Indian Renewable Energy Sector Directionless: Says the report jointly prepared by Commonwealth Business Council (CBC) and IIM-A

A new report by the Commonwealth Business Council (CBC) highlights that major challenges lie ahead if India is to realize its vast renewable energy potential. Despite the Indian Government being the only nation in the world that has a dedicated ministry to develop renewable and clean technologies, the report highlights a catalogue of ills in an industry dogged by poor R&D and ineffective government data that pose huge technical difficulties for investors.

India is blessed with 300 days of natural sunlight a year, high velocity winds from the strong south-west summer monsoon, massive hydro electricity potential in the north east mountainous region and even larger potential to develop electricity from municipal waste due to the ever expanding population which has already reached over a billion. There are 35 towns alone which each have a population over a million.

The report highlights that the wind sector suffers from huge grid interface problems which don’t generate efficient wattage from the rotating turbines. The drive for solar power is hampered by the lack of available land as solar plants are often competing with other infrastructure projects. The biomass market is completely unstructured so there is no formal way of meeting demands or checking the quality of the product. The electricity from waste sector is hampered by regional governments having poor local data on the characteristics of their waste making it difficult for companies to know how to design their power plants. The report also makes clear that there is a need for better technology and manufacturing across all sectors to efficiently convert the natural resource into energy.

The CBC report, written in conjunction with The Indian Institute of Management (IIM), is aimed at global investors looking at the Indian renewable energy market and particularly the state of Gujarat which has significant potential. It provides a frank assessment of what is currently lacking and therefore where their investment and expertise is likely to have most success.

In launching the report, The CBC has also set a new incubation hub with the Indian Government, the IIM, The UK Carbon Trust, and BP Alternate Energy Group to develop cutting edge technologies tailor made for Indian city and rural living as well as transport. By involving academics as well as industry, the idea to get ideas commercialized quickly.

Director General of the CBC Dr Mohan Kaul, said:

“This report gives global investors a clear roadmap for their expertise. It shows where their skills are most needed to help India deliver on its enormous renewable energy promise. “It is clear that there are still R & D, grid interface and manufacturing issues which need to be put right. The central and regional Governments can also do better. They need to provide more user friendly data, procedures and incentives if investors are going to take a risk on relatively new technologies which are already difficult enough to get off the ground.

“Our new incubation hub will get ideas from everywhere, including the Indian entrepreneurs. Hopefully, this hub can get these ideas backed and commercialized quickly. I look forward to seeing the first solar powered rickshaw.”

The report’s findings include:

Wind

Indian Challenge

• A nationwide wind resource assessment has hardly got off the ground. Of the total of 553 wind monitoring stations installed, currently only 53 are in operation. In Gujarat, of the58 wind monitoring stations installed, only 2 are in operation.
• Current wind electricity generators in India have poor conversions rates of wind to power. There is also poor grid-interfacing further hampering the evacuation of power during high wind regimes.
• Can still be very beauracratic for a private investor seeking a wind site, getting clearances from various agencies and sourcing equipment
• Huge R and D required to develop small scale wind generators generators and new light weight materials for large wind turbines
• There is a growing view amongst various stakeholders that the existing system of tax subsidies for wind power in India which are just linked to capital outlay needs to be stopped. Instead, a new system that encourages power generation must be put in its place.

Opportunity for investor

• Global companies are currently encouraged to invest through intermediaries as this involves little administrative responsibilities before the project is completed
• R and D opportunities linked to efficient electronics for protecting, controlling, optimizing performance, power management & conversion. Also R and D opportunities linked to establishing strong connectivity to the grid.

Solar:

Indian Challenge

• The amount of land required for utility-scale solar power plants competes with other necessities such as new infrastructure and crops.
• Solar power plants are not connected to the grid as large upfront investment cost coupled with low conversion efficiencies makes mass utility scale deployments unattractive. Solar power in India is currently used in a decentralized manner for home lighting, lanterns, street lighting systems, stand-alone SPV power plants and water pumping systems.
• Inefficient manufacturing processes makes the production of silicon based solar cells expensive. Japan, Europe, China, and the US are ranked far ahead in the production of solar cells.
• The recent shortage of Polysilicon, a key component of solar cells that is expected to continue in 2009 affects the solar cell production and sends the prices of the end products soaring.

Opportunity for investor:

• An immediate opportunity to manufacture and distribute solar water heaters and cookers
• Opportunity to develop Photovoltaic Devices that have applications in areas that are unviable to connect to grids or as backup power sources. These include solar power packs for rural households and duel pump stations. Solar signaling systems: for traffic lights or railways signaling systems. Solar Road Studs to mark multi-lane highways and Solar Street Light:
• R and D to develop PV systems that reduce the ratio of capital cost to conversion efficiency.
• India is the least cost producer and assembler of solar cells so there is an excellent opportunity to set up efficient manufacturing plants of solar cells and PV systems which can used internally and exported to the ever expanding European or American photovoltaic market

Biomass: energy from unused agricultural and forestry residues

Indian Challenge

• Currently, agricultural and forest residue is traded informally as there is no such structured market. As well as this meaning that there is no efficient way of meeting the demand - there is also no certainty on biomass quality
• The limited availability of raw material including fuel sources limits the size of the biomass energy systems to below what is commercially optimal.

Opportunity for investor:

• R and D to improve biomass conversion on the large MW biomass gasifiers
• Due to the lack of uncertainty in the biomass quality, an opportunity lies in efficiently collecting the biomass, segregating it into different qualities and providing it to power generation units.

Biofuels – for cars

Indian Challenge:

• Constraints in the supply of molasses have impacted the bio-ethanol production. Reaching a target of 5% blending in some states is still a challenge.

Opportunity for investor:

• Jatropha cultivation, which grows in semi-arid wastelands with minimum care, is an ideal feedstock for large scale bio-diesel programme
• To develop technology and techniques for producing ethanol from alternate feedstock such as sorghum ligno-cellulosic materials like, rice straw,
• Joint ventures can be formalized with automobiles companies like Tata Motor, Daimler Chrysler etc. to develop engines that run on different feedstock based biofuels, efficiently. Particularly as India move towards the target of 20% blending of petrol and diesel by 2017

Municipal solid waste to Electricity

Indian Challenge

Lack of reliable data with the urban local bodies on the waste characteristic of their particular region makes it difficult o design the

• appropriate units

Lack of efficient systems for collection and distribution of solid wastes

• leads to irregular supply of raw material
• Current technology to convert MSW to energy in an efficient and environment friendly manner still remains a challenge. Critics have raised questions regarding the toxic emissions from these projects which defeat the basic purpose of being environment friendly.

Opportunity for investor:

• R and D to develop technology which transfers the waste efficiently to electricity.

Even though the report highlights such challenges - it still predicts that in the long run there is every likelihood that India will fulfill its renewable energy potential. It highlights that currently 44% of the 200 million Indian households do not use electricity and so there is huge scope to still invest as India continues to develop. It secondly points out that India imports more than 70% of its oil requirement from the Middle East which it desperately wants to reduce with the Government increasingly stressing renewables as the answer. For example, India is the only country in the world to have a dedicated ministry to develop the renewable and clean technologies - Ministry of New and Renewable Energy (MNRE). Thirdly, the report highlights that India is hugely blessed with an abundance of renewable energy sources, specifically the solar, wind and hydro