2010 11 - Indian Energy Sector by ibef

INDIA: ENERGY SECTOR
September 2010

INDIA: ENERGY SECTOR September 2010

Contents … (1/3)

 Executive Summary

 Industry overview – power

 Generation

 Transmission and distribution

 Demand-supply position

 Government policy and reforms

 Opportunities in the Indian power sector

 Investment opportunities

 Industry overview – equipment industry

2


Contents … (2/3)

 Boilers

 Conductors, wires and cables

 Transformers

 Turbines

 Switchgears

 Transmission towers

 Wind turbine generators

 Diesel engines

 Capacitors

 Energy meters
3


Contents … (3/3)

 Control panels

 Oil exploration and drilling equipment

 Storage batteries

 Industry overview – oil and gas

 International interest

 Demand supply projections

 Demand supply scenario

 Government organisations

 Trends and opportunities

 Companies
4


List of tables … (1/8)

 Gross Domestic Product from Electricity Supply

 Energy Indicators

 Fuel-wise Generation Capacity

 Sector-wise Installed Utility Capacity

 Capacity of Thermal Power Plants by Fuel

 Hydroelectric Potential and Development

 RES Potential and Achievements

 Growth in Transmission Lines (Ckm)

 Growth in Sub-stations (MVA)

 Growth in Inter-regional Transmission Capacity
5



 Rural Electrification

 Electricity Consumption

 Electricity Demand and Supply

 Projected Requirement of Electricity

 Installed Capacity Addition Plan

 Projected Transmission Line Length

 Energy Saving Potential

 Fund Requirement for R & M Activities

 Fund Requirement for Distribution and Rural Electrification

 FDI in Energy Equipment and Related Industries
6



 Investments as of March 2010

 Major Projects Expected to be Complete in 2010

 Types of Utility and Industrial Boilers

 Production of Boilers

 Production, Import, Export and Consumption of Boilers

 Technological Partnership for Supercritical Technology

 Production of Various Types of Cables and Wires

 Export and Import of Cables and Wires

 Production of Transformers

 Imports and Exports of Transformers
7



 Production,Trade and Consumption of Turbines

 Snapshot of Power Generation Scenario

 Production of Switchgears and Circuit Breakers

 Exports and Imports of Switchgears

 Domestic Production of Transmission Towers

 Exports of Transmission Towers

 Installed Wind Power Capacity

 Export and Import of Wind Turbine Generators

 Production, Imports, Exports and Consumption of Diesel Engines

 Production of Capacitors
8



 Production of Energy Meters

 Production, Import and Export of Storage Batteries

 Gross Energy Generated

 GDP from Petroleum Sector

 Realisation of Excise and Customs Duties

 Employment in Petroleum Sector

 FDI Inflows to Petroleum Sector

 Proven and Indicated Crude Oil Reserves

 Basin-wise Hydrocarbon Area

 NELP and CBM Achievements
9



 The Krishna-Godavari Basin

 Recent Discoveries

 Planned Petroleum and Natural Gas Demand-Supply

 Gas Production – Eleventh Five-Year Plan Projection

 Projected Natural Gas Demand – Eleventh Plan Period

 LNG Supply – Eleventh Five-Year Plan Projection

 Crude Oil Production – Eleventh Five-Year Plan Projections

 Crude Oil Imports

 Net Exports of Petroleum Products

 Import and Export of Crude Oil and Petroleum Products
10



 Product Import Price vs Gross Export Realisation

 Consumption of Petroleum Products

 Natural Gas Demand Sectors

 Share of Fuel Imports in Total Merchandise Imports

 India‟s Share in World Oil and Gas Market

 Percentage Demand Met from Domestic Sources

 Refinery Capacity

 Domestic Production of Petroleum Products

 Gross Refining Margins for Domestic Refineries

 NCI of Domestic Refineries
11



 Crude Oil Production

 Natural Gas Production

 LNG Imports

 Major Equipment Players

 Major Energy Sector Players

12


List of figures

 Structure of Indian Power Sector and Ownership

 Hydroelectric Electricity Generation Capacity

 Nuclear Power Capacity

 Category wise growth in Consumption

 Fuel-wise capacity addition in Eleventh Plan Period

 Price Revisions in Delhi

13


Contents


 Industry overview – power

 Generation







14

EXECUTIVE SUMMARY
India: Energy Sector September 2010

Executive Summary … (1/2)
The average growth rate of India‟s gross domestic product (GDP) during the period 2006-09, was about
8.6 per cent. The corresponding average growth rates of net national income and personal disposable
income were 14.5 per cent and 14.7 per cent, respectively. The average growth in the index of industrial
production (IIP) during this period was 7.2 per cent. IIP growth was 10.2 per cent in 2009-10. A high-
growth economy has resulted in increasing demand for energy.

In terms of purchasing power parity (PPP), Indian economy is the fourth-largest in the world. The country
accounts for over 17 per cent of the total global population and about 7 per cent of world‟s GDP.
However, according to the International Energy Agency (IEA), India‟s energy production accounts for just 4
per cent of the global energy production.The country accounts for 5 per cent of the total global energy
consumption.

According to the Central Electricity Authority (CEA), the average per capita electricity consumption in
India is about 704 kWh as compared to global world wide per capita consumption of 2,752 kWh. The
Government of India is keen to increase per capita consumption of energy to raise living standards in the
country. An average Indian consumes 0.53 tonnes of oil equivalent (TOE) of energy compared to the global
average of 1.82 TOE.

Higher economic growth is driving income growth, which in turn is driving up industrial investment and
fuel consumption. In general, demand exceeds supply and there is a broad-based energy shortage, which is
either met by imports or remains unmet.
15

EXECUTIVE SUMMARY

Executive Summary … (2/2)
Energy reforms and policy changes in recent years have not only opened up avenues for investments in the
sector, but have also resulted in private participation across its various segments. To attract foreign
investment in infrastructure, including energy, foreign direct investment (FDI) norms have been relaxed over
the years. Government of India has not only allowed 100 per cent FDI in the energy sector but also
amended previous norms and practices to provide a climate conducive to investment. The reforms of last
twenty years have yielded positive results.

By 2012, India requires an installed capacity of about 200,000 MW, which entails a huge capital investment.
This has created opportunities in the power generation, transmission, and distribution segments. Private
participation and public-private partnerships are being encouraged to pool in investments and expertise.
Apart from conventional fuel-based plants, renewable energy development has been placed on equal priority.

Significant opportunities in the oil and gas sector relate to exploration and discoveries under the New
Exploration Licensing Policy (NELP), refinery product and natural gas transmission infrastructure
development, and market development for oil and gas products.

The overall growth in India‟s energy sector has drawn investments into the electrical equipment industry, not
only in the form of capacity expansions and green field projects from existing players, but overseas as well.
The scope for expansion is significant as the energy sector itself offers investment opportunities in the next
decade and beyond.

16


Contents


 Industry overview – Power

 Generation







17

INDUSTRY OVERVIEW-POWER

Industry overview – Power … (1/5)
Background

India‟s power sector has had a remarkable growth in past few decades. There has been a significant push
towards opening the electricity sector to competition and to redesign the electricity markets to achieve
more efficient outcomes. Consequently, the sector has moved from a mostly vertically integrated structure –
with the state electricity boards (SEB) owning the generation, transmission and distribution businesses – to a
more unbundled corporate structure.

