, while electricity generation from solar thermal, geothermal, and ocean power is non-existent. This is an indicator of the opportunity that is available in harnessing the full potential of these sectors.
Renewable Resources, Capacity, and Potential-
India’s renewable energy resource potential is significant, with wind energy, biomass, and small hydropower representing the technologies with the largest potential. Wind has been the most successful renewable resource to date and has the most potential going forward. Currently however only nine states use wind energy and they represent over 99 percent of the nation’s total wind capacity. Assuming 20 percent grid penetration in the future and an increase in the availability of wind resources in certain provinces – most notably Maharashtra, Andhra Pradesh, Tamil Nadu, and Gujarat – wind could potentially account for up to 45,000 MW of energy per year. Since the total installed wind capacity in 2007-08 was only 5,341 MW.
The majority of wind resources are found in coastal states, where geographic and climatic conditions are favorable for wind farms. The approximate potential for biomass utilization (largely co-generation) is estimated at about 22,000 MW. Waste-to-energy potential is approximately 2,700 MW. It has been estimated that India produces 139 million tons of surplus biomass every year, which can produce about 16,000 MW of electricity. Rajasthan, Punjab, Uttar Pradesh, Maharashtra, Madhya Pradesh, Haryana, and Gujarat account for 76 percent of the projected potential, and Rajasthan alone accounts for 25 percent of the total projected potential. The installed capacity of biomass power/co-generation increased from 381 MW in 2002 to 1,253 MW through September 2007. Andhra Pradesh, Karnataka, Tamil Nadu, and Uttar Pradesh account for 77 percent of the total installed capacity in the country. This trend is due to the availability of biomass and bagasse, which is used as raw material for electricity generation. Maharashtra and Uttar Pradesh are the two major bagasse-producing states, accounting for 57 percent of India’s projected bagasse potential (3,500 MW total).
About 166 MW of renewable energy can be found in distributed non-grid connected generation in India. Ethanol and biodiesel have been identified as key focus areas by the Indian Government, though currently both are in the early stages of commercialization. In 2004, the government mandated a 5 percent blending of gasoline with ethanol, subject to certain conditions. In addition, an autonomous National Biodiesel Board was created to promote, finance, and support organizations that are engaged in oilseed cultivation and oil processing leading to biodiesel production. The state governments of Andhra Pradesh, Chhattisgarh, Gujarat, and Tamil Nadu have even created state biodiesel boards and are implementing buy-back schemes with farmers to promote additional biodiesel development. Private players are participating in the plantation phase of the biodiesel production chain in Tamil Nadu.
India has an estimated hydropower potential of 84,000 MW, of which 15,000 MW is from small hydropower (SHP). The Ministry of New and Renewable Energy (MNRE) has identified 4,227 potential SHP sites, which could account for 10,324 MW of potential energy. India had only 1,748 MW of installed SHP capacity in 2007-08, meaning the market for SHP is expected to increase substantially. The potential of this sector is however dependent on the availability of water resources, which are thus far abundant in a majority of states. In fact, of the 135,000 MW capacity addition requirement anticipated by the government, 35,500 MW are expected to come from hydropower.
India also receives abundant solar radiation equivalent to over 5,000 trillion kilowatt hours (kWh) per year. The government has had a PV program in place for over two decades, yet the current installed capacity is just 3 MW, only a small proportion of the overall energy mix. PV systems are promoted primarily for rural and off-grid applications, consisting mainly of mini-grids, solar home systems, solar lanterns, and solar street lights. The overall solar water heater potential in India is estimated to be 140 million m2 of collector area, of which about 1.9 million m2 have been installed in buildings and in industry.
Energy Efficiency, Co-Generation, and Transportation-
India’s energy efficiency potential mostly comes from supply side high-efficiency, low-emission coal, thermal, or electric power generation. Transmission and distribution losses have been recorded to exceed 25 percent, indicating a potential market for firms able to reduce these inefficiencies. Industry has been a major target of the energy efficiency effort, as it accounts for 50 percent of the total commercial energy use in India. Six key industries—aluminum, cement, fertilizers, pulp and paper, petrochemicals, and steel—account for about two-thirds of total industrial energy use. The energy intensity in these industries is higher than in developed countries, mainly owing to obsolete and energy inefficient technologies.
