Energy Sector in India:

A Strategy Paper on Renewable Source of Energy with special Reference to Wind and Solar
Harihar Panigrahi - U211029 Sridhar Chakravarthi M - U211069 Vijay Dewangan - U211081
In this report, attempt has been made by the team to analyse energy sector in India and a strategy on renewable source with special reference to Wind and Solar Sector.

ExPGP 2011-2014 Xavier Institute of Management, Bhubaneswar

Table of Contents

Abstract Introduction Overview of Power Industry in India Business Scenario Government Incentives for the RE sector in India Renewable Energy Options Assumptions and Critical Success Factors Proposed Business idea Business Strategy Strategy Deployment using Balanced Scorecard framework Implementation Plan Risks and mitigation plans Conclusion References

2 2 2 8 10 14 16 16 18 21 22 24 24 25

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Abstract It is a well-known fact that India does not have adequate power generation. In spite of many efforts by the government of India, the gap has only been growing. Though many incentives have been announced for the private participation in the energy sector, due to low ROI and buy-back rates, the investors are not interested. This strategy paper , proposes a few recommendations to address this issue.

Introduction There is a large power crisis looming over the economic growth projections of India. As of now, many small scale Industries as well as small farmers are facing the brunt and are becoming unprofitable. Though the government has come up with many subsidies and schemes, they have been focused more on individual consumers rather than Industrial consumers. There are no incentives offered to any industry who wants to move over to non-conventional energy sources for their daily requirements. Similarly, a very low buy-back rate has been hampering the growth of the wind and solar power sectors. This paper explores the current scenario and aims to address some of the issues related to supply side of the equation. Overview of Power industry in India The energy policy of India is largely defined by the country's burgeoning energy deficit and increased focus on developing alternative sources of energy particularly nuclear, solar and wind energy About 70% of India's energy generation capacity is from fossil fuels, with coal accounting for 40% of India's total energy consumption followed by crude oil and natural gas at 24% and 6% respectively. India is largely dependent on fossil fuel imports to meet its energy demands by 2030, India's dependence on energy imports is expected to exceed 53% of the country's total energy consumption. In 2009-10, the country imported 159.26 million tonnes of crude oil which amounts to 80% of its domestic crude oil consumption and 31% of the country's total imports are oil imports. The growth of electricity generation in India has been hindered by domestic coal shortage and as a consequence, India's coal imports for electricity generation increased by 18% in 2010. Due to rapid economic expansion, India has one of the world's fastest growing energy markets and is expected to be the second-largest contributor to the increase in global energy demand by 2035, accounting for 18% of the rise in global energy consumption. Given India's growing energy demands and limited domestic fossil fuel reserves, the country has ambitious plans to expand its renewable and nuclear power industries. India has the world's fifth largest wind power market and plans to add about 20GW of solar power capacity by 2022. India also envisages to increase the contribution of nuclear power to overall electricity generation capacity from 4.2% to 9% within 25 years. The country has five nuclear reactors under construction (third highest in the world) and plans to construct 18 additional nuclear reactors (second highest in the world) by 2025 The electricity sector in India had an installed capacity of 210.936 GW as of November 2012, the world's fifth largest. Captive power plants generate an additional 31.5 GW. Non Renewable Power Plants constitute 88.55% of the installed capacity and 12.45% of Renewable Capacit. India generated 855 BU (855 000 MU i.e. 855 TWh) electricity during 2011-12 fiscal.
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In December 2011, over 300 million Indian citizens had no access to electricity. Over one third of India's rural population lacked electricity, as did 6% of the urban population. Of those who did have access to electricity in India, the supply was intermittent and unreliable. In 2010, blackouts and power shedding interrupted irrigation and manufacturing across the country. The per capita average annual domestic electricity consumption in India in 2009 was 96 kWh in rural areas and 288 kWh in urban areas for those with access to electricity, in contrast to the worldwide per capita annual average of 2600 kWh and 6200 kWh in the European Union. India's total domestic, agricultural and industrial per capita energy consumption estimates vary depending on the source. Two sources place it between 400 to 700 kWh in 20082009. As of January 2012, one report found the per capita total consumption in India to be 778 kWh. India currently suffers from a major shortage of electricity generation capacity, even though it is the world's fourth largest energy consumer after United States, China and Russia. The International Energy Agency estimates India needs an investment of at least $135 billion to provide universal access of electricity to its population. The International Energy Agency estimates India will add between 600 GW to 1200 GW of additional new power generation capacity before 2050. This added new capacity is equivalent to the 740 GW of total power generation capacity of European Union (EU-27) in 2005. The technologies and fuel sources India adopts, as it adds this electricity generation capacity, may make significant impact to global resource usage and environmental issues. India's electricity sector is amongst the world's most active players in renewable energy utilization, especially wind energy. As of December 2011, India had an installed capacity of about 22.4 GW of renewal technologies-based electricity, exceeding the total installed electricity capacity in Austria by all technologies. India's network losses exceeded 32% in 2010 including non-technical losses, compared to world average of less than 15%. Both technical and non-technical factors contribute to these losses, but quantifying their proportions is difficult. But the Government pegs the national T&D losses at around 24% for the year 2011 & has set a target of reducing it to 17.1% by 2017 & to 14.1% by 2022. Some experts estimate that technical losses are about 15% to 20%, A high proportion of non-technical losses are caused by illegal tapping of lines, but faulty electric meters that underestimate actual consumption also contribute to reduced payment collection. A case study in Kerala estimated that replacing faulty meters could reduce distribution losses from 34% to 29%. Key implementation challenges for India's electricity sector include new project management and execution, ensuring availability of fuel quantities and qualities, lack of initiative to develop large coal and natural gas resources present in India, land acquisition, environmental clearances at state and central government level, and training of skilled manpower to prevent talent shortages for operating latest technology plants. In so far as electricity consumption is concerned, India has reached a level of about 600-kilowatt hour (kwh) per head per year. The comparable figures for Japan are about 7,800, for South Korea about 7,000, for China about 1380, for USA about 13,000, for OECD countries about 8050 and world average are about
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2430. Thus, both in terms of per capita energy consumption and in terms of per capita electricity consumption, India is far behind many countries, and as a matter of fact, behind even the world average. Therefore, to improve the standards of living of Indian people and to let them enjoy the benefit of economic development, it is imperative that both energy consumption and electricity consumption level is enhanced. India is targeting a growth rate of 9 10%, having already reached a level of almost 8%. To sustain the double-digit growth rate for next 10-15 years, it would be essential that the level of energy availability and consumption, and electricity consumption in particular, is enhanced substantially.

