Wind Energy in India : Realisable Option for Power Generation

1
Wind Energy in India Realisable Option for
Power Generation
Harish Mehta Director SUZLON Group of Companies
2
Disclaimer

• Except for the historical information contained
  herein, statements in this presentation, which
  contain words or phrases such as "will", "would",
  "expect", "believe", and similar expressions or
  variations of such expressions may constitute
  "forward-looking statements". These
  forward-looking statements involve a number of
  risks, uncertainties and other factors that could
  cause Suzlon Energy Limited's (the "Company's")
  actual results to differ materially from those
  suggested by the forward-looking statements.
  These risks and uncertainties include, but are
  not limited to, the performance of the Indian
  economy and of the economies of various
  international markets, the performance of the
  wind power industry in India and world-wide,
  competition, the Company's ability to
  successfully implement its strategy, the
  Company's future levels of growth and expansion,
  technological implementation, changes and
  advancements, changes in revenue, income or cash
  flows, the Company's market preferences and its
  exposure to market risks, as well as other risks.
  The Company undertakes no obligation to update
  forward-looking statements to reflect events or
  circumstances after the date thereof.
• This presentation and any information presented
  herein are not, and are not intended to be,
  offers to sell nor solicitations of offers to buy
  the Company's equity shares or any of its other
  securities and shall not constitute an offer,
  solicitation or sale in any jurisdiction in which
  such offer, solicitation or sale is unlawful
• The Company's equity shares have not been and
  will not be registered under the U.S. Securities
  Act 1933, as amended (the Securities Act), or
  any state securities laws in the United States
  and, as such, may not be offered or sold in the
  United States or to, or for the benefit of, U.S.
  persons (as such term is defined in Regulation S
  under the Securities Act) absent registration or
  an exemption from the registration requirements
  of the Securities Act and applicable state laws.
  Any offering of the equity shares to be made in
  the United States (or to U.S. persons) was made
  by means of a prospectus and private placement
  memorandum that may be obtained from the Company.
  Such prospectus and private placement memorandum
  will contain detailed information about the
  Company and its management, as well as financial
  statements.

3
Sustainable Development Energy and Environment
convergence

• Energy
• World is running out of fossil fuel
• The last two years has seen highest
• Demand for energy is outstripping the growth in
  generation capacity
• Environmental problems
• Air Emissions (SOx, NOx, CO, SPM), ozone
  depletion, global warming
• Water-Acid precipitation, degradation, loss of
  bio-diversity
• Sustainable development of Energy Ecology
  Economy
• Harnessing renewable energy holds the key

4
Renewable Energy Global Scenario

• 3,850,000 MW worldwide
• 190,000 MW is grid connected RE (5)
• 59,000 MW of wind energy installations
• 25,000 MW added last calender year
• About 48 through wind energy alone
• 11,407 MW in 2005

Wind Installations world over Dec05
5
RE no longer a fringe player

• Global RE market was valued more than US 25
  billion in the 2005 calendar year
• Approximately 45 attributed to wind energy alone
  
• Several estimates put the Global RE market to
  grow to US100 billion by the year 2010
• Growth in the last 5 years was about 30, the
  same is likely to continue in the coming years
• Generation from renewable energy surpassed 17,000
  million units in FY 2005-06, which is more than
  generation from nuclear energy in India

6
Global Wind Energy On a Strong Growth Path

• Global wind energy sector expected to grow to
  117,412 MW between 2004 and 2009E
• Region-wise capacity growth expected at
• 38 for Australia
• 25 for Asia
• 23 for America
• 17 for Europe
• India, China, Australia and US are expected to be
  key growth markets

Key Markets Wind Power Status 2004 vs. 2009E
Cumulative Installed Capacity (MW)
CAGR (2004 2009E) 23 32 38 23
18850
20000
0
Source BTM Consult ApS Report 2005
7
Key Growth Drivers for Wind Energy

• Cost per Kwh of wind generation decreased from
  US 0.38 in early 80s to present US 0.03-0.06,
  at excellent wind sites (1)
• Rising Oil Gas prices makes Wind Energy cost
  competitive