Nonetheless, energy efficiency in Indian industry has increased steadily. In cement, steel, aluminum, and fertilizers, the average energy consumption has been declining as a result of energy conservation in existing units and the development of efficient technologies. Energy efficiency in building and construction has not been the beneficiary of a concerted energy efficiency effort and needs to be assessed and targeted.
As of now, India had an installed capacity of 782 MW of bagasse co-generation, including grid and off-grid installations. By 2012, a total of 1,200 MW of installed cogeneration from bagasse is projected. In transportation, the rapid growth in motor vehicle activity in India is contributing to high levels of urban air pollution, among other adverse socioeconomic, environmental, health, and welfare impacts. The demand for transport increased by 1.9 percent per year from 2005–2010, but is projected to double by 2015 and more than quadruple by 2030. The slow growth in demand for diesel to date may be due to improved efficiency of new cars and trucks and switching to compressed natural gas vehicles for public transportation in some major cities.
However, like many developing countries, India lacks mandatory vehicle fuel efficiency standards. The Ministry of New and Renewable Energy is promoting several research, development, and demonstration projects including a demonstration project in battery-operated vehicles (BOVs), which help in conserving oil and curbing environmental pollutions. In addition, fuel cell–battery hybrid vehicles with domestically developed exchange membrane fuel cells of 10 kW have undergone field performance evaluation, which could lead to domestic production and wider applications of fuel cell systems across the country. Hydrogen fuel is expected to be a major alternative to fossil fuels for India’s transport sector by 2020. Various laboratories in the country are developing different technologies for production, storage, and transportation.
In India’s 11th Five-Year Plan, the government aims to achieve a GDP growth rate of 10 percent and maintain an average growth of about 8 percent during the next 15 years. This growth will be highly dependent on the expansion of the country’s energy consumption. Due to rapidly expanding demand for power, a capacity addition of over 100,000 MW is planned through 2011 and 2012. Though this is largely based on growth of thermal generation, the contribution of electricity from renewable sources is expected to increase, with wind energy continuing to lead the way.
India needs 347,000 additional megawatts of energy through 2020, of which renewables can account for 24 percent of the needed capacity. One of the major requirements for developing this sector is the availability of cost-effective technologies and successful demonstrations. It is found that the renewable energy targets in the 11th Five-Year Plan—which goes through 2012. These targets correspond to a need for massive investment in the clean energy sector in India. In fact, the projected addition of 15,000 MW from renewable energy could lead to $21 billion in investment over the next ten years.
The current capital cost of small hydro and wind in India is similar and ranges from $900–1300/kW and $950–1100/kW, respectively. Biomass is slightly less, at $800–1000/kW. Bagasse co-generation and biomass gasification range from $600–800/kW. PV is by far the highest at $5000–6500/kW. The delivery cost for all the above except for PV ranges from $0.045–7/kWh, with co-generation at the bottom of the range and wind at the top; PV is in the range of $0.19–40/kWh.
India currently manufactures wind generators with up to 1,650 kW of per unit capacity. To harness the projected wind potential, however, new technologies with higher capacities are needed in the country. India has a fairly developed capacity and technology for designing, constructing, and operating small hydropower plants. There has been continuous improvement with time in India’s small hydro technology, with increasingly efficient and reliable domestic equipment. In addition, India has manufacturing facilities for equipment and components used in solar PV systems, though there is a need for megawatt-scale PV power-generating systems. A number of solar thermal applications have also been developed in India, which include water/air heating, cooking, drying of agricultural and food products, water purification, detoxification of wastes, cooling and refrigeration, heat for industrial processes, and electric power generation.