The Opportunity in Power Problem To address the issue concerning energy consumption, and more particularly, the need for enhancing the energy supply, India has accorded appropriate priority to both - supply side management and demand side management. On the supply side management, while it is essential for India to radically expand the capacities on all the fronts and all the segments of energy, equally important is the need for efficient consumption of energy for which a number of initiatives have been put in place. On the supply side, the mismatch between demand and supply is so large that India can ill-afford to choose one option in preference to the other. For several years, in fact may be for next few decades, India would need to exploit all possible options to create reasonably large capacity base on the energy side. It needs to expand manifold the coal production, extract through all possible means, the oil and gas reserves, wherever possible, resort to import of coal, acquire coal and gas reserves abroad, will need to continue substantial dependence on import of oil, and exploit fully the large hydro electric potential which is of the order of over 1,50,000 MW. Only about 32,000 MW i.e. about 20% of the hydroelectric potential has been exploited so far. Increase in the capacity base of power generation through dependence on the coal reserves of the country, which are of the order of 200 billion tones is inevitable. Nuclear programme has proved to be effective and successful. After initial teething problems in mid eighties, from early nineties, the nuclear power plants have demonstrated to be utilized at substantially high level of availability and efficiency and this is one of the important options that India is pursuing. Gratifyingly, a number of companies in India have discovered huge gas reserves, both on the Western, and more particularly, toward the Eastern coast. Besides, a number of LNG terminals have also been developed and are being developed so that the use of gas could be supplemented through import of Liquefied Natural
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Gas. India is one of the very few countries which has been successful in employing wind turbine technology and today of the total capacity of 1,25,000 MW in the country about 5% is constituted by the various nonconventional sources of generation, wind being the largest contributor. On the Demand Side Management, there exists a substantial scope. On the basis of random sampling studies conducted on various segments of energy consumption, it has been established that over 20% of energy is wasted because of in-efficient consumption. The Government of India enacted a legislation called Energy Conservation Act in the year 2001. The Bureau of Energy Efficiency (BEE) has been put in place in pursuance to implementation of this law. The Bureau has formulated a number of major action plans to make significant dent on various segments of energy consumption in the domestic sector, in the agriculture, in service group and in manufacturing sector. The programmes include Standards and Labeling of energy consuming gadgets, setting and enforcing consumption norms, developing energy efficient building codes, energy audits of large buildings etc. Generation vis--vis Consumption of Power by Indian States in FY 2011-12

The above graphs depicts power generation vis--vis consumption by various states of India for the fiscal year 2011-12. Baring Gujarat, the other heavily industrial states like Haryana, Uttar Pradesh, Punjab, Rajasthan, MP, Maharastra, Andhra Pradesh, Tamilnadu, Karnatak have huge shortage of power. Power being lifeline for any country/state, shortage is effecting Industrialisation and MNCs are going back to those countries where there is abundant availability of Power.
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Looking at the above trend on sources of generation of power and the pace of generation, it is doubtless that Thermal Power will lead the way to great extent to meet Indias power deficit. However, the other sources like Hydro and Nuclear growth is almost flat with lot of people going against installation of Nuclear ones. This means, India need to focus on other sources i.e. renewable sources of generation of power over and above non renewable source like Thermal Power.

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As evident from the above graphs, majority of the Industrialised states of India has potential in meeting their power deficit through renewable sources of energy like wind power, bio-mas power, solar etc.

