2/17/09-P&C 4th August 2010

To:
All Stakeholders

Subject: Preparation of Strategic Plan for Renewable Energy- request for

response to Questionnaire
Dear Sir,
As you are aware the Ministry of New and Renewable Energy has been promoting
the development of various renewable energy sources in the country for nearly last three
decades. While significant achievements have already been made in different renewable
energy sectors, there is still a vast untapped potential. The Ministry’s endeavor is to
significantly up-scale the deployment and utilization of various renewable energy systems,
for which it has drawn up ambitious plans and targets.

2. With a view to significantly accelerate the development process, the Ministry is

preparing a 5-year Strategic Plan to achieve sectoral objectives and targets and has engaged
M/s MERCADOS- Energy Markets Pvt. Ltd to assist in and coordinate the exercise. The key
components of this Strategic Plan would be to define/ identify:

 Vision, Mission and Objectives; Aspiration

 Priority list for technologies and sources to be promoted; Desired outcomes
 Important External and Internal factors which would impact the sector
 Threats and Opportunities for the sector
 Key stakeholder; Government support needed for achieving the objectives /targets.
 Final Strategy for promotion and achieving the desired outcomes

3. Stakeholder consultations are considered an important component of the Strategy

development process. In this regard a Brief giving an Overview of the Renewable Energy
Sector and a Questionnaire have been prepared by the Consultant and the same are
attached. It will be appreciated if you/ your organization could spare some of your valuable
time for going through the same and provide your valuable feedback/ inputs on various
sections of the Questionnaire. Any additional suggestions / views would, of course, also be
appreciated.

4. Your support and cooperation in this important activity is solicited. The feedback/
inputs may please be sent latest by 20th August 2010 to the following E-mail Id:
mnrestrategy@gmail.com.

[A.K. Varshney]
Director (P&C and SPV)
DEVELOPMENT OF A FIVE YEAR STRATEGY FOR
MINISTRY OF NEW AND RENEWABLE ENERGY

BRIEFING PAPER
Prepared for:

MINISTRY OF NEW AND RENEWABLE ENERGY,

GOVERNMENT OF INDIA
For:

CONSULTATION WITH STATE NODAL AGENCIES AND

OTHER STAKEHOLDERS

Prepared by:

MERCADOS – ENERGY MARKETS INDIA PVT. LTD.

DATE: July 22, 2010
 MERCADOS EMI

I. OBJECTIVE OF THE PAPER

Ministry of New and Renewable Energy (MNRE) is required to establish its 5 year plans that clearly
articulate the goals and strategy of the Ministry during this period. MNRE has mandated Mercados
EMI to assist the Ministry in developing the plans. The objective of this short discussion paper is to
outline the realities facing the renewable energy sector in India and in this context the paper
articulates the goals of the MNRE and validates them through a questionnaire that accompanies this
paper. The said questionnaire is also designed to seek stakeholder viewpoints on the key measures
that MNRE needs to take to achieve the goals, and the barriers that need to be addressed in this
regard.

Renewable power capacity in the country reached 16,817MW on 31st March 2010, which is about
9% of the total installed capacity in the country, and contributed about 4% to the electricity
generation mix. Major contribution of 11,807MW is from wind power. As table 1 below indicates,
the proportion of wind as a percentage of overall MW deployed through the various renewable
energy technologies (RETs) is 70% as on 31st March 2010. A total capacity of 2330MW was
added during 2009-10 from RETs, which included a wind power capacity of 1565MW.