As compared to 23 integrated utilities, i.e. SEBs, that existed before the electricity reforms began in the
1990s, there are now more than 80 utilities or companies with varied ownership structures and mandates,
viz., central government‟s power generation and transmission companies; state governments‟ generation,
transmission and distribution utilities; city-specific private utilities; captive power units of companies; and
independent power producers (IPP).

Intra-state power transmission is the sole responsibility of the state transmission utilities (STU) while inter-
state and inter-region transmission is entrusted to Power Grid Corporation of India Limited (PGCIL), a
central public sector unit (CPSU).

Distribution of power is mostly controlled by state distribution companies (discoms) though there are also a
few private companies in this business in a few states and cities. To comply with the provisions of Electricity
Regulatory Commission Act, 1998, most states have set up state electricity regulatory commissions (SERCs),
which regulate tariffs for the generation, transmission and distribution companies. The Central Electricity
18



Regulatory Authority (CERC) fulfils this responsibility for the central power utilities. There is an appellate
tribunal for disputes resolution.There are also a few power trading companies that facilitate the exchange
of power between regionally separated companies and utilities at a price/margin determined by CERC.

Section 246 of the Indian Constitution puts power sector on the `concurrent list‟, which implies that both
the state legislatures and the Parliament have the power to create policies for the sector. However, in the
event of a conflict, the central law prevails. In recent decades, the Government of India has focused on
infrastructure development with top priority given to the power sector.

Figure 1: Structure of Indian Power Sector and Ownership

Power Sector Utilities:

Generation companies:
Transmission companies:
SEBs, State -owned gencos Distribution companies:
SEBs
IPPs SEBs
STUs
CPSUs Private licensees
PGCIL
Private licensees State discoms
Private companies
Captive units

19



The history of governance in the sector dates back to The Electricity Act, 1910, which provided the initial
legal framework. It was followed by an amended Electricity (Supply) Act, 1948, which provided the overall
regulatory framework for the sector. Recognising the need for accelerating reforms, the Electricity Act,
2003 was enacted in June 2003. It repealed and replaced the earlier laws. Although, since then several
additional rules and laws have been passed to regulate the sector, the Electricity Act, 2003, remains the
basis for all legal provisions and guiding principles for the sector.

Importance to Economy
Electricity is a key driver of rapid economic growth and industrialisation of the country. Decades of
economic planning have placed significant emphasis on developing the power sector. Rapid economic
growth and higher standards of living depend considerably on the availability of adequate and reliable
power at an affordable price.

The gross domestic product (GDP) from electricity supply at constant prices was US$ 14.71 billion in
2008-09, accounting for 1.63 per cent of GDP. The employment generated by the sector is in excess of 1
million.

20



Table 1: Gross Domestic Product from Electricity Supply
(US$ million)

2004-05 2005-06 2006-07 2007-08 2008-09

Constant Prices 11,159.29 12,046.67 14,380.95 16,395.52 14,723.91

Current Prices 11,158.85 12,262.44 14,980.24 16,722.14 15,078.91

External investment in India‟s electricity sector has also had a strong growth. Despite global economic
problems, India has had only marginal variation in FDI inflows, and the inflows to power sector increased
from US$ 157 million in 2006-07 to US$ 1.44 billion in 2009-10.

However, as demand growth and power supply shortages increase, there is scope for even more
investment in the sector. The average per capita electricity consumption in India is only 704 kWh as
compared to worldwide per capita consumption of 2,752 kWh.

21



Table 2: Energy Indicators

Indicator Unit India World
Energy Production MTOE 450.92 11,939.53
Energy Consumption TWh 609.74 18,186.94
Total Primary Energy
MTOE 594.91 12,029.27
Supply (TPES)
TPES/Population TOE/capita 0.53 1.82
TPES/GDP (PPP) TOE/2 million US$ 0.15 0.3
Electricity Consumption* kWh/capita 704.4 2,752
CO2/TPES Tonne CO2/TOE 2.23 2.51
CO2/Population Tonne CO2/capita 1.18 4.38

Source: International Energy Agency – 2007 indicators, CEA

Empirical analyses have confirmed that demand for electricity is closely linked to changes in GDP and this
relationship is remarkably stable and broadly linear. The Central Electricity Authority (CEA) has identified
that at a GDP growth rate of 9 per cent, the power sector must grow at over 7.2 per cent, annually.

22


Contents



 Generation







23

GENERATION

Generation … (1/10)
Overview
The total generation capacity of the grid-connected power utilities was 159,398 megawatts (MW) as of
March 2010. The thermal power capacity of utilities was 102,453.98 MW, followed by hydropower
(36,863.40 MW), renewable energy sources or RES (15,521.11 MW) and nuclear power (4,560 MW). The
following table summarizes the growth in installed capacity.

Table 3: Fuel-wise Generation Capacity

FY Capacity (MW) Share (%)
Thermal Hydro Nuclear RES Total Thermal Hydro Nuclear RES
2003 76,762 26,767 2,720 1,628 107,877 71.2 24.8 2.5 1.5
2004 77,969 29,507 2,720 2,488 112,683 69.2 26.2 2.4 2.2
2005 80,902 30,942 2,770 3,811 118,426 68.3 26.1 2.3 3.2
2006 82,411 32,326 3,360 6,191 124,287 66.3 26 2.7 5
2007 86,015 34,654 3,900 7,761 132,329 65 26.2 2.9 5.9
2008 91,907 35,909 4,120 11,125 143,061 64.2 25.1 2.9 7.8
2009 93,998 36,878 4,120 13,243 148,238 63.4 24.9 2.8 8.9
2010 102,454 36,863 4,560 15,521 159,398 64.3 23.1 2.9 9.7
Source: CEA, IMaCS Research

24

GENERATION


As of March 2010, the state government utilities owned 49.8 per cent of the total installed generation
capacity of 159.39 gigawatts (GW). The remaining was owned by central utilities (32 per cent) and private
utilities (18.2 per cent).

In the past decade there has been a shift in the trend of capacity addition. After many decades of near
monopoly of state utilities in fresh capacity creation, private utilities‟ share has grown significantly. Clearly,
the reforms have succeeded in inducing private investment in the sector.
Table 4: Sector-wise Installed Utility Capacity

At end-FY 2002 2003 2004 2005 2006 2007 2008 2009 2010

State 62,995 66,582 67,380 65,942 70,184 70 095 74 689 76,388 79,392

Central 31,335 29,944 32,979 38,790 39,959 45,121 48,361 48,971 50,993

Private 10,717 11,351 12,325 13,688 14,144 17,108 20,010 22,879 29,014

Total 105,047 107,877 112,684 118,420 124,287 132,324 143,060 148,238 159,398


25

GENERATION

Thermal Generation
India‟s electricity generation capacity is mainly coal-based. It is considered good for base-load power
generation. An estimated 82.2 per cent of the installed thermal power capacity is based on coal as the fuel.
In fact, the power sector accounts for about 75 per cent of India‟s coal demand.