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Business Environment The Prime Minister of India has announced a goal of 10% share for RE or 10,000 MW in the power generation capacity to be added during the period up to 2012. Renewable Energy Policy A comprehensive RE Policy for all-round development of the sector, encompassing all the key aspects, has been formulated by MNES. The broad objectives envisaged in the draft policy are: Meeting the minimum energy needs through RE; Providing decentralised energy supply in agriculture, industry, commercial and household sectors in rural and urban areas, and Providing grid quality power. The policy envisages 10% of additional grid power Generation capacity to come from RE by 2012. The policy is awaiting approval by the Government. Policy measures aim at overall development and promotion of renewable energy technologies (RETs) and applications. Policy initiatives encourage private as well as FDI including provision of fiscal and financial incentives for a wide range of RE programmes. Further, the procedures have been simplified, and provide excellent opportunities for increased investment in technology up-gradation, induction of new technologies, market development and export promotion. Foreign Investment Policy FDI

Foreign investors can enter into a joint venture with an Indian partner for financial and/or technical collaboration and for setting up of RE-based power generation projects Proposals for up to 100 per cent foreign equity participation in a joint venture qualify for automatic approval. Hundred per cent foreign investment as equity is permissible with the approval of the Foreign Investment Promotion Board (FIPB). Foreign investors can also set up a liaison office in India The Government of India also encourages foreign investors to set up RE-based power generation projects on Build, Own and Operate (BOO) basis. Various Chambers of Commerce and industry associations in India provide guidance to the investors in finding appropriate partners The Government of India encourages foreign investors to set up power projects on BOO basis. Investors are required to enter into a power purchase agreement with the concerned state government No prior approval of the government is required to set up an industrial undertaking with Foreign Direct Investment (FDI) by Non-Resident Indians (NRIs) or Overseas Corporate Bodies (OCBS) The Reserve Bank of India (RBI) has permitted Indian companies to accept investment under the 'automatic route' without obtaining prior approval from RBI. Investors are required to notify the

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regional office of RBI, of receipt of inward remittances within 30 days of such receipt and file required documentation within 30 days of issue of shares to foreign investors Foreign Investment Promotion Board (FIPB) The FIPB has been revamped and made itself the single-window agency for all matters relating to FDI as well as for promoting investment into India The Board is chaired by the Secretary (Department of Industrial Policy & Promotion), Government of India It provides appropriate institutional arrangements, transparent procedures and guidelines for investment promotion and to evaluate proposals for foreign investment (other than those eligible for automatic approval by the Reserve Bank of India) FIPB would also monitor implementation of mega projects to facilitate further investment and remove bottlenecks The Board considers all investment proposals with or without technical collaboration and/or industrial license FIPB has made available a mailbox facility for filing applications: The e-mail address for the same is siaapplication@ub.nic.in. The format is available at www.indmin.nic.in This Board meets every week and considers all applications within 15 days of their receipt with the endeavour to communicate decisions to the applicants within four weeks

Foreign Investment Implementation Authority (FIIA) The FIIA has been set up in the Ministry of Commerce and Industry to translate FDI approvals and implementations It is headed by the Secretary (Department of Industrial Policy & Promotion) and is serviced by the SIA FIIA would provide a one-stop after-care service to foreign investors by helping them to expedite approvals and clearances and to sort out operational problems with other government agencies The FIIA will act as a single-point interface between the investors and government agencies including administrative ministries, state governments, Pollution Control Boards, Directorate General of Foreign Trade, regulatory authorities, tax authorities and Company Law Board among others Approval holders have been requested to get in touch with respective officers in FIIA

Industrial Policy MNES is promoting medium, small, mini and micro enterprises for manufacturing and servicing of various types of RE systems and devices. Industrial clearances are not required for setting-up of an RE industry No clearance is required from Central Electricity Authority (CEA) for power generation projects up to Rs 1,000 million A five-year tax holiday is allowed for RE power generation projects Soft loans are available through IREDA for RE equipment manufacturing
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Facilities for promotion of Export Oriented Units (EOUS) are available for the RE industry Financial support is available to RE industries for R&D projects in association with technical institutions Import of power projects are allowed Private sector companies can set up enterprises to operate as licensee or generating companies Customs duty concession is available for RE spares and equipment, including those for machinery required for renovation and modernisation of power plants. Excise duty on a number of capital goods and instruments in the RE sector has been reduced or exempted

Incentives and Subsidies Tax holiday under the domestic income tax law Undertakings engaged in generation or generation and distribution of power have been offered a 10-year tax holiday for renewable energy plants if it begins to generate power before 31 March 2013. However, they have to pay a minimum alternative tax at the rate of approximately 20 percent, which can be offset in future years. It is likely that a new direct taxes code will be made effective from 1 April 2013. The draft provisions of direct taxes code provides for alternative mechanism for providing tax incentives to power companies. Alternative incentive mechanism provides for expenditure based incentive to business of generation, transmission or distribution of power. As regards this incentive, all revenue and capital expenditure (except few) will be allowed as tax deduction upfront instead of claiming amortisation / depreciation on the capital expenditure and there would be no tax holiday available. Generation Based Incentives (GBI): In order to attract foreign investors, the Government has taken several initiatives such as introducing GBI scheme for to promote projects under Independent Power Producers (IPP) mode as follows: Wind power @ INR 0.50 per MW, Solar Power @ INR 12.41 per KW Accelerated depreciation: Under the domestic income-tax law, Renewable companies (Solar as well as wind power) were provided with accelerated depreciation at 80 percent. However, recently, the government has restricted the accelerated depreciation of 80 percent to windmills installed on or before 31 March 2012. Windmills installed after 31 March 2012 will be eligible for depreciation of 15 percent instead of 80 percent on written down value method. It may be noted that 80 percent depreciation is still available for solar power projects. Further, power companies have been provided with an option to claim depreciation under straight line method. However, a company can claim either accelerated depreciation or GBI but not both. Quota obligations Renewable Purchase Obligation (RPO):

