Energy in India

May 29, 2012 The Indian energy sector is expected to become at par with the global stipulations on carbon emissions and sustainability through various changes in the current set-up. The launch of Jawaharlal Nehru National Solar Mission (JNNSM)a joint initiative of the Ministry of New and Renewable Energy (MNRE) and Ministry of Power and the first of its kind in the world-is one of the most important environment-friendly energy solutions available in India. The National Solar Mission targeting 20,000 MW grid solar Power, 2,000 MW of off-grid capacity including 20 million solar lighting systems and 20 million square meters (sq.m.) solar thermal collector area by 2022 is under implementation. The main objective of the mission is to help reach grid parity by 2022 and help set up indigenous manufacturing capacity. Emission of greenhouse gases leading to climate changes has become a major concern globally. Under the Kyoto Protocol's terms, industrial country parties will be under obligation to limit their greenhouse gas emissions by 2008-12. India has also signed the treaty and under the protocol, India now focuses to drive a Clean Development Mechanism (CDM) aimed at protecting the environment by reducing carbon emissions. Power generation and capacity India has made remarkable progress in the power sector during the Eleventh Plan, stated Mr Sushilkumar Shinde, Minister of Power. He said that during the Eleventh Plan period the country has added about two-and-a-half times of the capacity that was added during the Tenth Plan period. He said that 80,000 MW capacity is under construction for the Twelfth Plan. During the year 2011-12, indigenous and imported coal received by power sector was around 373 million tonne (MT) and 45 MT, respectively and coal-based generation was 584.6 billion unit (BU). For the year 2012-13, the target for supply of indigenous coal is 402 MT and the power utilities are expected to import around 70 MT of coal. Keeping in view the above availability of coal, coal based generation for the year 2012-13 is expected to be around 636 BU i.e. a growth of 8.8 per cent. Further, there has been a considerable growth in the power sector as the generating capacity in the country has increased to 185,496.62 MW as on November 30, 2011. Last year has witnessed a significant growth in the number of new initiatives in the renewable energy sector. The wind energy sector picked up momentum again by adding over 2800 MW capacity resulting in grid-connected renewable power capacity crossing the 22,000 MW milestone. During 2011, grid-connected solar power plants crossed the 100 MW milestone as well. Further, over 1000 remote villages were electrified through renewable energy systems during this year.

Wind power is the fastest growing renewable energy sectors in India. A total capacity of 15,880 MW of wind power has been installed in the country. A capacity of around 2827 MW has been installed during 2011. Jawaharlal Nehru National Solar Mission The Mission aims at adding 20,000 MW solar power capacity in the country by 2022. Implementation of the Phase I of the Mission started during 2011. One of the target areas is promotion of grid-connected solar power in a big way with the objective to bring cost of solar power generation to grid parity levels. During 2012, 180 MW of grid-connected solar power projects have been commissioned in the country and this figure will cross 400 MW by the end of this financial year. As per provisional data for the period April-December 2011 provided by the Ministry of Petroleum and Natural Gas, 28.7 million metric tonnes (MMT) of crude oil was produced (actual production) in the country. Further, 126.20 MMT of crude oil was refined during AprilDecember 2011. Natural gas is also expected to play a key role in Indias energy mix by 2025, increasing to 20 per cent. The country produced 36194.2 million cubic metres (MCM) of natural gas during April-December 2011, as per the provisional data provided by the Ministry of Petroleum and Natural Gas.

SECTOR FACTS

FDI inflows from non-conventional energy sources during the period April 2000 to March 2012 were US$ 1,484.70 million, according to the Department of Industrial Policy and Promotion (DIPP) The petroleum and natural gas sector has attracted cumulative FDI worth US$ 3,338.75 million from April 2000 to March 2012, according to the Department of Industrial Policy and Promotion (DIPP)

Investment Opportunities
India has been ranked as the third best investment destination in renewable energy sector, next only to China and the US, according to a report Ernst & Young Renewable Energy Country Attractiveness Indices, May 2011, released by Ernst & Young. Significantly, an investment of about INR 4,900 crore (US$ 881.07 million) has been received as FDI equity inflows in the renewable energy sector during the last three years and the current year, till June 2011. The Working Group on Power for formulation of the 12th Five Year Plan has estimated total fund requirement of INR 13,72,580 crore(US$ 246.80 billion) for the power sector during the 12th Plan. The Working Group has estimated an investment requirement of INR 6,38,600 crore