Most of the solar thermal devices and systems are manufactured in India. Manufacturing capability also exists in India for the equipment/machinery required in biomass projects. Biomass co-generation combustion technology is already in operation as well as atmospheric gasifiers, in which the country has significant experience and expertise. Thus, except for critical control equipment and high-efficiency turbines, most of the equipment can be procured from indigenous sources. India has limited local capacity for waste to energy technology, however, and large-scale operation of biomethanation, combustion/incineration, pyrolysis/gasification, landfill gas recovery, and other technologies requires import of design, engineering, and equipment.
Three major drivers exist for clean energy demand in India. First, the gap between existing electricity supply and demand is large and expected to grow. Second, the need to strengthen energy security has caused India to invest in wind, biomass, and hydropower generation as a way to diversify their energy portfolio. Third, fossil fuels imports are increasingly susceptible to price fluctuations and leave India vulnerable to supply insecurity; increasing dependence on indigenous and renewable resources is thus an attractive countermeasure.
India’s environmental, social, and health concerns are serious—India is a top greenhouse gas (GHG) emitter in the world, with corresponding costs in health and productivity. Indoor air pollution in rural areas from reliance on biomass for cooking, for instance, causes serious health issues for women and children. Nonetheless, India enjoys significant resources for clean energy development including both human and ecological resources, and strong government support. These factors in themselves are important indicators of India’s energy future.
India’s energy sector has undergone a significant renaissance over the last decade as a number of new policies have created both the institutions to promote clean technology development but also the momentum and government support needed to see projects through to completion. New policies include the National Environment Policy, which provides guidance on air pollution reduction, climate change, and GHG mitigation; promotion of clean technologies; and the measurement of efficiency per unit of economic output. The National Tariff Policy establishes power purchase tariffs for the State Electricity Regulatory Commissions. India’s Ministry of New and Renewable Energy has issued a draft renewable energy policy that identifies the strategies for increased deployment of grid-connected renewable energy technologies. The country’s Rural Electrification Policy goals include provision of access to electricity to all households by the year 2009.
The National Electricity Policy stipulated that the energy intensity of GDP growth must be lowered through higher energy efficiency, and merged the Petroleum Conservation Research Association and the Bureau of Energy Efficiency to form an agency capable of moving energy efficiency investments forward. The board set standards for labeling energy-intensive equipment created financial penalties for equipment that fails to meet minimum standards, and mandated the purchase of renewable-energy-based through competitive bidding.
The conduct of energy audits has been made mandatory in large energy-consuming units in nine industrial sectors. These units, indicated as “designated consumers,” are also required to employ “certified energy managers” and report energy consumption and energy conservation data annually. To achieve the potential of 15,000 MW of renewable energy within the 11th Five-Year Plan period, the proposed energy efficiency measures include forming industry-specific task forces, conducting energy audits among designated consumers, recording and publishing best practices per sector, developing energy consumption norms, and monitoring compliance with mandated provision by designated consumers. The program includes capacity building to train key personnel in energy efficiency measures and management. Among the fiscal policies already in place are income tax holidays, accelerated depreciation, duty-free import of renewable energy equipment, capital subsidies and concessionary financing from the Indian Renewable Energy Development Agency, requirements for energy purchases by distribution companies, and exemptions from electricity taxes and sales taxes. In addition to these financial incentives, wind energy projects and equipment used in biomass/bagasse power generation can claim accelerated depreciation in the first year of the project. There is also a liberalized foreign investment approval regime to facilitate foreign investment and transfer of technology through joint ventures.
United Nations Framework Convention on Climate Change and Clean Technologies-
To develop meaningful and effective actions to enhance the implementation of Article 4, paragraph 5, of the Convention by increasing and improving the transfer of and access to environmentally sound technologies (ESTs) and know-how, the ‘Technology Framework’ was established in COP 7 by Decision 4/CP.7. A country-driven, integrated approach, at a national and sectoral level was adopted as overall approach to implement the framework. It should involve cooperation among various stakeholders (the private sector, governments, the donor community, bilateral and multilateral institutions, non-governmental organizations and academic and research institutions), including activities on technology needs assessments, technology information, enabling environments, capacity building and mechanisms for technology transfer.