India aims to derive 15 percent of its energy requirements from renewable energy sources by the year 2020. RPO is one of the tools of implementing this ambitious goal. Under these rules, distribution companies, open access consumers and captive consumers are obligated to buy a certain percentage of
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their power from renewable sources of energy. We believe that going forward enforcement of RPO will create the volumes needed for the Renewable Energy Certificate market. Fiscal and financial incentives for Small Hydro Power Wheeling, banking, Third party sale, Buy-back facility by states Capital subsidies and sales tax incentives in certain states Detailed project report preparation at discounted price Capital grant for setting up projects in North Eastern states Financialsupportforrenovation,modernizationandcapacityup-ratingofoldSHPstations Financial support for development/up gradation of water mills Soft loans from IREDA for setting up of SHP projects up to 25MW capacity Biomass power Enactment of favourable policy regimes at the state as well as the Central levels Buy-back/Wheeling/Banking of generated electricity Incentives in the form of sales tax exemptions, equity and grants, etc. Interest subsidy for commercial biomass power projects up to 3% interest subsidy for biomass/bagasse cogeneration (commercial projects) Capital subsidy for cogeneration projects in Joint Venture model/IPP mode in cooperative/public sector sugar mills Financial assistance under the National Biomass Resource Assessment Program (NBRAP) Energy from Waste Easy allotment of land, supply of garbage and facilities for evacuation, sale and purchase of power to encourage setting up of waste-to-energy projects. Commercial Projects: Financial assistance as interest subsidy for reducing rates of interest. Demonstration Project: Financial assistance on capital cost of the project. Power Generation at Sewage Treatment Plants: Financial assistance on incremental cost for generation of power from biogas. Energy from Solar No specific conditions for JV formation 100% EOU to setup a manufacturing plant Technology transfer for the manufacture of silicon solar cells and PV systems MNES financial incentives for solar PV grid connected power projects IREDA financial package for solar photo voltaic (power generation systems) MNES Financial Incentives for Solar Photo voltaic Systems

Subsidy pattern for solar thermal systems/devices

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Solar thermal systems/devices

Capital subsidy (Rs./ sq.m. of collector area) or 30% of project cost whichever is less*

Solar water heating & air heating systems, box cookers based on following type of Collectors Evacuated Tube Collectors (ETCs) 3000 Flat Plate Collectors (FPC) with liquid as the working fluid 3300 Flat Plate Collectors with air as the working fluid 2400 3600 Solar collector system for direct heating applications Dish solar cookers & steam generating systems based on following type of collectors Concentrators with manual tracking 2100 Non- imaging concentrators 3600 Concentrators with single axis tracking 5400 Concentrators with double axis tracking 6000

* Besides capital subsidy, soft loan at 5% for balance cost of system excluding beneficiary share of 20% may also be available. Also for special category states, this subsidy will be double limited to 60% of project cost. In un electrified rural areas, subsidy for solar thermal power plants will be 60% in all category of states.

Programme wise Renewable Power Buyback Policies State Wise RENEWABLE POWER POLICIES-PROGRAMME-WISE Buy-back rate: Rs /unit S.No. 1. 2. 3. 4. 5 6. State / UT Wind Power Andhra Pradesh 3.50 / kwh fixed for 10 yrs Arunachal PradeshAssam Bihar Chhatisgarh Gujarat 3.56 fixed for 20 yrs Haryana 4.08 escalation 1.5% base year 07-08 Himachal Pradesh J&K Jharkhand Karnataka 3.70 Small Hydro PowerBiomass Power 2.69 (04-05) 2.63 (05-06) Esc @ 1% for 5 yrs 2.71 (05-06) 3.00 No escalation. 2.25 (94-95) 4.00 biomass 3.74 - cogen. Esc. @ 2% (base 200708) 2.50 2.90 2.74-cogen.
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7. 8. 9 10.

fixed for 10 yrs

11. 12.

Kerala

13.

14. 15. 16. 17. 18. 19. 20.

21. 22. 23. 24.

3.14 fixed for 20 yrs Madhya Pradesh 4.03 - 3.36 (constant) Reducing @ 0.17 per yr for first four years Maharashtra 3.50 / kwh Esc. of 0.15 per yr for 13 years from DOC of the project Manipur Meghalaya Mizoram Nagaland Orissa Punjab 3.66 with five annual escalation @ 5% upto 2012 Rajasthan 4.50 for Jaisalmer, Jodhpur etc. and 4.28 for pther districts (base year 08-09) Sikkim Tamil Nadu 3.39 / kwh (Levelised) Tripura Uttar Pradesh -

2.25

2.25 (99-00)

2.88 - biomass Esc @1% for 10 yrs (base04-05) 2.80 (2000-01) Esc @ 5% for 5 yrs 3.33-5.14 Esc. @ 0.03-0.08 for 20 yrs. 3.05- cogen. 3.04-3.43-biomass Esc @ 1% for 13 yrs 3.01 (01-02) Esc @ 3% for 5 yrs limited to 3.48 3.60-3.96 water-air cooled 2.73 (2000-01)* Esc @ 5 % for 9 yrs 2.86 existing plants 2.98 new plants Esc @ 0.04/ year 2.86 existing plants 2.98 new plants Esc @ 0.04/ year

2.73 (98-99) 2.75 (98-99)

2.25

25.