Table 5: Capacity of Thermal Power Plants by Fuel

FY 1985 1997 2002 2003 2004 2005 2006 2007 2008 2009 2010
MW 27,030 61,010 74,429 76,762 77,969 80,902 82,411 86,014 91,907 93,725 102,454
Coal 26,311 54,154 62,131 63,951 64,956 67,791 68,519 71,121 76,049 77,649 84,198
Gas 542 6,562 11,163 11,633 11,840 11,910 12,690 13,691 14,656 14,877 17,056
Diesel 177 294 1,135 1,178 1,173 1,202 1,202 1,202 1,202 1,200 1,200
Share (%) 63.5 71.1 70.9 71.2 69.2 68.3 66.3 65.0 64.0 63.4 64.3
Coal 61.8 63.1 59.1 59.3 57.6 57.2 55.1 53.7 53.2 52.4 52.8
Gas 1.3 7.6 10.6 10.8 10.5 10.1 10.2 10.3 10.2 10.2 10.7
Diesel 0.4 0.3 1.1 1.1 1.0 1.0 1.0 0.9 0.8 0.8 0.8


26

GENERATION

The dominance of coal in India‟s generation capacity is mainly because of significant domestic reserves. As of
April 2009, the coal reserves of India (to the depth of 1,200 m) have been estimated at 266 billion tonnes by
the Geological Survey of India. The proven reserves are of 105 billion tonnes, indicated reserves of 123
billion tonnes and inferred reserves of 38 billion tonnes. India‟s proven reserves at current levels of
production are enough to last about 200 years.

Natural gas is now finding a greater role in India‟s energy mix. Its share in the total installed power
generation capacity has increased from 4.4 per cent at end of 1991-92 to 10 per cent at end of 2008-09.
Compared to coal-based plants, natural gas plants emit only about half as much carbon dioxide (CO2) per
kWh. Also, with production starting at some recently developed gas fields in India, there is a greater
potential for development of gas-based power plants.

Hydroelectric Power
Hydroelectricity is clean and its generation is largely free of the concerns of fuel supply and price volatility of
imported fuels. However, its share in the fuel mix for power generation has declined because of high initial
costs and development risks. In recent years, the government has tried to address many of the concerns in
hydroelectric power project development to improve the share of hydropower in the hydro-thermal
electricity generation mix.

27

GENERATION

Figure 2: Hydroelectric Electricity Generation Capacity


India‟s hydroelectric potential has been estimated to be 600 billion kWh per annum, corresponding to a
capacity of 148.7 GW. States with high potential are Arunachal Pradesh (50.3 GW), Himachal Pradesh (18.8
GW), Uttarakhand (18.2 GW), and Jammu & Kashmir (14.1 GW). However, only 23 per cent of the potential
has been realised so far.

28

GENERATION

Table 6: Hydroelectric Potential and Development
April 2009

Potential Capacity Per cent of Capacity under Per cent of
Region
(MW) Developed Potential Construction Potential
North 53,395 13,772 25.8 7,064 13.3
West 8,928 5,804 65 400 4.5
South 16,458 9,395 57.1 786 4.8
East 10,949 3,049 27.9 2,211 20.2
North-East 58,971 1,203 2 2,724 4.6
Total 148, 701 33,223 22.3 13,185 8.7


A vision paper prepared by the Ministry of Power envisages harnessing the entire hydro potential of 148.7
GW by 2025-26. Moreover, renovation, modernisation, up-rating and life extension of some of the existing
hydropower plants are expected to yield additional capacity of 4,300 MW during the Eleventh Five-Year Plan
period (2007-2012).

Renewable Energy
Renewable energy sources (RES) have great potential to contribute to improving energy security of the
country and reducing green-house gas (GHG) emissions. Using renewable sources to generate electricity has
several advantages –a perennial energy source, potential for lower reliance on imported fossil fuels and
lower CO2 emissions. However, at present, the principal constraint facing rapid expansion of renewable
29

GENERATION


power is high initial cost as compared to the competing fuels. India‟s renewable energy resources are
summarised below.
Table 7: RES Potential and Achievements
(MW)

Achieved as of March 31,
Source/System Potential
2010
Grid Interactive Renewable Power
Bio-power (woody biomass) 62,000 866
Wind Power 45,000 11,807
SHP 15,000 2,735
Cogeneration – Bagasse 5,000 1,334
Waste to Energy 5,000 65
Solar Power 4-7 kWh/sq m/day 10
Sub Total 132,000 16,817
Distributed Renewable Power
Rural 30,000
405
Captive generation-industrial, commercial 20,000
Sub Total 50,000 405
Total 222,000 17,222

Source: Ministry of New & Renewable Energy, IMaCS Research

30

GENERATION

India is among the five largest wind power generators in the world. The share of RES in the country‟s total
generation capacity has increased from 1.1 per cent at the end of 2001-02 to about 9.7 per cent at the end of
2009-10.The total renewable capacity is expected to increase to 23,476 MW by the end of March 2012.Wind
power is expected to contribute almost 74 per cent of this capacity.

Nuclear Power
India‟s nuclear power self-sufficiency runs across the entire value chain: uranium exploration and mining, fuel
fabrication, heavy water production, reactor design and construction, reprocessing and waste management.

India‟s reserves in the reasonably assured resources (RAR) category are estimated at 77,185 tonnes of U308,
the estimated additional resources (EAR)-I reserves are about 23,525 tonnes of U308.The remaining
reserves are categorised as speculative resources (SR), which could become available for nuclear power
programme with further exploration. After accounting for various losses, including mining (15 per cent),
milling (20 per cent), and fabrication (5 per cent), the net uranium available for power generation is about
61,000 tonnes. The available uranium has electricity potential of 328 GWe of pressurised heavy water type
reactors (PHWR) and 42,231 GWe of fast breeder reactors (FBR).

The Atomic Energy Act, 1962, allows setting up of nuclear power stations only by government companies.
Two government companies, Nuclear Power Corporation of India Limited (NPCIL) and Bharatiya Nabhikiya
Vidyut Nigam Limited (BHAVINI), are responsible for setting up and operating nuclear power reactors.

31

GENERATION

As of March 2010, nuclear power plants accounted for 2.9 per cent of the total installed capacity. Though
nuclear power is under government-controlled entities, options are being explored to attract investment
from private sector.
Figure 3: Nuclear Power Capacity


32

GENERATION

The Planning Commission‟s expert committee on an Integrated Energy Policy has suggested in its report
that there is a possibility of reaching a nuclear power capacity of 21-29 GW by 2020 and 48-63 GW by 2030
through a mix of indigenous PHWRs, FBRs, and light water reactors (LWR).

In July 2005, India and the US signed a joint statement designed to give India access to the global market for
nuclear fuel and reactors. This was followed by a nuclear exports waiver by the Nuclear Suppliers Group
(NSG) in September 2008. Subsequently, India has entered into deals with France and Russia to source fuel
for its existing nuclear plants.

33


Contents



 Generation







34

TRANSMISSION AND DISTRIBUTION

Transmission and distribution … (1/7)
Power Transmission
Adequate capacity addition and optimum utilisation are important aspects of power sector development.
Commensurate with the capacity addition, an extensive network of transmission and distribution has been
developed for evacuation of power and supply to consumers. Notwithstanding the substantial progress, many
regions in the country still suffer from shortage of electricity. The new generation capacity additions as well
as targeted increase in per capita consumption call for further strengthening and expansion of the
transmission system.

