We propose an Integrated gamification proposal for the diversification into the renewable industry of India. Our Model is based on the proposed indigenous Arena Selection Model to identify, impact and move pitch.
Renewable Energy - Diversification strategy in India - Consulting
1. ReNew Power – Diversification
Strategy
Team Brewcrew
IIM Rohtak
We propose an Integrated gamification proposal for the diversification into the renewable industry of
India. Our Model is based on the proposed indigenous Arena Selection Model to identify, impact and
move pitch.
Disclaimer : Secondary research information has been used to validate the solutions in the case. All the recommendations related to the business problems, as
mentioned in the case, has been given by Team Brewcrew from IIM Rohtak
Naveen Kumar ● Anmol Gupta ● Pratham Mantri
3. Team BrewCrew, IIM Rohtak
Opportunity Areas
The MNRE has planned an ambitious target of
reaching 175 GW of renewable capacity by 2022
of which 100 GW is planned for solar
Expected that 49% of total energy generated by
2040 would be through renewables
60 solar cities will be developed in India as part
of Ministry of New and Renewable Energy’s
Solar Cities program
Financing the projects is a big challenge because India will need to invest
close to $150 billion to meet its 2022 renewable energy targets
Govt. putting tariffs on solar panel imports from China is another bi threat
because 90% of solar production in India is through Chinese products, so
profitability would suffer!
current market developments and observed prices also raise risks related
to the timely signing of Power Purchase Agreement (PPAs) and contract
renegotiation for already tendered projects
India is estimated to have renewable energy
potential of 900GW from commercially
exploitable sources and it has already
committed to reach the level of 225 GW
by 2022
Installed renewable power generation
capacity has increased steadily over the
years, posting a CAGR of 9.29 per
cent over FY08–18. India added record
11,788 MW of renewable energy capacity in
2017-18
Expected Market Size in 3-4 years Challenges
Government Commitments
Growth Drivers
RENEWABLE INDUSTRY TODAY
Renewable Purchase
Obligations (RPO’s)
Favourable Policies
and Incentives
Investments
Scheme for Development of Solar Parks
& Ultra Mega Solar Power Projects
4. Team BrewCrew, IIM Rohtak
Renew Power should look to expand its renewable energy value chain only by exploring opportunities in the same
sector, whilst foraying into new segments inside it.
Climate change
concerns
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-
-
-
-
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Uncertainty
government
policy
Worsening
fiscal terms
Access to reserves:
political constraints
& competition from
other bidders
Competition from
new technologies
Cost containment
Firm risks
Human
Capital
deficitNew
Operational
challenges
Price Volatility
Risk based diversification framework
Internal Control
Strategies
Operational
Excellence
Alliances
Cost optimizations
Improved Client
Intimacy
Compliance with
Standards
-More Same Less
The Fundamental Logic for Diversification
Capital Intensive sector, so any further bidding or acquisition
would require a lot of funds. Hence, an ardent need to look for
other sources of income for hedging the current uncertainties.
Relying only on the dollar sales of energy generation is risky in the
current scenarios, because there’s no clear mandate yet in the
solar sector on grounds of GST, application of customs duty and
the proposed safeguard duty. The 7.5 per cent duty and additional
surcharge will add almost 15 Paisa to each unit generated. This
will have an impact on a lot of projects
Another issue with the current model is that the proposed
safeguard duty on solar cells and modules imported from
China and Malaysia could potentially increase tariff by Rs 1-
1.15 per unit
Diversification strategy
5. Team BrewCrew, IIM Rohtak
The combination of solar PV and battery
storage evolves as the low-cost
backbone of Indian energy supply,
resulting in 3.2 – 4.3 TWp of installed
PV capacities, depending on the applied
scenario in 2050
India’s massive power grid system
needs re-balancing to deal with the
fluctuating/erratic nature of power
generated from renewable energy
flowing into the system and keep
supply in sync with demand, hence the
lucrativeness of this segment.
