Bioenergy, Geothermal, Hydropower, Solar, Wind Power

Q & A: Opportunities in India’s Renewable Energy Market

India’s renewable energy market is estimated at half a billion dollars and is experiencing annual double-digit growth. Looking to keep up with demand, Indian businesses will be visiting the U.S. as part of an inbound trade mission to explore sourcing and partnership opportunities with American companies. The event, sponsored by the U.S. Commercial Service under the auspices of the Asia Pacific Partnership for Clean Development & Climate, will include stops in Chicago and Los Angeles, August 7 and 9. Renewable Energy Access.com recently discussed India’s renewable energy market with Preetha Nair, Senior Commercial Service specialist at the U.S. Embassy in New Delhi.

Q: Why should U.S. companies be looking to India’s renewable market? A: The market in India for renewable energy (RE) business is estimated at $500 million and is growing at an annual rate of 15 percent. The new RE policy of the Government of India (GOI) aimed at generating 10,000 megawatts (MW) of power through renewable and non-conventional sources by 2012 is expected to further boost the growth rate of this sector. Of the estimated potential of 100,000 MW from RE, only about 3500 MW has been exploited to date. The federal government has set a medium scale goal of: electrification of 24,000 remote villages and meeting 10 percent of the country’s power supply through RE by the year 2012; deployment of solar water heating systems in one million homes as well as 5 million solar lanterns and 2 million solar home lighting systems; and setting up an additional 3 million family size biogas plants. Q: What is driving renewable energy use in India right now? Is it purely government-based incentives, market based, or a mix of both? And if there are some key policies in place, please give us a short overview. A: Renewable energy use in India is a mix of government based and market based incentives. Key factors responsible for growth in this sector include: * Large demand supply gap in electricity; * India is generously endowed with RE resources like solar, wind, biomass materials, urban and industrial wastes and small hydro resources; * Low gestation periods for setting up RE projects with quick return; * Conducive Government Policies; * The large number of financing options available for capital equipments; * Increasing awareness among industry that being environmentally responsible is being economically sound; India has announced Electricity act 2003 according to which electricity has been opened to private entrepreneurs and mandates to promote cogeneration and generation of electricity from renewable energy sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee. The GOI has also announced a National Renewable Energy Policy to support and accelerate power generation from renewable to meet the minimum energy needs. Other policy initiatives are very favorable for doing business in renewable energies. For example, no clearance is required from Central Electricity Authority for power generation projects up to $21 million, and financial support is available to renewable energy industries for taking up R&D projects with technology institutions. Q: Which specific renewable technologies is India looking for-solar, wind, etc. Can you mention a couple of specific project opportunities? A: Sub-sectors that continue to show a high growth rate and are expected to drive the RE market are briefly discussed below: Solar Energy: The scope of generating power and thermal applications using solar energy is huge. Only a fraction of the aggregate potential in renewable and in particularly solar energy is being used so far. Processed raw material for solar cells, large capacity SPV modules, thin film solar cells, SPV roof tiles, inverters, charge controllers have good market potential in India. On the solar thermal side, advanced solar water heaters, roof integrated solar air heaters; solar concentrators for power generation (above 100 KW) and others are highly demanded in India. At present, a private investor is developing an integrated solar combined-cycle thermal plant in the state of Rajasthan with a capacity of 140 MW. Wind Energy: India has a potential capacity of over 40,000 MW that can be extracted from the free and eco friendly energy source of wind. So far only 1700 MW has been tapped which is just about 2.8 percent of the current identified potential. India is implementing the world’s largest wind resource assessment program comprising wind monitoring, wind mapping and complex terrain projects. This program covers 800 stations in 24 states with 193 wind monitoring stations in operation at present. Indian Renewable Energy Development Agency (IREDA) sponsored wind power development program provides financial assistance for the project and extends equipment financing. Biomass Energy and Cogeneration: In a country like India, biomass holds considerable promise as an eco-friendly source for generation of power for decentralized applications. More than 540 million tons of crop and plantation residues are produced every year, a large portion of which is either wasted, or used inefficiently. India is the largest producer of cane sugar. The energy potential from cogeneration is estimated at 19,500 MW, which comprises around 3,500 MW of surplus power from bagasse-based cogeneration, and 16,000 MW of grid quality power from surplus biomass material. Notable initiatives for acceleration of the biomass power generation program include granting interest subsidy, concessional customs duties, exemptions from excise duty and sales tax, 100 percent corporate income tax holidays, accelerated depreciation, and soft loans for commercial biomass-fired power projects. Hydro Projects: With numerous rivers and their tributaries in the country, the small hydro which sector presents an excellent energy opportunity with an estimated potential of 15,000 MW about 10 percent of this has been exploited so far. India is encouraging the development of small hydro projects in the state sector as well as through private sector participation. In order to accelerate the development of small hydropower in the country, India also provides, for example, concessions for existing hydro projects including financial support for renovation, modernization and capacity up rating of aging small hydro power stations. Energy from Wastes: The large amounts of refuse in urban areas caused by rapid urbanization and industrialization throughout India represent another source of non-conventional energy. An estimated 40 million tons of solid waste and approximately 5,000 million cubic meters of liquid waste are generated annually in the urban areas of India. Good potential exists for generating approximately 15,000 MW of power from urban