The capacity additions to transmission lines (220 kV and above) until the end of 2008-09 are indicated in the
following table.
Table 8: Growth in Transmission Lines
(Ckm)

Up to 2nd year
Particulars 6th Plan 7th Plan 8th Plan 9th Plan 10th Plan
of 11th Plan

765 kV - - - 1,160 2,184 3,118
± 500 kV HVDC - 1,634 1,634 4,738 5,872 7,172
400 kV 6,029 19,824 36,142 49,378 75,722 89,496
220 kV 46,005 59,631 79,600 96,993 114,629 112,960


35


With adoption of new technology, there has been a significant addition of transmission capacity at the extra-
high voltage levels of over 500 kV. The 765 kV and 500 kV-HVDC technologies have raised grid efficiency and
have strengthened the grid at the inter-regional links.

Table 9: Growth in Sub-stations (MVA)

Up to 2nd year
Particulars 6th Plan 7th Plan 8th Plan 9th Plan 10th Plan
of 11th Plan
765 kV - - - - - 4,500
± 500 kV HVDC
- - - 5,200 8,200 8,700
Converter/BTB Station
400 kV 9,330 21,580 40,865 60,380 92,942 111,202
220 kV 37,291 53,742 84,177 116,363 156, 497 177,189


At present, the country has five regional grids - one each for the Northern, North-Eastern, Southern,
Eastern and the Western region. Except for the Southern region, all other regional grids have been
synchronised. Expansion of the regional transmission networks is essential for transmission of power across
the country, from the abundant generation areas to deficit areas. As part of its ambitious mission to provide
electricity to the entire country by 2012, the Government has set a target of adding over 60,000 circuit
kilometres (37,200 miles) of new transmission lines at a cost of about US$ 146 million. The integrated grid is
expected to carry as much as 60 per cent of the power generated in the country. The government is also
36


carrying out US$ 126-million expansion of the five regional systems as well as the inter-regional grid to
boost transmission capacity from 17,000 MW to 37,000 MW.
Table 10: Growth in Inter-regional Transmission Capacity
(Ckm)

Year 2,002 2,005 2,007 2,010 2,012
765 kV - - 1,100 2,200 9,200
400 kV 1,000 2,400 7,800 11,400 16,400
HVDC bi-pole - 2,000 2,500 2,500 6,500
HVDC B-T-B 2,000 3,000 3,000 3,000 3,000
HVDC mono-pole 200 200 200 200 200
220 kV 1,850 1,850 1,850 1,850 1,850
Total 5,050 9,450 16,450 21,150 37,150


To facilitate greater private sector participation in transmission and to leverage advantages of competition,
the central and state electricity regulatory commissions have harmonised their regulations for grant of
transmission licenses. These regulations provide the framework for procurement of transmission licenses
through competitive bidding.

37


Overall, the CEA has estimated a fund requirement of US$ 33.33 billion for implementation of transmission
schemes during the Eleventh Plan period. This includes requirement of US$ 17.86 billion for the regional and
the national grid transmission schemes and US$ 15.48 billion for the state sector transmission schemes.

Power Distribution
Distribution is a vital component of the electricity-supply chain, but this segment has lagged in operational
efficiency as well as financial performance. Under-recovery of costs and poor collection efficiency of the
power utilities have been a key concern. The consequent deterioration in operational efficiency has further
aggravated the situation.With the restructuring of electricity utilities from their monolithic structures to
separation of generation, transmission and distribution, the focus has finally shifted to making the distribution
segment more efficient and financially viable. This has created significant opportunities in the segment.

Recognizing the urgent need for reforms in the distribution sector, the Government of India introduced the
Accelerated Power Development Programme (APDP) in 2001.The APDP was aimed at strengthening
transmission and distribution networks and reduction in aggregate technical and commercial (AT&C) losses.
Subsequently, incentive financing was integrated with the existing investment programme to achieve
commercial viability of SEBs and power utilities and link it to the reform process. APDP was renamed
Accelerated Power Development & Reforms Programme (APDRP) in 2002-03 for Tenth Plan period (2003-
07). The main objectives of the programme were to achieve financial viability of state utilities, reduce AT&C
losses, improve customer satisfaction, and increase the reliability and quality of power supply. After a re-
examination of the APDRP, The Cabinet Committee on Economic Affairs (CCEA) approved a restructured

38


APDRP (R-APDRP) for the Eleventh Plan period as a central sector scheme in July 2008. The focus of this
programme is on actual, demonstrable performance in terms of AT&C loss reduction.

Projects under the scheme are to be taken up in three parts. The activities covered under the three parts
are:

• Part A: Preparation of baseline data for project area, covering consumer indexing, geographic
information system (GIS) mapping, metering of distribution transformers and feeders, automatic data
logging for all distribution transformers and feeders, supervisory control and data acquisition (SCADA)
and distribution management system (DMS).

Initially, 100 per cent of the funds for the approved projects are to be provided through loans from the
Government of India on terms decided by Ministry of Finance. The amount allocated for these activities
is US$ 2.48 billion.

• Part B: Renovation, modernization and strengthening of 11 kV level substations,
transformers/transformer centres, re-conductoring of lines at 11 kV and lower levels, urban-rural load
bifurcation, feeder separation, load balancing, HVDS (11 kV); laying aerial bunched conductor in high
population-density areas; replacement of electromagnetic energy meters with tamper-proof electronic
meters; installation of capacitor banks and establishing mobile service centres.

39



Initially, up to 25 per cent funds for the projects are to be provided through loans from the Government of
India on terms decided by Ministry of Finance. For special category states, loan amount would be 90 per
cent of the project cost. However, the project-wise requirement of gross budgetary support is to be decided
by a Steering Committee. The remaining funds are to be raised from financial institutions.The amount
allocated for these activities is US$ 9.95 billion.

• Part C: Funding of activities related to promoting reforms in the power sector. The fund allocated for
these enabling activities is US$ 292.78 million.

Guided by various regulatory and policy initiatives for efficiency improvements in the distribution sector,
several Public Private Partnership (PPP) models have been proposed. Successful PPP models include first
corporate distribution franchise model in Bhiwandi and distributed-generation based franchise in Pune. The
franchisee model is being promoted by state governments that are keen to improve their networks and
collection efficiencies without complete privatisation. Private companies have also shown interest in
distribution franchises offered by several states.