Table 1: Grid Interactive Renewable Power Installed Capacity upto 31st March 2010

S.No Resources Achievements Cumulative Technology-

during 2009-10 Achievements wise
(in MW) (in MW) (upto cumulative
(upto 31.03.2010) 31.03.2010) achievement
as a % of total

1. Biomass Power (Agro 153.30 865.60 5.15%

residues)
2. Wind Power 1565.00 11807.00 70.21%
3. Small Hydro Power 305.27 2735.42 16.27%
(up to 25 MW)
4. Cogeneration- 295.30 1334.03 7.93%
bagasse
5. Waste to Energy 4.72 64.96 0.39%

6. Solar Power 8.15 10.28 0.06%

Total (in MW) 2330.42 16817.29

Source: Ministry of New and Renewable Energy (MNRE), Government of India

For the 10th Plan period (2002-07), a target of 3583MW installed capacity from renewable energy
was set by MNRE. This target was substantially exceeded, largely on account of large scale addition
of wind power capacity during the 10th Plan. Achievement at the end of the plan period in wind
power installed capacity was 5537MW, way above the total renewable energy target. Taking into
account the trend of development during the 10th plan period, the 11th plan target for wind power
was set at 10,500MW. This was driven by the aim that at least 10% power generation installed
capacity in the country, with 4-5 per cent share in the electricity mix, should come from renewables
by the end of the 11th Plan. Out of the overall target of 78,577 MW power generation installed

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capacity addition during the 11th Plan period, 14,500 MW (about 18.5%) capacity addition was
proposed from renewable energy sources.

During the 11th plan mid-term review meeting that was held in September last year, the Ministry
revised the target for wind power installed capacity to 9000MW till 31st March 2012.

A very large Generation Based Incentive (GBI) program has been introduced to encourage IPP
scale wind project development. Even more significant is the large scale solar power program
under the National Solar Mission, under which a massive scale-up of solar generation capacity is
proposed, as depicted in the table below.

Table 2: Current and Proposed Solar Installed Capacity

Date Grid based Solar Capacity Solar thermal Off grid solar
installed/proposed collectors applications

March, 2010 8.15 MW (installed) 3.53 million sq 2.46MW

meters

March 2013 1100 MW (including 100 MW of 7 million sq meters 200MW

off-grid and rooftop/tail end
capacity)

2017 4000 MW (can be up to 1000 15 million sq meters 1000MW

MW, subject to availability of
international finance)

2022 20000 MW 20 million sq meters 2000MW

Clearly these represent ambitious and important policy goals that assume particular importance in
the context of the serious concerns on climate change. MNRE needs to prepare and equip itself to
meet these objectives.

Large scale wind and solar capacity installation are important priorities of MNRE, but not the only
ones. Several other technologies are assuming greater prominence by the day on account of their
promise. India has nearly 25000 villages, located in islands or remote areas distant from
habitation, where power from grid lines is not techno-commercially feasible. In these areas,
depending on availability of local resources, solar PV, wind, biomass, biogas and micro-hydel based
power generation are the major options, with a combination of these being quite common. Apart
from the grid based renewable power, MNRE has an ambitious off-grid/distributed renewable power
program and renewable energy program for rural applications. By March 2010, a cumulative
total of 5,348 villages and 1,408 hamlets had been electrified using renewables. Rural
applications of solar PV in India increased to more than 583,429 home lighting systems, 792,285
solar lanterns, and 7,334 solar-power water pumps. Table 3 provides a summary of the
achievements in off-grid distributed renewable power and decentralized energy systems.

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Table 3: Achievements in Off-grid renewable power and decentralized energy systems

S.No Resources Achievements Cumulative

during 2009-10 Achievements (in
(in MW) MW) (upto
(upto 31.03.2010) 31.03.2010)

Off-Grid/Distributed Renewable Power (including Captive/CHP Plants)

1. Biomass Power / Cogen.(non- 50.80 MW 232.17 MW

bagasse)
2. Biomass Gasifier 13.28 MWeq 122.14 MWeq

3. Waste-to- Energy 15.88 MWeq. 46.72 MWeq

4. Solar PV Power Plants 0.16 MWp 2.46 MWp

5. Aero-Generators/Hybrid 0.22 MW 1.07 MW

Systems
Total 80.34 MWeq 404.56 MWeq
Decentralized Energy Systems
1. Family Type Biogas Plants 1.06 lakh 42.40 lakh