West Bengal

4.00 / kwh To be decided on case to case

2.25

* Rs.2.48 per unit at 5 % escalation for 9 years (2000-01) for off-season power generation using coal/lignite (subject to ceiling of 90% of HT tariff). Policies for wheeling/ banking/ third part sale vary from state to state

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Renewable Energy Options Renewable Energy from Wind Wind power is currently one of the most developed and cost-effective renewable electricity technologies. Wind power is a renewable source of energy and produces no greenhouse gases during its operation. Wind may be classified as off-shore or on-shore.

Off-Shore Wind Off-shore wind is wind blowing from the land toward the sea. This energy is harnessed by installing wind turbines off-shore. Offshore wind is more technologically challenging and expensive to harness compared to onshore wind. However, it has a larger potential due to stronger and more consistent wind energy, leading to higher power outputs and more generating hours per year. However academic research indicates that for feasible off-shore wind farm sites, a seabed slope of not more than 5% and a total water depth not exceeding 35 metres are necessary. Most of the infrastructure will be located along a designated coastline, following all the norms and with the necessary environmental clearances. All the new proposals for on-shore infrastructure linked to off-shore wind farm developments will be decided as per the principles of sustainable development and following proper planning. On-Shore Wind On-shore wind is wind coming from the sea toward the land; which can be harnessed for energy by installing wind turbines on land. The advantages of wind energy are no air pollution and relatively cheap to build. With a turbine lasting 20-25 years; landowners can receive an income from the development while the land can be used for other purposes as well, generating additional income. The environmental impact of wind energy is far lower than that of conventional energy sources. However, there are some negative effects on the environment such as impacts upon the landscape; bird life; noise; and electromagnetic interference. However it has become common practice worldwide to identify areas that are environmentally sensitive (e.g. designated habitats, bird migration paths, undisturbed peat lands, noise sensitive locations) and avoid those areas for wind farms. Other disadvantages of wind energy include the constant need for wind, and a significant amount of land is required for wind farms. There are 4 classifications identified based on Wind Energy potential areas for on-shore wind energy development: Priority Areas are areas which have secured planning permission and where on shore wind farms can be developed immediately. Tier 1 - Preferred (Large Wind Farms) are areas in which the potential for large wind farms is greatest.
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Tier 1 - Preferred (Cluster of Turbines) are areas identified as being most suitable for smaller clusters of wind turbines (clusters of up to three to five turbines depending on site conditions and visual amenity). Tier 2 - Open for Consideration identifies areas which may be considered for wind farms or small clusters of wind turbines but where the visual impact on sensitive or vulnerable landscapes, listed highly scenic routes, scenic routes, scenic viewing points and scenic routes will be the principal consideration.

Renewable Energy from Solar and Solar Thermal Energy Solar energy is derived from the sun. Solar thermal energy is a technology for harnessing solar energy for thermal energy (heat). Solar energy can be captured in two ways; through active solar techniques which include the use of photovoltaic panels and solar thermal collectors to harness energy, or through passive solar techniques including orientation of a building towards the sun and using materials with favourable light dispersing properties. A solar thermal roof installation can generate a proportion of a households annual demand for hot water. Photovoltaic panels can generate renewable electricity for on-site use, or for export to the grid, even when the sky is overcast. Thermal energy can also be harnessed through the use of heat pumps. Both practises (active and passive) are currently used in households and buildings throughout the County. The main advantage of solar energy is that passive energy can be inexpensive if built into a development. The main disadvantages of solar energy are that some forms are currently not cost effective; and given that reliability depends on sunlight, storage and backup are necessary. Solar energy shall be encouraged throughout the County, especially for generating electrical/heating needs of public infrastructure (e.g. solar panels to power traffic warning signs) and new domestic buildings in accordance with the principles of proper planning and sustainable development. Proposals for solar renewable developments will have to demonstrate that the proposals will not have an adverse effect on protected species and their habitats (e.g. bats) and on protected structures. Any proposals for renewable energy developments from solar sources should be determined in accordance with the principles of proper planning and sustainable development and the requirements set out earlier. Location Considerations The key element in preparing this Strategy was to ensure that the harnessing of renewable energy for the production of electricity and the economic potential presented by renewable technologies will provide benefit for the global environment and local communities whilst ensuring protection of the natural and built heritage of the state and protecting the residential amenities of the existing population. A detailed study has been carried out by the government to identify potential areas for different types of renewable energy developments in the country. Planning considerations such as designated natural heritage areas and built heritage, scenic views/routes and populated areas and infrastructure constraints should be identified.
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Environmental considerations arising from the strategic environmental assessment and ecological impact assessment (Water quality, flooding etc.) should be identified. All planning and environmental considerations of the state should be plotted. The areas identified as suitable for particular renewable energy developments are outlined in the maps. Each proposed development will be assessed on its impacts on the Renewable Energy Strategy.