40


Rural Electrification
In April 2005, the Government of India launched the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), a
scheme for developing rural electricity infrastructure and household electrification. The scheme was aimed
at achieving the incumbent government‟s National Common Minimum Programme (NCMP) promise of
providing access to electricity to all households in five years. Rural Electrification Corporation (REC) is the
nodal agency for implementation of the scheme. A capital subsidy of US$ 1.2 billion was budgeted for
implementation of Phase I of the scheme during the Tenth Plan period. The scheme was reviewed towards
the end of plan period and modifications were made for its implementation during the Eleventh Plan period.
Accordingly, the Ministry of Power approved a capital subsidy of US$ 6.6 billion in February 2008. The
current status of rural electrification is as mentioned in the following table:

Table 11: Rural Electrification

Rural Electrification Status*
Total No of Villages 593,732
No of Villages Electrified 498,080
% of Village electrified 83.9%

Source: CEA, Ministry of Power
*As of May 2010

41


Contents



 Generation







42

DEMAND-SUPPLY POSITION

Demand-supply position … (1/5)
Overview
For the past two decades, India has had to face increasing deficit in power supply, both for meeting its
normal energy requirements as well as its peak load demand. The problem is acute during peak hours and
summers, and necessitates planned load shedding by many utilities to maintain the grid in a healthy state. The
average all-India shortages in 2009-10 were at 10 per cent in terms of normal energy requirement and about
13 per cent in terms of peak load.
Table 12: Electricity Demand and Supply

Energy Peak Demand
FY (MU) (MW)
Demand Availability Shortage % Demand Met Shortage %
2002-03 545,983 497,890 48,093 8.8 81,492 71,547 9,945 12.2
2003-04 559,264 519,398 39,866 7.1 84,574 75,066 9,508 11.2
2004-05 591,373 548,115 43,258 7.3 87,906 77,652 10,254 11.7
2005-06 631,024 578,511 52,513 8.3 93,214 81,792 11,422 12.3
2006-07 693,057 624,716 68,341 9.9 100,715 86,818 13,897 13.8
2007-08 737,052 664,660 72,392 9.8 108,866 90,793 18,073 16.6
2008-09 777,039 691,038 86,001 11.1 109,809 96,785 13,024 11.9
2009-10 830,594 746,644 83,950 10.1 118,472 102,725 15,747 13.3

Source: CEA

43


With the shortage at both the normal and the peak levels, Indian power industry does not exhibit much
cyclicality. Further, with assured returns, the margins of players and their profitability is almost independent
of the economic cycles.

Electricity is the most important component of primary energy. India‟s electricity consumption has grown at
an average rate of 7.3 per cent during the period 2002-07 to about 577.9 TWh. Consumption has increased
at a faster rate since 2002-03, reflecting buoyant industrial demand. Industrial consumers are the largest
group of electricity consumers, followed by the domestic, agricultural and commercial consumers, in that
order. India‟s per capita electricity consumption increased from 178 kWh in 1985-86 to 704.4 kWh in 2007-
08. Over the period, 2001-08, per capita consumption has increased at an average rate of 4.45 per cent. It is
still much lower compared to the international standards.
Table 13: Electricity Consumption
FY Consumption (GWh)
Dom. Comml. Indl. Agri. Others Total
2003-04 89,736 28,201 181,970 87,089 31,338 418,334
2004-05 95,659 31,381 199,488 88,555 32,950 448,033
2005-06 100,090 35,965 214,121 90,292 33,983 474,451
2006-07 111,002 40,220 241,216 99,023 34,210 525,671
2007-08 120,981 46,685 265,407 104,182 40,706 577,960


44


Electricity Requirement
The demand for power is expected to increase to 975 billion kWh by 2011-12. However, at an average GDP
growth rate of 8 per cent, the overall demand is expected to increase to about 1,097 billion kWh in 2011-
12, including the demand from non-utilities.
Table 14: Projected Requirement of Electricity
Energy Requirement Peak Demand Installed Capacity Required
(Billion kWh) (GW) (GW)
GDP growth at 8.0% 9.0% 8.0% 9.0% 8.0% 9.0%
2003-04 633 633 89 89 131 131
2006-07 761 774 107 109 153 155
2011-12 1,097 1,167 158 168 220 233
2016-17 1,524 1,687 226 250 306 337
2021-22 2,118 2,438 323 372 425 488
2026-27 2,866 3,423 437 522 575 685
2031-32 3,880 4,806 592 733 778 960
Source: IMaCS Research

The 17th Electric Power Survey (EPS) has forecast a peak demand of 152,746 MW for 2010-11.That means
a capacity addition requirement of about 72,000 MW during the Eleventh Plan period. Though the target
set for capacity addition during the Eleventh Plan period is 78,700 MW, only 62,000 MW is expected to be
added by the end of the period.

45


Capacity Addition Plan
The following table provides the Eleventh Plan targets for adding generation capacity. In a reversal of the
trend witnessed during the 1990s, a substantial contribution is expected from the hydropower sector. Also,
the private sector is expected to account for 15 GW of the planned capacity addition of 78.7 GW during
this period.
Table 15: Installed Capacity Addition Plan
(MW)

Sector Thermal Hydro Nuclear Grand Total
11th Plan Total 59,693 15,627 3,380 78,700
Central 24,840 8,654 3,380 36,874
State 23,301 3,482 - 26,783
Private 11,552 3,491 - 15,043

Recognising the large potential of coal reserves in the country as an economic and readily available
resource, a significant proportion of the future capacity additions is expected to be based on coal. Further,
to reduce the environmental impact and to increase efficiency, the strategies proposed by the power
ministry include introduction of large-sized units (660-800 MW) employing the super-critical technology. The
source-wise capacity addition as envisaged under Eleventh Plan period is as given below:

46


Additional generation capacity would require Figure 5: Fuel-wise capacity addition plan (2007-2012) (%)
commensurate investments in transmission
infrastructure as well. Huge transmission capacity 4%
enhancement is required under Phase-III of National
Grid Programme, which targets an inter-regional 20%

exchange capacity of 37,700 MW by 2012. With Thermal
rapid industrialization and growing power Hydro
requirements, many states have decided to set up Nuclear
high-capacity intra-state power transmission
systems. PPP model is being adopted by many 76%
utilities to attract private investment in transmission
sector. The future capacity addition plan envisaged is
as given in the table below:
Table 16: Projected Transmission Line Length (Ckm)
Sector 11th Plan 12th Plan
765 kV 5,428 8,000
500 kV HVDC 5,206 4,500
400 kV 49,278 51,000
220 kV 35,371 50,000
Total 95,283 113,500


47


Contents



 Generation







48

GOVERNMENT POLICY AND REFORMS

Government policy and reforms … (1/10)
Overview
Prior to 1991, power markets in the country were completely in the hands of the State Electricity Boards
(SEBs).Their poor financial health and the wide-spread inefficiencies in the system resulted in the initiation
of reforms in 1991.

The reforms initially focussed on the generation side of the business. Power was removed from the list of
activities reserved for the public sector in the Industrial Policy Resolution, and the Electricity Supply Act,
1948 was amended to lift many of the regulatory impediments to private investment in the sector. The
policy allowed full local and foreign private ownership of power companies and offered a thirty-year license
with the prospect of twenty-year renewals and higher financial returns.

Subsequently, it was felt that reforms were also required on the distribution side of the business, as the SEBs
were in a poor financial condition and unable to invest in fresh capacity. In addition to direct loans to SEBs,
the state governments also provided substantial guarantees to financial institutions for enabling SEBs to raise
requisite resources. Reform of power distribution was, and still is, a fundamental requirement for improving
commercial performance and financial viability of the power sector in India and attracting public and private
investment. Improvement in cost recovery in power sector also assumed significance, particularly in the
context of provision of free or subsidised power to certain consumer segments by the state governments.

