Royal Danish Embassy, New Delhi,

Trade Commission of Denmark, Bangalore,

Trade Council of Denmark

The Energy Sector in India

Table of Contents

1 Introduction ............................................................................................3
2 Market Indicators....................................................................................3
3 Market Trends.........................................................................................4
3.1 Renewable Energy Sources......................................................................... 5
3.1.1 Wind Energy............................................................................................. 5
3.1.2 Solar............................................................................................................ 5
3.1.3 Biomass/Cogeneration ........................................................................... 7
3.1.4 Urban and Industrial Waste ................................................................... 7
4 Market Evaluation...................................................................................7
5 Market Opportunities .............................................................................7

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1 Introduction
India is literally running short of energy. The energy supply has not followed the
tremendous demand in this emerging country, which has resulted in the fact that India
has been compelled to import a large amount of energy, especially oil and gas1. India
stands with a huge challenge to supply stable energy for its inhabitants for the years to
come, which gives great market possibilities for Danish suppliers to the energy sector.

2 Market Indicators
By world standards, India’s current level of energy consumption is very low. Electricity
consumption per capita is in India approx. 630 kWh (2005-06) per capita, whereas in
Denmark it is approx. 6700 kWh per capita. Nevertheless, there is still a shortage of
power in the country.

Power Situation: (April 2006-January 2007) (Provisional)

Demand Met Surplus/ Deficit

Energy 572,812 MU 519,656 MU -9.30%
Peak Demand 100,403 MW 86,425 MW -13.90%
Source: Ministry of Power (MU = Million Units)

Hence the above figure the power sector has been characterised by a shortage ranging
between 9% to 14%. With a targeted GDP growth rate of 7 – 8 %, and an estimated
energy elasticity of 0.80, the energy requirements of the country are expected to grow at
5.6 – 6.4 % per annum over the next few years.

The Government of India has an ambitious mission of “Power for all by 2012”. This
mission would require that the installed generation capacity should be at least 200,000
MW by 2012 from the present 128,581 MW (February 2007)2. To achieve the Power
Ministry’s goal of adding over 80,000 MW by 2012, an investment opportunity of
US$90 billion exists.

The country faces significant challenges to meet this demand. Even though the overall
generation has increased from 301 billion units in 1992-93 to 587 billion units in 2004-
053, the growth has not been able to meet the demand.

In the past few years, there has been considerable growth in power generation based
on renewable sources of energy, which also plays a big part in the governments plan.

1 1Indiaimports 60 pct.-75 pct. of its oil consumption, IREDA (2005)

2 Ministry of Power - http://powermin.nic.in/
3 Ministry of Power - http://powermin.nic.in/

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 Current installed capacity based on these sources is about 6,200 MW, of which wind
power constitutes a major part.

Energy Production % (28.02.07)

Totally installed capacity 128.581 MW

5%
3%
1%
27%
11% Hydro
Coal
Gas
Diesel
Renewable
Nuclear

53%

Source: Ministry of Power

There is also an urgent need to improve the transmission and distribution (T&D)
system to reduce the substantial losses currently incurred on this account. Transmission
capacity has not kept pace with increases in generation, leading to considerable
congestion of the system.

In India bulk transmission has increased from 3,708 ckt km 1947 to more than 265,000
ckt km today. The entire country has been divided into five regions for transmission
systems namely the Northern region, North Eastern region, Eastern region, Southern
region and Western region. The interconnected transmission system within each region
is also called the regional grid.

To be able to reach the requirements of the Government plan of having at least 200,000
MW installed capacity by 2012, an expansion of the regional transmission network and
the inter-regional capacity to transmit power is essential. The latter is required because
resources are unevenly distributed in the country and power needs to be carried great
distances to areas where load centres exist.

3 Market Trends
The Government has made strategic plans to supply energy to its power starving
country. In 2002 the 10th Five Year Plan was made setting a target of adding over
100,000 MW of capacity by the year 2012. The 12th Plan is addition target (2012-17) to

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be another 66,500 MW. Therefore the government has to rely on different sources of
energy to fulfil the plan.

3.1 Renewable Energy Sources

India has huge gap between demand and supply of conventional electricity and hence
renewable energy sources are being exploited. It is an important element of India’s
power policy – to meet the needs of power in an environmentally friendly way and to
provide power to remote areas. The target is that 10% of the energy has to be covered
by Renewable Energy by 2012. The Indian Renewable energy industry is estimated at
US$ 500 million and is growing at an annual rate of 15%.

3.1.1 Wind Energy

India’s wind sector is experiencing an impressive growth these years. In 2006 a record
installation of 1840 MW was accomplished bringing cumulative wind power capacity up
to 6228 MW. This makes India the fourth largest wind power nation in the world4. India
now occupies an enviable position as the wind leader in Asia, and has world ranking as
the third largest producer in the world after USA and Germany.

