Lighting up India


Florian Neuhof , August 10th, 2010

Faced with the need to massively expand its power generation capacity, India is pursuing all the options at its
disposal, finds a report from Business Monitor International.

India’s electricity sector is struggling to cope with current demand, which has been mushrooming as a consequence of high population growth levels and continued economic expansion.

This presents a major obstacle to the country's business environment and economic development, and cements existing regional wealth discrepancies. In response to the problem, utlities all over the country are busy growing their generation capacities.

Growing, but slowing
Power plants and transmission grids are estimated to account for the majority of energy and utilities infrastructure industry value in 2009/10 at 59 percent, or US$17.58 billion. The sector is forecast to increase its share in line with government announcements for heavy investment in to clean energy, including solar, wind and nuclear, all of which are capital intensive.

Water infrastructure industry value, on the other hand, will rise only moderately from an estimated $1.48 billion in 2009/10 to $3.27 billion in 2014/15. This represents approximately 2.5 percent of the total infrastructure industry value in India. Though there is great demand for water infrastructure in India, projects are scare and tend to be small in scale.

In 2009/10 energy and utilities infrastructure will account for around 59 percent of total infrastructure industry value, equal to $29.4 billion. The sector’s share is expected to decline; however, Business Monitor International (BMI) believes there is upside potential. Investment is being piled into the sector, with a large number of power plants being built and associated pipelines to supply fuel.

Energy and utilities industry value is anticipated to grow substantially over the midterm, reaching $73.49 billion by the end of 2014/15.

Feedstock mix for the energy fix Nuclear, solar, coal and gas are all set to be important elements of India’s future power mix as the country increases investment into energy and utilities infrastructure to meet demand and facilitate economic growth.

King coal
Coal is the undisputed leader in the power game. Coal-fuelled currently power plants generate more than half of India’s power. The fuel is indigenous to the country and, according to the BP Statistical Review, India had 58,600 million tonnes of proven coal reserves at the end of 2008.

In 2009, it is estimated to account for 55 percent of power generation. Coal-fired power generation is expected to show a substantial increase in absolute terms due to India's significant coal reserves and because coal projects tend to be much cheaper than power plants running on gas or other sources.

Nuclear explosion
India’s nuclear power sector is continuing to attract the attention of major international players, as it promises to unlock investments worth hundreds of billions of dollars. The Indian government is keen to pursue nuclear as an answer to rapidly growing demand for electricity.

Currently, only 3.7 percent of India’s electricity is generated from nuclear power.

By 2050, India hopes to supply 25 percent of power from nuclear sources. The freeing of India’s nuclear power sector is thought to potentially open up $150 billion of investments, according to India’s Economic Times.

In late September 2009, India's Prime Minister Manmohan Singh, announced plans for the largest expansion of nuclear power capacity in the world, predicting that by 2050 India could generate up to 470 gigawatt (GW) of nuclear power if the country executes its strategy effectively.

India currently has a nuclear power capacity of 4.12GW from 17 reactors. This strategy would see an increase in capacity of more than 11,000% by 2050.

Hydropower
Hydropower accounts for a significant proportion of India’s electricity-generating capacity.

In 2009, it accounted for 17.8 percent with a generating capacity of 162TWh. The country is currently ranked around sixth in the world in terms of hydropower production, with more than 3.5 percent of global total capacity.

There is a large amount of hydroelectric capacity in the construction and planning stages, according to the Indian government. The average size of future projects is expected to be 500MW.

Solar rising
In August 2009, India announced it would push forward with an ambitious plan for bringing solar power to the fore in the country's electricity mix.

The Solar Mission envisages increasing India's solar power generating capacity to 20GW by 2020, from the current 14GW. By 2030, this is planned to reach 200GW, and 300GW by 2050.

The draft
plan included the allocation of $20 billion by the government over a 30-year period to assist with manufacturing and installation of solar power plants. However, according to media reports, a new version of the plan
envisages that other countries will help foot the bill.

Private investment enters the energy sector In March, a consortium of global investors acquired a 44
percent stake in Asian Genco Pte Ltd (AGPL), an infrastructure company with a focus on the Indian power generation sector.

The deal is the largest equity transaction to date in the country's power sector and highlighted the profit potential for private companies. APGL is domiciled in Singapore, but its entire power generation portfolio is located in India.

The consortium of global investors is led by Morgan Stanley Infrastructure Partners and also includes General Atlantic, Goldman Sachs Investment Management, Norwest Venture Partners, Everstone Capital and PTC India Financial Services.

Together the investors have committed $425mn to AGPL in order to boost its presence and market share in the Indian power sector. The company aims to put 1,350MW of capacity in operation, and wants to develop a project pipeline
exceeding 10,000MW by 2012.

Power plans
In January, the Rajasthan state government signed a memorandum of understanding (MoU) with the US-based William J Clinton Foundation for the establishment of solar parks. Each solar park will have a generation capacity of 3,000-5,000MW. The government is hoping to attract investment of $10.85 billion over the next five years.

Nuclear Power Corporation of India Limited (NPCIL) is looking to raise $3 billion to build four 700MW reactors, which will likely comprise two nuclear plants planned in Rawatbhata and Kakrapar. The company is also looking to raise $3.5bn for the two 1,000MW reactors that it is building in Kundakalum with the help of Russia's Atomstroyexport.

In April, the UAE-based ETA Power Generation announced plans to establish a thermal power plant in Tamil Nadu in India. The development of the 1,320 MW power plant is estimated to cost $1.1 billion. The first unit of the plant is expected to be completed by March 2014 and the second unit is likely to be completed in the following six to nine months.

In November, a joint venture of Indian utility Tata Power and Norwegian utility SN Power announced plans to invest $3.2 billion in the construction of hydropower projects in India and Nepal. The two utilities are expecting to have 2,000MW of hydropower under construction or in operation by 2015 and a further 4,000MW by 2020.


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