The setting up of CERC and the state electricity regulatory commissions (SERC) was a key element of the
reform process, whereby the regulatory control was passed on to independent regulators. The commissions

49


are mandated to regulate the tariffs charged to consumers, promote investment and advise the government
on power sector policies.

The next step was separating the generation, transmission and distribution functions of the integrated SEBs.
Starting with Orissa, many states have unbundled their SEBs to form separate entities. This has enabled
independent functioning of the three segments in terms of every-day operations, investment assessment,
project identification and deployment of funds.

Key Policies
The Electricity Act, 2003
The Electricity Act, 2003, provides a comprehensive yet flexible legislative framework for power sector
development.The key objectives of the Electricity Act, 2003 are as follows:

• Consolidation of the laws relating to generation, transmission, distribution, trading and use of
electricity with broad measures conducive to development of the entire electricity industry

• Promotion of competition in the industry

• Protection of consumers‟ interest and facilitation of electricity supply in all areas

50


• Rationalisation of electricity tariffs

• Ensuring transparency of subsidies

• Promotion of efficiency and environmentally benign policies

• Constitution of CEA, regulatory commissions and establishment of an appellate tribunal

National Electricity Policy, 2005
The National Electricity Policy (NEP), 2005 aims to achieve accelerated development of the power sector,
supply of electricity to all, and protection of interests of consumers and other stakeholders. It has tried to
address the issues pertaining to availability of energy resources, technologies for using those resources,
economics of generation using different resources, and the country‟s energy security. The salient objectives
of the policy are as follows:

• Access to electricity for all households in next five years

• Power demand to be fully met by 2012

• Energy and peaking shortages to be overcome and spinning reserve to be made available
51



• Supply of reliable and quality power of specified standards in an efficient manner and at reasonable rates

• Per capita availability of electricity to be increased to over 1,000 units by 2012

• Minimum lifeline consumption of 1 unit/household/day by year 2012

• Financial turnaround and commercial viability of the electricity sector

• Protection of consumers‟ interests

The policy requires the state governments to prepare a five-year plan with annual milestones to bring down
AT&C losses. It also aims to facilitate investment in distribution by ensuring adequate returns for utilities.

National Electricity Policy, 2005
In January 2006, the Government of India notified the National Tariff Policy, 2006, which aims to ensure the
following:

• Financial viability of the power sector

52



• Attract investments

• Availability of electricity to consumers at reasonable rates

• Transparency and consistency in regulatory approach to tariff determination

The regulatory commissions are guided by the Tariff Policy, which stipulates that procurement of future
requirement of power is to be done through competitive bidding. A two-part tariff structure is to be
followed for awarding all long-term contracts to facilitate merit order despatch. Furthermore, power
purchase agreements (PPA) are required to ensure adequate and bankable payment security mechanism to
mitigate the risk of default.

Integrated Energy Policy, 2006
The broad vision behind the Integrated Energy Policy is to meet the energy demand of all, including the
lifeline energy needs of vulnerable households.The emphasis is on safe and convenient energy at the least
cost in a technically efficient, economically viable and environmentally sustainable manner.

53


National Action Plan on Climate Change
In 2008, India announced its first National Action Plan on Climate Change (NAPCC) outlining existing and
future policies and programmes to address climate change mitigation and adaptation.The plan includes the
National Solar Mission, National Mission for Enhanced Energy Efficiency, National Mission on Sustainable
Habitat, National Water Mission, National Mission for Sustaining the Himalayan Ecosystem, National Mission
for a “Green India”, National Mission for Sustainable Agriculture and National Mission on Strategic
Knowledge for Climate Change.

Industrial Policy for Renewable Energy
The Government of India is promoting medium, small, mini and micro enterprises for manufacturing and
servicing of various types of renewable energy systems and devices. The industrial policy measures include
the following:

• Exemption from industrial clearance for setting up renewable energy units.

• Exemption from CEA clearance for power generation projects of up to US$ 238.1 million.

• Five-year tax holiday for renewable energy power generation projects.

• Soft loan made available through IREDA for renewable energy equipment manufacturing.

54


• Facilities for promotion of export-oriented units for renewable energy industry.

• Financial support extended to renewable energy units for taking up R&D projects in association with
technology institutions.

• Permission to private sector companies to operate as distribution licensees or generating entities.

• Custom duty concession given for renewable energy parts and equipment, including for machinery
required for renovation and modernisation of power plants. Excise duty on a number of capital goods and
instruments in the renewable energy sector has been reduced or exempted.

• Excise duty reduction or exemption on a number of capital goods and instruments used in the renewable
energy sector.

The Mega Power Policy
Under the Mega Power Policy, projects of more than 500 MW (and 350 MW in special category states) with
inter-regional power transmission capabilities qualify to receive financial incentives. Under the policy, a
qualifying project can avail of financial concessions such as zero customs duty on import of capital equipment
and deemed export benefits under the Foreign Trade Policy and income tax holiday under Section 80-IA of
the Income Tax Act. Tax holidays are available to such projects for 10 years within 15 years of commissioning.
States can also provide exemptions on local taxes and duties. Projects in the public sector get 15 per cent
price preference.
55


The Ultra Mega Policy
The government has launched an initiative for developing 4,000 MW coal-based ultra mega power projects
(UMPPs). The objective behind this initiative is to obtain cheaper tariffs using economies of scale and
mitigate the risks related to acquisition of land, fuel, water and statutory clearances. These projects are
awarded to developers on the basis of tariff-based competitive bidding. Project-specific shell companies
(SPVs) have been set up as wholly-owned subsidiaries of Power Finance Corporation Limited to tie up
necessary inputs such as land, captive mining blocks for fuel and water, and to facilitate in-principle
environment and forest clearances. Each SPV is transferred to the selected developer along with the
clearances obtained and resources secured. So far, nine sites have been identified by CEA for the proposed
UMPPs.These include four pit-head sites, each, in Madhya Pradesh, Jharkhand, Orissa and Chhattisgarh, and
five coastal sites, each in Gujarat, Andhra Pradesh, Tamil Nadu, Maharashtra and Karnataka. Some states are
keen to have additional UMPP sites.

The New Hydro Policy, 2008
A new hydro policy was approved by the Union Cabinet in January 2008.The key features of the policy are as
follows:

• Both the public sector and the private sector developers can be allocated projects without having to go
through the tariff based competitive bidding route. The tariff would be decided by the appropriate
regulatory commission.

56


• The developers have been allowed merchant sales of up to 40 per cent of the saleable energy. This allows
them the flexibility of diversifying revenue realisations instead of being bound by fixed PPAs.

• The policy allows 12 per cent free power to the local state government and an additional 1 per cent for a
local area development fund that would provide a regular source of income to build replacement
infrastructure for the displaced people and to fund welfare schemes for them.

• For the families affected by projects, the policy provides for 100 units of free electricity per month for a
period of 10 years. In addition, the policy stipulates that at every project site, an industrial training institute
would be set up six months before the beginning of the project work to train the affected people to
undertake skilled and semi-skilled jobs on project.

The 50,000 MW Hydroelectric Power Initiative
The Central Government launched a 50,000 MW hydropower initiative in May 2003. It was felt that an ideal
hydro-thermal mix in the ratio of 40:60 is necessary for building flexibility in power system operations to suit
varying load patterns during a year. Both base-load and peak-load requirements can be sufficiently met with
such a mix while maintaining the grid stability.