India 2004 2005 2006

Annual MW 875 1,388 1,840
Cumulated MW 3,000 4,388 6,228
Source: BTM Consult Aps

The rapid increase of capacity in India is likely to continue, and is expected to reach a
cumulated installed capacity by 2011 of 18,028 MW5.
India does only have onshore wind turbines at the moment, and India is furthermore
different from all other big markets in the world because approximately 70% of the
customers are manufacturing companies generating power for their own consumption.
Utilities and Independent Power Producers (IPPs) only account for approx. 20% of the
market.

3.1.2 Solar

Solar energy consumption in India has grown in the last couple of years and has resulted
in the birth of a flourishing industry in the large, small and medium sectors. Under the
renewable energy plan up to 2012 the Government of India has set target of
deployment of solar water heating system in one million homes, 5 million solar lanterns
and 2 million solar home lighting systems.
India, being a tropical country, is blessed with plenty of sunshine. There are on an
average 250 to 300 clear sunny days a year. Thus, it receives about 5000 trillion kWh of

4 BTM Consult Aps - March 2007 - Report ”World market updates 2006”
5 BTM Consult Aps - March 2007 - Report ”World market updates 2006”

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solar energy in a year. The total solar module assembly capacity is 50-55 MW today. It is
expected that the time for a major leap forward has come and in the next 10 years it
should reach 200 MW.

The Solar Energy consists of:

• Solar thermal technology is incorporated in:

– Water Heating
– Solar Ponds
– Solar Cooker
– Solar Air Heating

Solar water-heating system installations by year

1.6

1.4
Collector area (million sq.mt.)

1.2

0.8

0.6

0.4

0.2

0
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
Year
Source: Ministry of New and Renewable Energy

• Solar PV is incorporated in:

– Solar Home Lighting
– Solar Street Light
– Standalone Power Plants

Growth in PV production in MW
Solar Cell PV Module

70 65

60
Production in MW

50 45

40 36 37
32
30 25
20 20 22 23
20 17
14
9.5 11
10

0
1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06

Source: Ministry of New and Renewable Energy

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 3.1.3 Biomass/Cogeneration

These energy sources constitute another important element, with an estimated potential
of around 19,500 MW. (Existing installed capacity around 950 MW).

Energy from biomass, biogas and waste only constitutes of approx. 12,75 pct. of the
commercial renewable energy production. But electricity from biomass and biogas plays
an important role for many Indian families in the country side as is used as heating
source for e.g. cocking. Concurrently there is furthermore established approx. 3,8
million small gas firing plants6 which win biogas from organic waste. The gas is used to
cover basic needs as lighting and heating. These plants are used on a non-commercial
basis and are financed by the users and the Ministry of New and Renewable Energy.

Even though biomass, biogas and waste are limited in the commercial energy
production, India is one of the leading country within the area as, mentioned
earlier, many families in the country side rely on this form of energy. Still there
is a long way to make this form of energy significant in the commercial
production. Hence the potential within this sector is still huge and untapped.

3.1.4 Urban and Industrial Waste

These forms of energy based power plants are estimated to have a potential of 2,700
MW. There is hardly any generation from this source at present.

4 Market Evaluation
Given the big gap in demand and supply in the power sector in India, Danish
companies with new products, equipment and technology to offer within the sector
have a high potential for growth in the market.
Within renewable energy, the larger Danish wind and solar energy companies have
already established a strong presence in India. However the market potential is still huge
and the scope for entry of companies producing ancillary equipment for the sector still
remains untapped. Similarly, Danish companies within biomass and cogeneration need
to have a closer look at this market.

5 Market Opportunities

• Supplying components to the fast growing wind industry

• Solar Energy Market
• Technical solutions for reducing energy costs for companies
• Supplying technology and equipment to the biomass, biogas and waste sector

6 MNES Annual report 2005-06

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 • Increasing degree of privatisation in the electricity sector opens up the
possibility for consultancy and sub supplying.
• The poor conditions of the existing power plants show a general demand for
changes and improvements of equipments and plants.
• Great transmission costs signal a demand for modern cables in the electricity
sector
• High growth rates imply increasing CO2-emissions, which lead to a greater
demand for energy efficient technologies such as clean coal technologies.
• India shows great potential in carbon trading, which leads to a demand for new
technologies
• Greater political emphasis on cooperation between the public and the private
sector though partnerships opens up for great financing possibilities
• The establishment of a national gas grid opens up for opportunities in the field
of supplying equipment, systems and plants
• Political actions are taken to implement energy labelling on energy intensive
products

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 Royal Danish Embassy, India

11, Aurangzeb Road

110 011 New Delhi, India
Tel +91 11 42090700
Fax +91 11 2379 2019
E-mail : [email protected]
www.ambnewdelhi.um.dk

Trade Commission of Denmark,

Bangalore

16/1, Vittal Mallya Road

Bangalore-560 001 India
Tel +91 80 2227 7174/75
Fax +91 80 2227 7176
E-mail [email protected]
www.dtcbangalore.com

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