Energy Handbook 2011 - GBR

P o w e r S u m m i t - T h e E n e r g y H a n d b o o k 2 0 1 1
C o u n t r y P r o f i l e : I n d i a
“However, we did not want to marginalise
ourselves as a pure renewables player; we
want to be part of the mainstream solution.
There is a requirement for conventional
energy within our region. In India flue-gas
desulphurisers are not required and we
are the only company to have made a bid
on the basis that we will implement an
FGD. We recognise that renewables must
also be an integral part of the solution,
and we are now the largest developer of
wind farms in India.”
India’s lack of domestic gas reserves,
and its inability to build a pipeline from
Central Asia or Iran through neighbouring
Pakistan, has prevented the development
of significant gas-fired generation
capacity. Joint Secretary at the Ministry
of Petroleum and Natural Gas Sunil Jain
explains: “Worldwide, gas represents
some 30 percent of the energy basket; in
India it is only 9 percent. India has a huge
appetite for natural gas, and demand is
only constrained by supply and the supply
network itself.”
Interview with Jayant Deo
Managing Director and CEO, Indian Energy Exchange
Q – Please could we start
with a brief overview of
IEX and how it came to
be established?
A – In 2006 the CERC
realised that it was
important for India
to have a live trading
platform for power and
initiated a programme to
establish one. In 2007
a consortium lead by
Financial Technologies and key private players in
the energy sector got approval to start developing
an Indian power exchange and agreed a deal with
the Scandinavian power exchange, Nordpool.On
22nd June 2008 we went live with the Indian
Power Exchange. We sell power here on an
hourly basis. The bidding is done blindly so as to
ensure a fair playing field, it is a futures market,
but a short term futures market. In a very short
period of 24 months we have come to have more
than 400 traders on the Exchange. This is an
impressive uptake by any measure, but given the
economic problems of 2008/9 it is superb.
Gas from the Krishna Godavari basin is set
to increase India’s production dramatically,
and exploration work is underway across
the country. A long-running court case
involving Krishna Godavari gas supplied
by Reliance Industries to Reliance ADA
has recently been resolved and the pricing
mechanism and allocation system has
been clarified as a result.
The Government is keen to encourage
further exploration, and Jain notes:
“India has a very friendly regime when
it comes to oil and gas, I think one of
the best in the world. Last year, during
the global economic crisis, our latest
round of block licensing was fully
subscribed.” Gas-fired capacity is set
to grow substantially in the coming
years (Reliance Power alone intends
to build 8 GW of capacity) though the
combination of ever-increasing load and
competition from alternative uses for
gas will ensure that it does not become
a dominant source of power in the
medium term.
Q – The IEX is the only power exchange operating
in a market in which there is a deficit, how does
this affect the dynamic of the Exchange?
A – India is a vast and varied country, daily peak
demand in the east will not fall at the same time
as in the south, and peak supply during the rainy
season in the north (where many hydro facilities
are located) does not match peak demand there.
Renewables
Renewable energy is a hot topic in India,
as in many other countries. India’s
objectives are threefold when it comes to
renewables: build a large-scale industry
which will generate jobs and export
revenue, demonstrate a commitment
to reducing emissions relative to
economic development, and go some
way to achieving energy independence.
Renewable sources of power have the
potential to play a significant role in the
electrification of rural India.
As a means of addressing India’s energy
deficit crisis, renewable sources have a
dual role to play: aside from the obvious
capacity addition they are also an ideal
source of distributed energy. As Rabindra
K. Satpathy, the man in charge of solar
at India’s largest corporation, Reliance
Industries, observes: “We believe that
distributed power will play a crucial role
in the development of India, instantly
cutting the 37 percent transmission and
distribution losses.” With an installed
capacity of over 12 GW as of mid-2010,
and a substantial home-grown turbine
manufacturing industry, India has already
achieved a strong position in the wind
sector. Under the 11th Five Year Plan
(due to conclude in 2012) the Government
envisaged 10,500 MW of new capacity, of
which more than 5 GW had been installed
by mid-2010. The Ministry of New and
Renewable Energy appears confident that
the remaining capacity will be added by
the end of the plan.
In hydro power India has phenomenal
potential. The Government distinguishes
between large- and small-scale hydro,
with only schemes of up to 25 MW
qualifying for full-scale renewables
support. Sameer S. Shetty, Managing
Director of India’s largest producer of
small hydro turbines, BFL (a Fouress
Group company), says: “The market has
huge potential, but the the disconnect
between potential and realisation is quite
big. There is 22 GW of viable identified
capacity for small hydro but India is
building 600–700 MW annually at best.
Power is a state subject and even though
the Central Government and the Central
Ministry determine a framework, they
have no means to ensure that the state
fulfils its requirements.” Nevertheless,
a substantial number of small hydro
schemes are under development and
among the great variation between states,
some have a supportive and pragmatic
attitude to small hydro.
The private sector, with a handful of
exceptions, has proven reticent to take
up the challenging of developing India’s
numerous large-scale hydro opportunities.
Nimish Patel, Director of India’s largest
dam and hydro tunnelling company,
Patel Engineering, says: “Thermal plants
have predictable time lines and you can
commission a plant in three to four years.
Hydro however requires long investigation
periods and the schemes can take a very
long time to get approved. Research
reports are not always up to standard
and thus the private sector has been
very wary of these risks.” Things are
beginning to change and some extremely
successful hydro schemes have been
developed by private-sector investors.
Bhilwara Energy developed its first hydro
scheme in 1995, and unlike early privatesector
thermal plants it has proven to be
a commercial success. Riju Jhunjhunwala
of Bhilwara Energy explains: “We recently
commissioned a new 200 MW plant in
India and are looking into developing a
much larger plant in Nepal. The land is
already acquired, infrastructure is being
developed, and the tender documents
are being prepared. All the electricity
generated there will be sold to India.” By
2015 the company intends to have 3 GW
Across the world most government
While net demand is higher than net supply in
targets for wind energy have been
India, we have found that the market did not
missed, yet India (which met the target
ensure that all power being generated was
for its 10th Five Year Plan in 2006)
consumed, the IEX helps address this issue.
seems to have implemented a strategy
that works. Co-founder and Director
Q – How easy is it for you to sell the concept of
of wind farm developer Veer Energy
merchant trading to a generator?
and Infrastructure Ltd Dhimant J. Shah
A – A company’s decision to go merchant or not
will of course be informed by their appetitive for
says: “The Government has made it
risk and their debt profile. For most generators,
a regulation that every energy service
entering a fixed term contract for 50 or 60% of
provider has to provide up to 7 percent
their output makes a project viable as it satisfies
of their energy sourcing from renewable
lenders that there is a secure income stream to
energy. We are happy with the way that
pay debt, they may chose to sell the remainder on
we have progressed. The model works
the IEX as it gives them exposure to the upside
here in India but it may take some time for
that the Indian energy growth curve presents.
manufacturers, developers and investors
to get used to it.”
of installed capacity under operation.
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