The Electricity Act, 2003, requires hydropower developers to obtain approval from CEA, which in turn is
required to assess whether a proposed project‟s river works could jeopardize the prospects of the best
development of the river or its tributaries for power generation while being consistent with the
requirements of drinking water, irrigation, navigation, flood-control or other public purposes. CEA must
57


make this assessment in consultation with the central and the concerned state governments.

Under this initiative, a pre-feasibility report (PFR) is completed by CEA before a project is offered to a
developer. PFRs have been prepared for 162 projects with a cumulative capacity of 34,020 MW and now
detailed project reports (DPR) are under preparation.The projects are located in Andhra Pradesh, Arunachal
Pradesh, Chhattisgarh, Himachal Pradesh, Jammu & Kashmir, Karnataka, Kerala, Madhya Pradesh, Maharashtra,
Manipur, Meghalaya, Mizoram, Nagaland, Orissa, Sikkim and Uttaranchal.

Open Access and Power Trading
Open access is a key feature of the Electricity Act, 2003. Open access to transmission and distribution on
payment of charges to utilities enables a variety of licensees to use spare capacities to transmit power from
generation points to load centres. Power trading through the open access system allows freedom to buy and
sell electricity. This has also helped develop power exchanges in the country.

58


Contents



 Generation







59

OPPORTUNITIES IN THE INDIAN POWER SECTOR

Opportunities in The Indian power sector … (1/10)
Regional Cooperation
South Asian countries have a great potential for electricity generation and have complementary endowments
on a contiguous landmass, which is a prerequisite for developing an integrated power infrastructure,
including power grids and gas pipelines. If India has an edge in producing coal-based energy, Pakistan and
Bangladesh have the benefit of gas-based power generation, while Nepal and Bhutan have abundant potential
for hydropower.

These regional complementarities can be exploited for mutual benefit. A regional network of gas pipelines
and power grid is expected to enhance energy security of India. It is also likely to significantly benefit the
neighbours by reducing their cost of fuel transportation and help them in harnessing their energy resources
optimally.

Bangladesh has substantial reserves of gas – about 22.9 trillion cubic feet (TCF) – of which 16 TCF is proven
reserves. There is potential for Bangladesh to export gas to India. There is a huge potential for
hydroelectricity in the Hindukush-Himalayan region, of which only 11 per cent has been exploited so far.
Bhutan has hydroelectric potential to generate 30,000 MW and Nepal could produce 43,000 MW, and the
two could export power to India and Bangladesh.

India is in the process of upgrading transmission lines to fetch power from Nepal and Bhutan to its states of
West Bengal, Bihar and Uttar Pradesh. However, it may require a corridor through Bangladesh for
transmission lines.

60


Merchant Power
Merchant power plants (MPP) are a product of the restructured electricity industry. MPPs fill different niches
in the market: some provide steady supply to the grid while others fire up only when there is high peak-
demand. Given this strong incentive of high returns, MPPs strive to produce power efficiently and supply to
locations where it is needed the most. Private sector interest in power also stems from the possibility of
selling power at high prices in the present supply-constrained scenario.

Renewable Energy Option
The country has an estimated renewable energy potential of 85,000 MW from commercially exploitable
sources. The potential for wind power is 45,000 MW, for small hydro 15,000 MW and for biomass and bio-
energy it is 25,000 MW. In addition, India has the potential to generate 35 MW per sq km using solar
photovoltaic and solar thermal energy.

The Central Government has proposed an addition of 15,000 MW of renewable energy generation
capacities during the Eleventh Five-Year Plan period. The total investment on development of renewable
energy sources during the plan period is expected to be about US$ 2 billion. The renewable energy industry
is identified as a priority lending sector by the Reserve Bank of India.

61


Government Incentives
• SERCs have been mandated to promote renewable energy through renewable purchase obligations, which
require distribution companies to source up to 10 per cent of their power from such sources.

• The key incentives for wind energy include a provision for 80 per cent accelerated depreciation in the first
year, a 10-year tax holiday, income tax waiver on power sold to utilities and privileged tariffs.

• Projects that do not claim accelerated depreciation benefits are entitled to generation-based incentive of
US$ 0.011 for each kWh of power sold to IPPs with capacity of more than 5 MW.

• India offers several subsidies to solar power products, such as solar lanterns, home lighting systems besides
generation-based incentives of up to US$ 0.286/kWh to solar power plants.

• For small hydropower projects (less than 3 MW), incentives include concessions on customs duty, capital
subsidies, 10-year tax holiday and other state-level incentives such as exemptions from sales and electricity
tax and preferential tariffs.

• Incentives for biomass energy include accelerated depreciation, import duty concessions, excise duty
exemption, capital subsidies and a 10-year tax holiday.

Several export incentives have made India a key player in the global market for wind turbine generators
(WTG) and solar photovoltaic cells and panels.
62


Policy Incentives

• 100 per cent accelerated depreciation in the first year of the installation of projects and systems

• No excise duty on manufacture of most of the finished products

• Low import tariffs for capital equipment and most of the materials and components

• Soft loans to manufacturers and users for commercial and near commercial technologies

• Five-year tax holiday for power generation projects

• Remunerative price for grid-feeding renewable energy units under the alternate power purchase policy of
state governments

• Facility for banking and wheeling of power

• Facility for third-party sale of renewable energy

• Financial incentives and subsidies for devices with high initial cost

• Involvement of women in implementation of renewable energy programmes

63


• Encouragement to NGOs and small entrepreneurs

• Special thrust on renewable energy in the North-Eastern region of the country; 10 per cent of planned
funds earmarked for North-East for enhanced and special subsidies

• For municipal waste-to-energy projects, allotment of land on long-term basis at token lease rent and supply
of municipal waste at project site free of cost

In addition, the Central Government gives financial assistance to develop solar cities in the following manner:

• Up to US$ 0.12 per city for a period of five years

• Up to US$ 0.03 million for preparation of a master plan

• Up to US$ 0.03 million for institutional arrangements

• Up to US$ 0.5 million for awareness generation, capacity building and other promotional activities

• Up to US$ 0.03 million for oversight of implementation during five years

The government has created a liberal environment for foreign investment in renewable energy projects. Key
highlights of the foreign investment policy are:

64


• Permission for foreign investors to form joint ventures with Indian partners for financial and/or technical
collaboration and for setting up of renewable power generation projects

• Liberalised foreign investment approval regime for easy investment and technology flows to joint
ventures

• Automatic approval for proposals for up to 74 per cent foreign equity participation in a joint venture

• Permission for 100 per cent foreign equity with special approval from the Foreign Investment Promotion
Board (FIPB)

• Permission for setting up liaison offices in India

• Encouragement for foreign investment in renewable energy generation projects on build-own-operate
basis

State governments have also announced promotional policy packages in the form of wheeling, banking and
buyback guarantee in addition to considerable tariff escalations for energy from wind, co-generation, small
hydro, and biomass projects. In order to promote the sector, some state governments provide concession
and exemption in state sales tax and octroi. In addition, state renewable energy development agencies play a
hand-holding role in the development of renewable energy projects.