2. SPV Home Lighting System 72,886 nos. 5,83,429 nos.

3. Solar Lantern 82,999 nos. 7,92,285 nos.

4. SPV Street Lighting System 8680 nos. 88,297 nos.

5. SPV Pumps 106 nos. 7,334 nos.

6. Solar Water Heating - Collector 0.62 Mln. sq.m. 3.53 Mln. sq.m.
Area
Source: Ministry of New and Renewable Energy (MNRE), Government of India

Other emerging applications of Renewable Energy Technologies (RET) is for instance in powering
telecom towers. The massive proliferation of these towers is driving its own set of applications and
business models utilising, solar, wind, fuel cells or a combination of these technologies. A similar
example can be witnessed in the Solar Water Heating (SWH) systems where there has been a
steady increase in installations, and now the stage is set for wider scale deployment. MNRE would
have an important role in this scale up process and has to define the ways and means of doing so.

Hence, the importance of RETs exists in a wider energy context. The country faces severe energy
constraints that are difficult to mitigate. In the electricity sector, official peak deficits are of the
order of 12.7%. Even more significant is the fact that 50% of the population has little or no
commercial energy access for their living and livelihood. RETs can provide valuable access that is
difficult for conventional avenues to provide. The strategies and plans of MNRE would have to gear
up for the targets and mechanisms in this regard.

With these as objectives and background, this paper sets out the goals, objectives and
priorities of MNRE as they stand at this juncture, and defines the context of its
operations in some detail. As mentioned, the objective of the current process of interaction with
the state level agencies as well as other entities connected with MNRE is to seek a wider
stakeholder view and thereafter finalise the strategy and plans using the inputs thus obtained.

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II. VISION AND OBJECTIVES OF MNRE

The vision and the objectives of MNRE as they stand today are as follows:

Vision:

“The vision of MNRE is to upscale and mainstream the use of new and renewable energy
sources in furtherance of the national aim of energy security and energy independence,
with attendant positive impact on local, national and global environment.”1

The objectives of the Ministry are:

• To promote development and deployment of grid-interactive and off-grid/

distributed renewable power generation projects for augmenting contribution of
renewables in total electricity mix;

• To promote development and deployment of stand-alone/ decentralized

renewable energy systems for meeting energy needs in rural, urban, industrial and
commercial sectors;

• To promote research, design and development activities at premier national

institutions and industries on different aspects of new and renewable energy (NRE)
technologies.

Using this as the basis, the specific roles and outcomes have been defined by the Mercados team
working with MNRE to develop the five year strategy. The team has also had the benefit of a
detailed set of discussions with MNRE officials to define very specific roles of MNRE and outcomes
that would help measure the success of the role. Based on this process, the key roles that have
been identified for MNRE are:

a. Facilitation RET project investments

b. Identification of new models for deployment of RET and facilitating their

implementation

c. Technology innovation

d. Bridging funding gap for promoting technologies

e. Enhancing awareness and capacity

1
Source: Results-Framework Document for Ministry of New and Renewable Energy (2009-10) accessed at
http://mnre.gov.in/pdf/rfd-2009-10.pdf on March 30, 2010

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 MERCADOS EMI

The outcomes that are desired are:

a. Large scale deployment

b. Enhanced consumer access

c. Reaching desired levels of investment and capacity installation

d. Ensuring desired output/quality

e. Cost reduction

As has been mentioned at the outset, the objective of this paper (and the present activity phase) is
to seek stakeholder views on the above. To facilitate this process and set RETs in the overall global
and national energy context, this paper includes short sections on the global energy outlook, as
well as the energy outlook for India.