India has an estimated 127 gigawatts
(GW, or 1,000 MW) of offshore wind
power potential. In the European
markets, the (offshore wind power)
tariffs have come down significantly
and hence can be the next game
changer for India Through floating solar panels, the delay in land acquisition process can be
overcome. Second, the large water bodies like Hirakud, Chiplima and Jobra can
be used to put up solar plants as they are lying unused
With approximately 20 GW of solar
projects tendered since December
2017, the development activity is
expected to ramp up as these tenders
are auctioned, hence huge market for
third party EPC and O&M
2.
Offshore
wind
energy
1. Energy Storage
4. Third
Party EPC
and O&M
5.
Transmission
and
Distribution
5
Diversification
strategy
3. Floating Solar
Gamification strategy
6. Team BrewCrew, IIM Rohtak
Framework for prioritization of diversification areas
Ansoff MatrixWeightage given to each factor considered for diversification
Position of the
Bubble indicates
Priority score
Size of the
Bubble indicates
Risk Score
Scoring Style:
Relative
Risk and Priority
Risk Diversification, Opportunity in Low investment, better | Higher Brand Presence leading to
higher Brand Visibility | No prior experience or Human resource in other sectors; High Failure
Chances | Will lead to divert from core competency; Will require entire “ Brand Repositioning”
Diversification strategy
7. Team BrewCrew, IIM Rohtak
DIGITAL IN UTILITY-SCALE RENEWABLE GENERATION
The amount of data generated is growing
exponentially. Operating data from wind
turbines and PV systems is increasing quickly
as these systems are built—and sometimes
retrofitted—with higher-resolution sensors.
New inspection systems, such as drones—
service technicians with cameras and laser-
based measurements—are becoming more
and more pervasive.
Data lakes—accessible by analytics—are also
growing at a rapid pace. Marginal costs of
data transmission and storage allow for the
uploading of data from local control loops to
data lakes
Data analytics provides deeper insights in real time. Analytics tools are becoming much better at processing both structures
and unstructured data. And real-time results are available with ample computing power.
Operators need to build or buy digital capabilities and redesign all their service processes in order to make use of the
insights provided by digital. This is a prerequisite for bringing down operating costs by as much as 60% to 70%,
Diversification strategy
Editor's Notes
RISK
For example, in Jharkhand, the state distribution company delayed signing power purchase contracts for 18 months following a tender for 1.2 Gw of solar PV in 2016, citing lower discovered tariffs in other states.
DRIVERS
Government Commitments:
As a part of its Paris Agreement commitments, the Government of India has set an ambitious target of achieving 175 GW of renewable energy capacity by 2022. These include 100 GW of solar capacity addition and 60 GW of wind power capacity. The solar capacity target will be achieved before its 2022 deadline while wind power capacity is expected to reach 60 GW by FY21. 60 solar cities will be developed in India as part of Ministry of New and Renewable Energy’s Solar Cities program.
Investments:
The renewable energy space in India has become very attractive from investors’ perspective and has received FDI inflow of more than US$ 6.26 billion up to December 2017. India has also ranked second in the Renewable Energy Attractiveness Index 2017 as there is ample push from the government and the economics of the market is improving. More than US$ 42 billion has been invested in India’s renewable energy sector since 2014.
Favourable Policies and Incentives:
Renewable energy projects are included in priority sector lending, which is relatively cheaper than other sources of credit. Policies formulated for all sub sectors under renewable energy. Fiscal incentives provided to promote renewable energy.
Renewable Purchase Obligations (RPO’s):
RPO’s are a mechanism by which State Electricity commissions are obliged to purchase certain percentage of power from renewable energy sources. Also, floor prices of the RPO have been set to provide certainty to companies. The floor price has been set at US$ 144 per Megawatt.
Scheme for Development of Solar Parks and Ultra Mega Solar Power Projects:
Aims to set up 25 Solar Parks and Ultra Mega Solar Power Projects targeting 20,000MW of solar power installed capacity by 2019-20. US 83.78 million have already been sanctioned under the scheme. As of November 2017, the Ministry of New and Renewable Energy is conceptualising world’s biggest solar tender and will invite bids for setting up of 20 GW of solar capacity