Assumptions and Critical Success Factors

Governmental support Feasibility as per Policy Technical feasibility Additional ROI opportunities Project Management Availability of skilled manpower

Proposed Business Idea

It has been observed that both solar and wind power farms need vast areas of land, which cannot be used for any other purposes. As both these installations are open air, it is proposed to utilize the same area simultaneously for cogeneration of power using both means. A wind turbine needs 20 square meters at its base and may be another 100 square meters for access roads. They are installed 6-10 rotor diameters apart for maximum efficiency. Wind farms use very less ground. This ground is perfectly safe for raising crops, livestock, hunting, fishing, hiking etc. Most jurisdictions require a setback of a few hundred meters to houses to reduce the noise. This has the following advantages: Power generated / acre can improve tremendously as we will now be generating both solar and wind power from the same land. The power storage costs can be optimized between the two sources The power supply will be more stable across the seasons Both the installations do not obstruct each other The overall cost/ kWh will also come down very much, as the major cost contributor is land for installation. As the solar panels are light weight, we may be able to install them along the tower of the wind turbine as well. Latest technologies and methodologies of continuous alignment of the PV panels towards the sun can be used as there will be very less restrictions and PV panel layout can be designed with ease.

This strategy paper discusses the feasibility of setting up such an integrated power generation system. Technical Feasibility The following aspects of wind and solar energy provide us with the opportunity to collocate these units.
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Installation of solar panels does not involve major structures and construction which can obstruct the wind mills Most of the areas which are suitable for setting up wind farms are also suitable for solar power generation All the technologies are currently available and are well- established in the field There can be a good mix of power from both the sources; particularly near sea shores; as the day experiences good sun light and evenings will have strong breeze from land to sea.

Financial Feasibility The financial viability of the Integrated Power Generation Project can be assessed based on the following facts There are many incentives by the Ministry of Nonconventional Energy Sources, various State Governments, Indian Renewable Energy Development Authority (IREDA) and other agencies The power buy-back price policy is not very encouraging for the industry. This has to be offset by developing new financial engineering models which can improve the ROI rates as well as periods for the investors. However, there is a proposed increase in the penalty levied on the industrial consumers for which the private power suppliers can provide great solutions through captive power generation for a cluster of industrial units. The faster depreciation of the equipment also helps in reducing the book value of the assets. One of the major cost factors is the land price. The integrated project helps in improving the utilization of the space and improves the power/acre ratio to a large extent. The project should be registered as a CDM project and the Carbon credits thus generated, will help improve the ROI

Business Strategy
While there has been a steep increase in solar/wind installations in recent years, the total installed capacity of solar/wind power is a very small percentage of total energy production. For the solar/wind energy to create more jobs, greener economy, and reduce greenhouse gas emissions; we need better solar/wind technology. Installation and management of solar/wind energy farms is a complex task. To drive more solar/wind power farms, the Renewable energy programs must focus on the key barriers to growth. For successful marketing, a desire for the product should be created. Thus we need to understand the following a) b) c) d) Current consumer perceptions of the solar / wind energy and how to improve those perceptions What price/value equation will make it attractive and help growth Who are the credible sources of product information as per consumers Where to present all this information in the form of promotion, advertising, etc., so as to reach the right consumers. Current barriers for adopting Solar/wind power

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Cost High up-front and out-of-pocket costs along with long payback periods deter customers from installing solar/wind energy technology. Reliability The use of technology is not prevalent. There are many misunderstanding about its performance capabilities. These create concerns about the reliability of solar/wind technology. Complexity People think that the process of purchasing and installing solar/wind energy systems is complex and lengthy which discourages potential customers. Inertia The financial complexity and lengthy process of the solar/wind power sale often result in consumer inertia. The message about saving the environment is not the answer to motivate consumers towards renewable energy technologies. Though understood; the environmental benefits of solar and wind power have not been persuasive enough to broaden market adoption. Therefore, solar/wind programs must create a connection with customers through marketing messages, focusing on the misunderstandings and barriers; which can enhance interest and lead to further inquiry. The solar/wind programs must think and act like retailers by doing the following: let the public know the offering pricing that appeals to the public demonstrate and deliver high quality ease of the purchase create a buzz about the product

Today the consumers are bombarded with messages, using various channels of communication, to build a share of mind for a product or service. Marketing is the process of identifying what the consumer needs, how the product or service can address that need, how to communicate that value in a compelling way, and how to deliver that message in the most efficient and effective manner. The classic elements of marketing the 4 Ps: Product, Price, Place, Promotion offer a useful matrix to assess programs. Program initiatives should address each of the 4 Ps. Evaluate the Product from the perspective of consumers rational and emotional attitudes towards solar/wind technology. These attitudes affect the desire to purchase. Consumer reaction to solar/wind technology (e.g., price, reliability, quality issues) informs marketing and communications approaches by identifying both the opportunities the strengths and positive attributes that should be marshalled and the barriers the concerns and issues that prevent sales. Price is one of the single biggest barriers to growing the solar/wind marketplace; many states are addressing the financing of solar/wind to help overcome consumer price concerns. Today, financing mechanisms are broadening access to solar/wind power and making it available to new customer groups. However, the strategy must ensure that prospective customers are aware of these new financing strategies and aggressively promote the financial value of solar/wind products to consumer targets.
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The Place, or channels through which solar/wind is sold, also is an area where solar/wind programs have an important role through their work with installers, developers, and suppliers. Building a strong supplier network is critical in keeping up with rising demand; ensuring that customers can easily find an installer is part of this task. Strategy also should look at how complex the solar/wind sales process can be for consumers and how solar/wind programs can minimize and ease the transaction process. Lastly, Promotion of solar/wind should be a primary focus to increase the visibility of solar/wind installations and broaden the appeal of their solar/wind incentive programs. Using communications and promotional strategies to favourably present solar/wind in the marketplace and ensuring that the right messages are presented to the public will help build a stronger market for solar/wind technologies. Improve the value equation