Cost Competitiveness

• Kyoto Protocol Implementation - Carbon-dioxide
  emission to reduce by 5.2 of 1990s levels, by
  2012
• Implementation of Renewable Portfolio Standard
  requires minimum percentage of power generation
  from Renewable Energy

Environmental Awareness/ Government Initiatives
Energy Security

• Price volatility of Oil Gas have increased focus
  on Renewable Energy

• Global Electricity Consumption expected to double
  between 2002 2030(2)
• higher growth in India and China
• Wind Energys contribution expected to increase
  from 0.2 in 2002 to 3 in 2030 (3)

Increased Electricity Demand

• Source
• American Wind Energy Association
• World Energy Outlook 2004, IEA
• World Energy Outlook 2004, IEA

8
Renewable targets policies

• Renewables require support
• Many governments through public policy have fixed
  targets/goals
• EU 20 by 2020
• India 10 by 2012
• China 10 by 2020
• Various governments have implemented incentive
  schemes to stimulate the market to achieve these
  targets
• Feed-in tariffs
• Simplistic, transparent, popular most
  successful
• Fiscal incentives
• Investment subsidies
• Tendering procurement
• Market based mechanisms

9
Comparision of regulatory policy frameworks
Country Feed-in tariffs Investment subsidy Quota/ Certificates Fiscal measures
Germany v v
Spain v v
Denmark v v
Italy v v v
UK v v v
US v v v v
India v ? v
Australia v v v
China v v v
10
Indian Energy EnvironmentPotential for Growth in
Energy Consumption

• India has been characterized by energy shortages
• Installed capacity of 115,544 MW, as of March
  2005
• Demand exceeded supply by 7.3 with peak shortage
  at 11.7 (1)
• Strong growth potential for electricity
  consumption in India
• One of the lowest electricity consumption levels
  globally
• Per capita electricity consumption of 355 kWh
  compared to 827 kWh in China, 1,878 kWh in Brazil
  and 12,331 kWh in the United States (2)
• Power for All by 2012 vision by Indian
  Government to increase installed capacity to
  200,000 MW
• Electricity Act 2003 stipulates minimum
  percentage of power generation from renewable
  energy
• Government of India expects alternative energy
  sources such as wind energy to play an important
  role in bridging electricity deficit

• Source
• CEA
• United Nations

11
EA 2003 grid connected RE

• Section 61(h) The Appropriate Commission shall,
  subject to the provisions of this Act, specify
  the terms and conditions for the determination of
  tariff, and in doing so, shall be guided by the
  following, namely-
• (h) the promotion of co-generation and
  generation of electricity from renewable sources
  of energy
• Section 86(i)e The State Commission shall
  discharge the following functions, namely
• (e) promote cogeneration and generation of
  electricity from renewable 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

• Various State Commissions have put significant
  emphasis on the last part
• of this important clause while developing
  regulations for Distribution Licensees
• under their jurisdiction

12
Status of section 86(i)e in India
State Status of RPS Regulation Minimum Quantum
MP Final Regulation 0.5 Wind
Karnataka Final Regulation 5-10
Orissa Final Regulation 3 (WindHydro)
Gujarat Final Regulation 2
Rajasthan Order issued 6
UP Order issued 7.5
AP Final Regulation 5
Tamil Nadu Order issued 10
Kerala Final Regulation 5
Maharashtra Draft Regulation 6
13
Wind energy in India Perspective

• Initiated by Government of India in mid-80s
• Private sector investments started in early 90s
• Resource potential of 65,000 MW
• Installation gt5,200 MW by March, 2006
• Fourth in the world
• 1700 MW in the FY 2006
• High growth in the past 5 years

14
Impact of fiscal benefits

• There is a gradual move from tax driven market
  to energy driven market in India

15
Sum-up

• Wind energy can go a long way to establish the
  energy security in India
• More than 1,700 MW added in the last financial
  year 98 by private sector
• Wind energy can easily meet 5 of total energy
  generation in India on the shorter run
• Countries like Germany Denmark have increased
  this share to as high as 20
• Instruments like production tax credit would
  commercialise this source of energy in the near
  future

16
Thank you