and municipal wastes and approximately 100 MW from industrial wastes in India. Biofuels: The GOI recently mandated the blending of 10 percent fuel ethanol in 90 percent gasoline. This mandate has created an approximately 3.6 billion-liter demand for fuel ethanol mandate to the entire country. This significant demand growth creates a tremendous manufacturing opportunity for the U.S. fuel ethanol industry seeking to expand its investments internationally. Other potential biomass-derived liquid fuels produced and used in India consist of edible and non-edible oils such as Jatropha Curcas, Karanje and Honge. It has been estimated that about 5-7.5 million tons of biodiesel can be produced from cultivating some 5 million hectares of this land. The Indian railways have successfully conducted the trial run of the Amritsar-Shatabdi Express using bio-diesel and has signed a deal to use environmentally-friendly biodiesel in its locomotives following a successful trial with the fuel. Q: What are some challenges for U.S. firms looking to sell to India’s renewable technologies market? A: The GOI is encouraging foreign investors to establish renewable energy-based power generation projects on build-own-operate model. However, the main challenges for large-scale development of RE includes the following: -Risks involved in technology adoption -Distortions in energy market and easy availability of conventional energy with established networking arrangements -Stiff competition from subsidized conventional energy and its universal applicability -Lack of large-scale production facilities -High capital investment and marginal commercial viability – Lack of marketing mechanisms Q: What is the financing picture like in India? How are large wind power projects financed? Or how about small-scale solar thermal hot water, or solar PV panels for homes and businesses? How does micro-financing factor in here? A: A separate financial institution IREDA is in place solely for financing renewable energy power projects in the country. IREDA finances all renewable energy power projects in the country irrespective of their size at very low interest rates. In addition there are other financial institutions like Power Finance Corporation, Housing and Urban Development Corporation Limited etc., which finance all power projects including renewable energy sources. The Ministry of Non-Conventional Energy Sources has a program “interest subsidy” that provides subsidy to the end-users of solar water heaters. This subsidy is given to all the financial institutions in the country which in turn provide financial assistance at a very low interest rate (2 percent, 5 percent etc.) Some of the financial institutions provide financial support at very low interest rates to solar PV devices like home lighting, street lighting and lanterns. There is no problem for micro financing in the country. Q: Do U.S. firms have any competitive advantage with regards to specific renewable energy technologies? A: Yes, the strongest U.S. competitive advantage in renewable energy technologies is its emerging leadership in the areas of solar, biomass and biogasification. In addition, American engineering and know-how is highly respected in the renewable technologies field. Q: What kind of resources does the Commercial Service have to help U.S. firms looking to export to India? With its network of 109 offices across the U.S. and at American embassies and consulates in 80 countries, the U.S. Commercial Service utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. We offer export counseling, pre-arranged business appointments abroad, customized market research, trade events, advocacy, partner searches, and much more. The Commercial Service in India has seven offices throughout the country, and works closely with the Commercial Service network in the United States. For the nearest U.S. Export Assistance Center, visit www.export.gov. For more information on doing business in India, visit www.buyusa.gov/india/en/services.html Further information on the U.S. Commerce Department Trade Mission to India The U.S. Department of Commerce is inviting companies in all industry sectors to participate in a U.S. trade mission to India in late November and early December 2006. The mission will be led by U.S. Under Secretary for International Trade Franklin L. Lavin and include a business summit in Mumbai, formerly known as Bombay, plus a choice of stop in five other Indian cities: Bangalore, Chennai, Hyderabad, Kolkata (formerly Calcutta) and New Delhi. Some of the most promising markets in India, the world’s largest-free market democracy-with a population of about 1 billion-include pollution control equipment, renewable energies, oil and gas field machinery, textile machinery, information technologies, services, and others. For more information on the mission, visit www.export.gov/indiamission/ Exporting Tips from the U.S. Commercial Service – Dedicate top-level management and develop a clear export strategy. – Identify your market(s)-conduct research and a risk/reward assessment. – Be patient and realistic when going international. Take a long-term approach and allow sufficient time for due diligence. – Seek professional help from the U.S. Commercial Service, District Export Council, bankers, international legal firms, or freight forwarders – Make sure your product is export ready (standards compliance, regulations, labeling, licensing, etc.) – Understand and select the best distribution channel for each country (Do research on all potential distribution partners) – Create payment terms and conditions that meet the market’s needs/standards. You can offer terms to your foreign buyers. Meet your competitors head-on by using the EXIM Bank and SBA Export Programs. – Design your website to be attractive and responsive to foreign buyers. Visit http://www.export.gov/sellingonline. – Take advantage of U.S. government export promotion services. Everything from export financing, to market research to advocating for your products in overseas markets. Affordable and effective, regardless of the size of your company. India’s renewable energy market is estimated at half a billion dollars and is experiencing annual double-digit growth. Looking to keep up with demand, Indian businesses will be visiting the U.S. as part of an inbound trade mission to explore sourcing and partnership opportunities with American companies. The event, sponsored by the U.S. Commercial Service under the auspices of the Asia Pacific Partnership for Clean Development & Climate, will include stops in Chicago and Los Angeles, August 7 and 9. Renewable Energy Access.com recently discussed India’s renewable energy market with Preetha Nair, Senior Commercial Service specialist at the U.S. Embassy in New Delhi. For more information, visit www.buyusa.gov/eme/indiatm.html