Mechanisms for technology transfer-
The mechanisms for technology transfer, as identified in this section, are to facilitate the support of financial, institutional and methodological activities:
(a) to enhance the coordination of the full range of stakeholders in different countries and regions;
(b) to engage them in cooperative efforts through technology cooperation and partnerships (public/public, private/public and private/private); and
(c) to facilitate the development of projects and programmes to support such ends.
Long-term vision and goals-
1. Effective technology development, deployment and transfer will play a vital role in global efforts to reduce greenhouse gas (GHG) emissions and decrease vulnerability to the adverse impacts of climate change. Technology innovation and demonstration reduce the costs and improve the performance and availability of technologies for mitigation and adaptation, while deployment and diffusion programmes increase investment in and use of these technologies in all countries and regions. International technology cooperation can accelerate the pace of innovation, increase the scale of demonstration and deployment, and ensure technology diffusion and access in all countries.
2. A robust technology transfer programme under the Convention is required to catalyze the transition to low emission and climate resilient development. Potential contributions of a technology transfer programme to this transition by 2030 are summarized below:
(a) Expanded public and private research, development and demonstration (RD&D) programmes, resulting in new technologies and dramatic cost reductions and improved performance of technologies for mitigation and adaptation, along with stronger centres of innovation, particularly in developing countries;
(b) Enhanced technology deployment and diffusion programmes, along with private-sector investment flows, resulting in up to USD 1 trillion per year in investment in technologies for mitigation and adaptation around the world;
(c) Technological and institutional capacity and enabling environments are strengthened so that all developing countries can sustain technology development, deployment and diffusion activities in a cooperative framework.
3. This paper discusses three potential goals for achieving this vision:
(a) Accelerate innovation of environmentally sound and affordable technologies for mitigation and adaptation in all countries and regions;
(b) Scale up deployment of environmentally sound and affordable technologies for mitigation and adaptation, especially in developing countries;
(c) Speed up diffusion of environmentally sound and affordable technologies for mitigation and adaptation, especially in developing countries.
B. Options for enhancing technology development and transfer
4. The Expert Group on Technology Transfer (EGTT) delivered this paper to provide an expert evaluation of options for enhancing the development, deployment and diffusion of technologies for mitigation and adaptation. The paper was developed through an in-depth review of a diverse portfolio of options for strengthened technology cooperation based on the literature and on proposals from Parties to the Convention. These options were defined and evaluated for the three primary phases of the technology life cycle: research and development of innovative technologies; demonstration and deployment of near-commercial technologies; and diffusion of existing commercial technologies.
Summary and conclusion-
To conclude, it can be summarized that India is experiencing dramatic economic growth and a rapidly increasing demand for energy. Currently the world’s fourth largest energy consumer, India will be the third-largest by 2030. Both India’s cities and villages lack adequate energy; there is therefore a need to add on-grid and off-grid power generation.
India, the world’s fastest-growing free-market democracy, has a critical need for investments in clean energy. Demand for energy in India far exceeds supply, and the development of renewable energy resources is a high priority for the government. According to Commercial Service estimates, the market for renewable energy business is about $500 million per year and is growing at an annual rate of 15 percent. How and in what areas these needs materialize will depend on five major factors.
First, these energy needs will be driven by India’s quest to maintain the high levels of economic growth (around 6 to 7 percent annually).
Second, much will depend on India’s ability (or lack thereof) to locate and use existing domestic gas and petroleum reserves.
The third factor will be the ability of the Indian political system to address certain structural inefficiencies which contribute to significant loss and wastage.
Fourth, it will also depend on its ability to adopt new and more energy efficient technologies.
And fifth, much depends on India’s ability to secure external sources of energy.
Finally, India has a modest renewable-energy program, and the plans for its expansion are ambitious. According to the government’s Policy Statement on Renewable Energy, India hopes to obtain as much as 10 percent of its new power capacity from renewable sources—wind, biomass, hydroelectric, and solar—by 2012. If the country even hopes to approximate this goal, however, it will require both external funding and technological expertise.