65


Private Participation
To enable the private companies to enter the power sector, the government has introduced many policies
and regulations under the Electricity Act and the National Electricity Policy.

By 2012, India requires an installed capacity of about 200,000 MW. A huge capital investment is required to
meet this target. This has created investment opportunities in power generation, transmission, and
distribution through the PPP mode. India‟s power sector is still ridden with a large demand-supply gap. This
has necessitated some strategic initiatives. There are strong opportunities in transmission network area –
additional 60,000 ckm of transmission network is expected to come up by 2012 with a total investment of
about US$ 200 billion.

Coal Linkages

In 2003, the Government of India issued guidelines for allocation of coal blocks to power plants to
ensure commensurate fuel supply for sustained generation at cheaper prices. Coal blocks are allocated
to projects of CPSUs, state PSUs, joint venture companies, IPPs, UMPPs, captive power plants supplying
at least 25 per cent of their capacity to the grid and MPPs:

66


• Projects proposed to be executed by the CPSUs, state PSUs and SEBs are accorded the first priority.
Moreover, their expansion projects get a higher priority over new projects.

• Joint venture projects between the centre and a state or between the two states have the next priority.
Joint ventures between private sector and the centre or a state have the same priority if the public sector
partner has substantial say in the management.

Carbon Credit Market
The Clean Development Mechanism (CDM) is well accepted in India, which is among the leaders in the
carbon credit market. The country is expected to generate 573 million Certified Emission Reduction (CER),
or carbon credits, by 2012.

The Government of India and industry have been very proactive in their approach to the carbon credit
market. This has helped India gain an early mover advantage in CDM. As of July 2010, 520 projects have been
registered, which is 22.5 per cent of the total projects registered with CDM Executive Board of UNFCCC.
The majority of the CDM projects have come from renewable energy industry. Most of the CDM projects in
India are undertaken on a unilateral basis – developed independently by local stakeholders. Indian companies
in the power sector are involved in development of alternative sources of energy and have reaped benefits
from carbon trading.

67


Energy Efficiency and Conservation

Under the Energy Conservation Act, the Bureau of Energy Efficiency (BEE) has begun to enforce
mandatory energy audits and establish consumption norms for nine specified energy-intensive industries.
In addition to government policies, efforts of multilateral and bilateral organizations to conserve energy
across a wide range of sectors have attracted new domestic and international energy efficiency
companies to this market. The increasing appeal of energy efficient processes and products over the past
few years has led to investors‟ interest in funding the energy efficiency sector.

The potential for energy savings is enormous: an estimated 183.5 billion kWh per year, according to
reports prepared by the Asian Development Bank and the BEE. The sector-wise energy consumption on
an all-India basis for the year 2007-08 is given in the following table. A conservative estimate of potential
for savings from energy efficiency is about 15 per cent of the electricity consumption.

68



Table 17: Energy Saving Potential
(Billion kWh)

Sector Consumption Saving Potential
Agriculture Pumping 92.33 27.79
Commercial Buildings* 9.92 1.98
Municipalities 12.45 2.88
Domestic 120.92 24.16
Industry (Including SMEs) 265.38 18.57
Total 501.00 75.36

Source: Bureau of Energy Efficiency, IMaCS Research
*Establishments with connected load >500 kW

69


Contents



 Generation







70

INVESTMENT OPPORTUNITIES

Investment opportunities … (1/3)
Investment in Power Sector
Government of India‟s estimate of the required investment in the power sector to meet the targets of the
Eleventh Plan period is US$ 245.62 billion. It comprises funds required for adding power generation capacity,
renovation and modernisation of existing power plants, expansion and up-gradation of transmission and
distribution infrastructure, and decentralized distributed generation. The total requirement of funds for
generation projects during the Eleventh Plan period is estimated at US$ 97.83 billion. Of that, US$ 48.11
billion are required by the central government projects, US$ 29.47 billion by state government projects and
US$ 20.25 billion by the private sector.

Opportunities in Generation, Transmission and Distribution
Generation
According to the 17th Electric Power Survey (EPS) of CEA, electricity demand is expected to grow to 968.7
billion kWh in 2011-12 and is further expected to grow to 1,392.06 billion kWh by the end of Twelfth Five-
Year Plan period (2012-17).

The estimated cost of non-conventional energy sources and captive power projects during the Eleventh Plan
period is estimated as follows:

• Non-conventional energy sources (13,500 MW at US$ 0.95/MW) US$ 16.07 billion

• Captive power plants (12,000 MW at US$ 1.19/MW) US$ 11.43 billion
71


The Government of India has identified coal blocks with reserves of 3.2 billion tonnes for allotment by the
screening committee of Ministry of Coal for MPPs and captive power plants. About 10,000 MW is expected
to be developed through this initiative. The estimated funds required for this initiative are US$ 9.52 billion, at
1.19 per MW. Based on current prices, the fund requirement for renovation and modernisation (R&M) of
thermal and hydro power stations for the Eleventh Plan period is estimated as US$ 3.78 billion.
Table 18: Fund Requirement for R & M Activities
Capacity Estimated Cost
Particulars
(MW) (US$ Billion)
R & M of Hydropower 11,278.00 0.83
R & M of Thermal Power 12,389.00 2.95
Total Funds Requirement 3.78

Transmission
Total fund requirement for inter-state transmission system has been estimated at US$ 17.9 billion and for
intra-state transmission at US$ 15.5 billion. In order to mobilise resources from private sector, the
Government of India issued guidelines for private sector participation in transmission sector in January 2000.
These guidelines envisaged two distinct routes for private sector participation in transmission: the joint
venture route (wherein the CTU/STU shall own at least 26 per cent equity and the remaining is to be
contributed by the joint venture partner) and the Independent Private Transmission Company (IPTC) route
(wherein 100 per cent equity shall be owned by the private entity).

72


Distribution
It is estimated that to transmit the increased generation capacity, as envisaged in Eleventh Plan, to
consumers, a matching distribution network of about 1,500,000 ckm of 33 kV, 11 kV and LV lines and
292,000 MVA of distribution transformer capacity will be needed. Installation of capacitors and re-
conductoring of sub-transmission/ distribution network of about 3,000,000 ckm, and augmentation of
distribution capacity of 198,000 MVA of various sub-stations would also be required. In addition to these,
the estimated fund requirement of various other initiatives such as RGGVY under rural electrification and
APDRP is as follows:
Table 19: Fund Requirement for Distribution and Rural Electrification

Amount
Particulars
(US$ billion)
Sub-transmission and Distribution 46.90
RGGY 9.52
APDRP & Other Schemes 9.52
Others 2.38
Total Fund requirement 68.33

Source: Ministry of Power, IMaCS Research

73

2010 11 - Indian Energy Sector by ibef

2010 11 - Indian Energy Sector by ibef

Recomendados

Recomendados

Mais conteúdo relacionado

Mais procurados

Mais procurados (20)

Destaque

Destaque (6)

Semelhante a 2010 11 - Indian Energy Sector by ibef

Semelhante a 2010 11 - Indian Energy Sector by ibef (20)

Último

Último (20)

2010 11 - Indian Energy Sector by ibef