1) Identify the range of financial options currently available to customers within the market. - Lease arrangements, PPAs and other monthly financing strategies. New approaches, if any, should be offer. 2) Evaluate how financial options to prospective customers are currently promoted. - Reach a broad audience with these options and bringing new customer groups to solar/Wind. Leverage the resources of strategic partners (such as lending organizations) to create broader awareness. 3) Develop an outreach plan. - Prominently promote the affordability message in collateral material, public relations and advertising that go beyond the website. 4) Create a strong affordability message. - Use the website to show monthly payment options for solar/wind technology purchases or leases. 5) Work with installers. - Ensure to promote the financing options that are available to potential customers. 6) Focus on how to pay for solar/wind. - Ensure that workshops and other solar/wind seminars highlight financing as a key component, remembering that this is the biggest barrier to broader adoption. 7) Host special solar/wind financing events/workshops. - Identify target groups such as business associations, municipal and institutional customers, and developers. 8) Educate homeowners and commercial customers. - Work with local utilities to promote the value of combining solar/wind with energy efficiency for optimum financial effectiveness.

Reinforce the reliability of solar/wind

Evaluate customer concerns about solar/wind reliability in your market. Find opportunities to increase visibility of solar/wind installations in high traffic locations. Identify strategic partnerships with sports teams, local celebrities and media to create positive solar/wind images and increase presence of solar/wind installations in the public eye and in the marketplace. Offer educational seminars for specific targeted segments (chambers of commerce, solar/wind seminars for homeowners, workshops for municipalities) to build confidence in solar/wind technologies.
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Create campaigns built around positive testimonials from corporations, businesses, and institutions who have installed solar/wind power. Participate in or increase awareness of annual solar/wind home tours to broaden attendance. Create special VIP tours for target groups. Create a speakers bureau of homeowners and business leaders who will speak about the effectiveness of solar/wind power to meet their energy and financial needs.

Reduce the complexity

Work with installers to reduce time delays in the process of providing estimates to solar/wind prospects. Evaluate opportunities to create a solar/wind ambassador program that connects existing solar/wind customers with prospective customers to provide information during the complex decision-making process. Consider offering free estimates and/or an energy advisor program to guide prospects through the solar/wind incentive application process. Help customers overcome inertia

Create a database of interested solar/wind prospects and develop a communications strategy that continues to engage these prospective customers during the long decision-making process. Use promotional incentives and prospect mailings to encourage forward progress and sales. Raise the level of visibility of solar/wind in the marketplace to keep solar/wind in mind. Consider implementing a declining incentive program that encourages customers to act now.

Find the right message

Identify the right message for the marketplace and ensure that it is clear, consistent and addressing the value strategy. Perform a communications audit on solar/wind marketing materials to assess the effectiveness and consistency of the message. Identify what additional materials and outreach strategies are required to communicate the solar/wind value story. Review the solar/wind programs website for its consumer-friendly focus and message.

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Strategy deployment using Balanced Score Card model

When we use the Balanced Score Card model, for deploying business strategy, we need to understand the following factors regarding the business.

Financial objectives Customer Segments from which these financial objectives are achieved Business processes which will service the customers Training and skills required to manage these processes The Financial objectives are of two types. One is the revenue from supplying to the grid. Second is the revenue coming for Build-Operate-Transfer type of contracts for captive power generation units, set up for big companies. Based on these financial objectives, we can look at the following customer segments State electivity boards for grid supply Big factories and corporate offices Special Economic Zones IT parks, Industry Parks and Industrial Development Areas Small towns and clusters of villages

Off late, we have the example of the biggest and largest bank in India i.e. SBI who had made an agreement with Suzlon Energy to use Wind Power for all their energy requirements for Banking sector. Each of these segments are a possible client segment and can be tapped for BO or BOT type of contracts. Business processes which are required are the following Land Leasing process Erection and Commissioning of Power generation units Operation and Maintenance of power plants
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Metering and Billing process Legal processes for contracting and executing agreements and MOU s Business development and CRM process

Each of these processes will need trained manpower to execute. As we are talking about a Green Filed project, the manpower required will have to be recruited as well as trained in their respective areas of responsibility. The following are the skills envisaged to be required. Real estate development Technical competence in installation and operations of Solar/ Wind farms Project Management for erection and commission projects Contracting and Legal Institutional selling Government liaison Marketing