(US$ 114.83 billion) for the generation sector, INR 1,80,000 crore (US$ 32.37 billion) for transmission and INR 3,06,235 crore (US$ 55.06 billion) for the distribution sector. India's power sector is expected to generate revenue of about INR 13 lakh crore (US$ 294 billion) during the 12th five year plan (2012-17), according to Mr P. Uma Shankar, Union Power Secretary. He said the government is looking at revenue estimates of INR 2.5 lakh crore (US$ 56 billion) from transmission and INR 4 lakh crore (US$ 91 billion) from distribution in addition to INR 6.5 lakh crore (US$ 147 billion) from generation. India's petroleum refining capacity is expected to rise to 240 million tonnes per annum (MTPA) by March 2012 from the current 188 MTPA, attracting an estimated investment of US$ 13.5 billion US$ 14.6 billion. This will boost the country's exports of petroleum products, according to S Sundereshan, Secretary, Ministry of Petroleum & Natural Gas. During 2010-11 the Ministry has selected grid solar power projects of 800 MW capacity. Further, six major R&D projects in solar thermal and photovoltaic (PV) technologies have been sanctioned. National Centre for Photovoltaic Research and Education has been set up at IITBombay. Government has also approved the implementation of the first phase of the JNNSM (upto March, 2013) and the target to set up 1,100 MW grid connected solar plants including 100 MW of rooftop and small solar plants and 200 MW capacity equivalent off-grid solar applications and 7 million sq.m. solar thermal collector area in the first phase of the Mission, till 2012-13. Renewable energy contributes around 70 per cent of the total power business in India, as compared to 10 per cent in 2000, in terms of project numbers and dollar value, as per Anita George, Director, Infrastructure, International Finance Corporation (IFC). Renewable energy is central to climate change mitigation efforts. Broad estimates have shown that mitigation from existing renewable energy portfolio is equivalent to around 4-5 per cent of total energy related emissions in the country. Moreover, India has become an attractive destination for CDM projects owing to the vast market potential and well-developed industrial, financing and business infrastructure. India had 727 registered CDM projects, which is around 21 per cent of worldwide registered projects. With 520 projects, renewable constitute around 72 per cent Indian CDM registered projects. Within renewable, wind has the maximum number of 225 projects followed by hydro 82 and 6 for solar energy.

Investment Policy Updates

The Indian government has proposed incentives of up to US$ 0.258 per kilowatt hour for power plants, 10-year tax holidays, electricity tariff exemptions and other preferential tariffs. There are also subsidies for solar power systems and small hydro power projects.

To promote solar power for off-grid applications for both thermal as well as photovoltaic, the Government is offering financial support through a combination of 30 per cent subsidy and/or 5 per cent interest bearing loans for companies in the business. The Union Cabinet has approved the implementation framework of the National Mission for Enhanced Energy Efficiency (NMEEE), which seeks to strengthen the market for energy efficiency by creating conducive regulatory and policy regime. NMEEE has been envisaged to foster innovative and sustainable business models to the energy efficiency sector. The Cabinet approval includes implementation plan of NMEEE, funds to the tune of US$ 5.07 million. As per the Ministry of New and Renewable Energy (MNRE) Proposal for 11th Plan for Renewable Energy for Urban, Industrial and Commercial Applications - Subsidy / incentive is valid for only 2.5 million square metre targetted during first two years of the Plan (11th Five Year Plan 2007-12). Following the Central Government's decision to enforce the Energy Conservation Building Code (ECBC) in new buildings to minimise the use of energy and recommendations to the state governments to follow the same with suitable amendments warranted by local circumstances and requirements, the state of Haryana has enforced the provisions of the code. The code is applicable to all buildings and complexes having a connected load of 500 KW and more, or having a contract demand of 600 KVA and more. Buildings not using electricity or fossil fuel and those using energy for manufacturing, are exempt from application of the code. Investment policies have been initiated to bolster investments through regulated means. These include:

FDI up to 100 per cent under the automatic route is permitted for oil and natural gas exploration activities, infrastructure for marketing of petroleum products, petroleum product pipelines and natural gas LNG pipelines FDI up to 49 per cent is permitted under the Government route in petroleum refining in the private sector 100 per cent FDI into renewable energy through automatic route has been allowed by the Government

Source: Consolidated FDI Policy, Department of Industrial Policy & Promotion (DIPP) Till now 25.91 million compact fluorescent lamps (CFLs) have been distributed under the Bachat Lamp Yojana (BLY) scheme. In the 11th Plan total funds allocated for the scheme were INR 18.32 crores (US$ 3.3 million). The BLY scheme has been designed on public private partnership (PPP) mode. The Umbrella Framework for BLY has been registered as a Clean Development Mechanism (CDM) Programme of Activities (PoA).