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III. GLOBAL ENERGY OUTLOOK AND ITS IMPLICATIONS

FOR INDIA

1. GLOBAL ENERGY CONSUMPTION

The International Energy Agency (IEA) forecasts that world primary energy demand between now
and 2030 will increase by 1.5% per year from just over 12,000million tonnes of oil equivalent
(Mtoe) to 16,800 Mtoe - an overall increase of 40%. Developing Asian countries are the main
drivers of this growth, followed by the Middle East. Figure 3 provides the global per capita energy
consumption statistics.

Figure 3: World Energy Consumption per Capita

Source: IEA 2009

As the figure illustrates, the growth in per capita energy consumption over the last two decades
world-wide has taken place primarily on account of increased share of the transport sector followed
by the manufacturing sector. The exceptions to this trend are China and India where the growth
has taken place primarily in the manufacturing sector followed by the household sector. Going
forward, some of the trends in global energy consumption have been summarized below:

• Fossil fuels, especially coal, are expected to continue to provide the majority of the increase
in marketed energy use worldwide. Oil and other petroleum products are also expected to
continue to account for the largest share of world energy consumption, but their share is
likely to fall over the next couple of years mainly due to increasing world oil prices.

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• Petroleum and other liquid fuels will remain the most important fuels for transportation in
the coming years as there are few alternatives that can be expected to compete widely with
petroleum-based liquids. The share of biofuels is also expected to increase in the coming
years. However there is a significant resource issue that will need to be addressed.

• The rising price of oil is expected to have an impact on the usage and demand for natural
gas as well. Natural gas consumption is likely to go up in 2010 as it will be used to displace
the use of liquid fuels in the industrial and electric power sectors in many parts of the
world.

• Global coal consumption is expected to rise sharply because with oil and natural gas prices
expected to continue rising, coal will become appealing for nations with access to sufficient
coal resources. This is especially going to be true for China, India, and the United States.

• Natural gas and coal will continue to provide the massive shares of the total energy used
for electricity generation worldwide.

• Higher fossil fuel prices, energy security concerns, and environmental considerations are
expected to improve the prospects for new nuclear power capacity and other grid-
connected renewable energy sources in many parts of the world which is expected to
continue to expand over 2010. Rising fossil fuel costs, particularly for natural gas in the
electric power sector, along with government policies and programs to support renewable
energy, will allow renewable fuels to compete economically over time.

2. GLOBAL ENERGY SUPPLY

Figure 4 provides the evolution of world primary energy supply by fuel.

Figure 4: Evolution of world total primary energy supply by fuel (Mtoe) from 1973 to
2007

Source: IEA 2009

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The figure illustrates that over the past three decades, the energy supply mix has changed
significantly - the share of oil has reduced and the share of nuclear, gas, hydro and coal have
increased.

Figure 5 provides the world electricity generation trends from non-hydro renewable energy
resources.

Figure 5: World Electricity Generation from non-hydro RES

Source: IEA 2009

Renewable Energy production is expected to grow at an annual rate of 1.9% in the coming decades
with the greatest absolute increase expected in North America, Asian developing countries and
Central and South America.

Largest contributor is likely to be onshore and offshore wind energy; solar PV will grow particularly
in Germany, Japan and US in the coming years; biomass will continue to meet a significant share of
electricity and heat demand of Europe and Asian developing countries.

Some forecasts for global renewable energy development2 have been summarized below:

• Biofuels (global production and wholesale pricing of ethanol and biodiesel) reached $25.4
billion in 2007 and are projected to grow to $81.1 billion by 2017. In 2007 the global
biofuels market consisted of more than 13 billion gallons of ethanol and 2 billion gallons of
biodiesel production worldwide.

• Wind power (new installation capital costs) is projected to expand from $30.1 billion in
2007 to $83.4 billion in 2017. Last year’s global wind power installations reached a record
20,000 MW, equivalent to 20 large-size 1 GW conventional power plants.

2
Source: Global Energy Industry Outlook 2009, Energy Business Reports

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• Solar photovoltaics (including modules, system components, and installation) are expected
to grow from a $20.3 billion industry in 2007 to $74 billion by 2017.