Implementation Plan
Essential elements of renewable energy implementation In order to develop a policy to address the key issues related to renewable energy several approaches to renewable energy implementation were explored. Essential elements of such approaches are - sustainable development, an enabling environment, institutional arrangements, information and technology. Sustainable development:Sustainable development is defined as the integration of social, economic and environmental factors into planning, implementation and decision-making so as to ensure that development serves present and future generations. The provision of reliable and affordable energy for business and the domestic market, underpins everyones quality of life. Renewable energy that is produced from sustainable natural sources will contribute to sustainable development. As most of the sources are indigenous and naturally available, security of energy supply is improved and not disrupted by short-term international crises. The challenge of climate change is recognised as one of the major environmental threats facing the world today. Reducing the use of fossil fuels through the implementation of renewable energy will reduce harmful emissions and thereby reduce impact on climate change. Enabling environment:Renewable energy requires an enabling environment for several reasons. The relatively high capital cost of most renewable energy technologies makes them commercially uncompetitive in the short to mediumterm. The establishment of an appropriate enabling environment through the development of fiscal, financial and legislative instruments will therefore be required to simulate increased utilisation of these technologies. This includes Government support for renewable energy to help establish an initial market
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share and non-discriminatory open access to the national electricity grid (with an appropriate wheeling arrangement) and other energy infrastructure. Many of the renewable energy technologies are currently under-developed or not fully commercialised compared with conventional options and hence costs tend to be high. There is a reluctance to invest in what are sometimes considered to be risky investments. By undertaking demonstration projects with stakeholders these risks can be clarified and options to address them tested. Fossil fuels represent a concentrated form of energy, while renewable energy normally uses dispersed sources with low energy concentrations. Renewable energy typically has a different cost structure to conventional energy sources. For some technologies the initial capital cost is high but the operation and maintenance costs are low and the fuel is free or of low cost. The current price structure for energy derived from coal, crude oil and nuclear does not include environmental externalities and does not reflect the costs that production has on society at large. However, even if externalities were to be included, there would still be a need to support individual renewable technologies in the market until they achieve the necessary economies of scale, technological development and investor confidence. More work is required to quantify the level at which these externalities will be priced and on how to introduce these in the decision-making process (see 9.1). Supporting financial instruments should, however, provide incentives for continued minimisation of costs. Institutional Arrangements:Renewable energy is in its formative stages. Unlike established energy sectors, such as the electricity and liquid fuels sectors, renewable energy requires institutional arrangements to strengthen it. Electricity Sector Provide Policy for the integration of grid and non-grid technologies into a single National Electrification Programme, which is an integral element of the restructuring of the electricity distribution industry being undertaken. It should also encourage the entry of multiple players into the generation market. However, the appropriate regulatory and legal framework will be needed to support the entry of renewable energy generators. Information Technology:There is a limited, albeit significant, use of renewable energy. An urgent task is a quantitative baseline study to determine more precisely the quantum and nature of renewable energy currently in use, especially data on fuel wood which is highly unreliable. One obstacle to the development of renewables is the lack of information available to the consumer about renewable energy options. There is a need to provide comprehensive, independent and comparative information on renewable energy products and services to customers to support informed decision-making. The successful penetration and uptake of renewable energy technologies into depends crucially on growing a market demand in the various energy sectors. However, at present public awareness of the existence of renewable energy or its economic, environmental and social benefits, is limited. It is therefore incumbent to devise a realistic information dissemination and training strategy to encourage and enable private/public sector renewable energy participation in the energy market (e.g. market rules for a liberalized energy
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market) thereby increasing the market penetration for renewable energy. This will be done through formal training and education, employing targeted information campaigns using the network of vehicles at its disposal (including integrated energy centres, regional offices, and provincial energy forums) and building upon existing projects to demonstrate the benefits to the public.

Risks and mitigation plans

The following risks are envisaged and the proposed mitigation plans are mentioned against the same.

S.No

3 4

6 7

Risk Mitigation Regulation preventing installation of solar panels Understand the nuances of the regulation around wind turbines and the rationale for the same, so as to counter the issue and get approval. Non-availability of solar power during nights and Create a load balancing system and controls cloudy days which creates a difference in so that the system is adequately loaded and generating capacity monitored Difference in power generation parameters Install the necessary monitoring and between solar and wind equalizing mechanism for both the sources ROI of the project due to low power buy-back Identify and explore additional sources of tariff income generation. Ex: Carbon credits, captive power supply to large private consumers etc. Necessary technical skills not available in market Develop a comprehensive training program for technical graduates and offer the same as a part of their regular curriculum. Metering issues due to coexistence of Identify an automatic change over process government grid power when the grid fails. Non Availability of efficient photo solar cells for Tie up with technical institutions like IITs, generating higher power output per given area NIITs for R&D and select talents to work on the projects who can be employed back in the organisation. Delay in release of payments from Government Make arrangement of getting the payments when the plant is connected to the Grid released through bankers who in turn to get it from Government. Availability of A wind class sites with adequate Identification of sites and Government sun lighting for combined output support to get the land cleared from the land owner.

Conclusion The business landscape offers a good long term opportunity with some short term challenges. If addressed well, these challenges offer some excellent opportunities for the future. Skilled manpower development is a huge opportunity which cannot be ignored or left to fate. It would make a lot of sense to all the stakeholders to join together and address the serious energy deficit.

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References 1. Energy Statistics 2012 : Ministry of Statistics and Programme Implementation, Govt. of India: www.mospi.gov.in 2. Renewable Energy Policy in India 3. Subsidy Pattern for Solar Thermal systems/devices : Ministry of New and Renewable Energy 4. Taxes and Incentives for Renewable Energy KPMG International June 2012

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