• The fuel cell and distributed hydrogen market is expected to grow from a $1.5 billion
industry (primarily for research contracts and demonstration and test units) to $16 billion
over the next decade.

Clean energy, while still a fraction of global energy supplies, is scaling up. In 2007, global
cumulative installed wind power capacity exceeded 94,000 megawatts (MW) and the solar industry
surpassed the 10,000 MW mark with new additions of 20,000 MW and 2,821 MW respectively. Total
global biofuels production reached more than 15 billion gallons last year, with the U.S. accounting
for nearly half of all global output.

3. GLOBAL POLICY OUTLOOK ON RENEWABLE ENERGY

3.1. EUROPEAN UNION

In 2001, the Directive on promotion of electricity produced from renewable sources (European
Council, 2001) was adopted by the European Union (EU). The Renewables Directive (2001/77/EC)
was the common guideline for the EU Member States to increase renewable energy based
electricity (RES-E) within the EU. The Directive had set targets for the share of RES-E in total
electricity consumption at EU and Member State levels.

Subsequent to this, in June 2009, Directive 2009/28/EC of the European Parliament on the
promotion of the use of energy from renewable sources was announced which repealed Directive
2001/77/EC. Directive 2009/28/EC requires each Member State to adopt a national
renewable energy action plan. These plans are to set out Member States’ national targets for
the share of energy from renewable sources consumed in transport, electricity and heating and
cooling in 2020, taking into account the effects of other policy measures relating to energy
efficiency on final consumption of energy, and adequate measures to be taken to achieve those
national overall targets, including cooperation between local, regional and national authorities,
planned statistical transfers or joint projects, national policies to develop existing biomass
resources and mobilise new biomass resources for different uses. Through this directive, EU
reached a political agreement on the “20-20-20” plan that calls for 20 per cent reduction
in greenhouse gas (GHG) emissions by 2020; to establish a 20 per cent share for
renewables in the EU energy mix; and to improve energy efficiency by 20 per cent by
2020.

The framework for support of RES-E production and consumption to the member states at the EU
level has been provided by this Directive. The goal of increasing the share of RES-E in the overall
electricity mix in the EU is promoted by different support instruments such as feed-in based
schemes, quota/certificate based schemes, tendering schemes, investment subsidies, fiscal and
green labeling schemes. The most prominent ones are feed-in schemes based on tariffs or
premiums and quota/certificate schemes.

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3.2. US
In US, the foundation of renewable energy promotion has been found in the Public Utility
Regulatory Policy Act (PURPA) that was passed in California, in 1978, to reduce dependence on
foreign oil, to promote alternative energy sources and energy efficiency, and to diversify the
electric industry. Before, PURPA, only utilities could own and operate electric generating plants.
PURPA required utilities to buy power from independent companies that could produce power for
less than what it would have cost for the utility to generate the power, called the ‘avoided cost’.
PURPA has been the most effective single measure in promoting renewable energy in US. Some
credit the law with bringing on line over 12,000MW of non-hydro renewable generation capacity.
The biggest beneficiary of PURPA, though, has been natural gas-fired "cogeneration" plants where
steam is produced along with electricity. During the late 1990s there was a second period of growth
of renewable energy in the United States that was spurred by a combination of federal tax
incentives and policies adopted in several states such as the Renewable Portfolio Standard (RPS).

Currently in US, there exists a mix of different support instruments to promote renewable
energy such as feed-in based schemes, quota/certificate based schemes, tendering
schemes, investment subsidies, fiscal and green labeling schemes. The RPS is the most
widely used support mechanism in US, and is based on the obligation/certificate system. Under
this, a political target is established for the minimum amount of capacity or generation that must
come from renewables, with the amount generally increasing over time. Apart from this, voluntary
green power marketing programmes have also encouraged wind power developments, which
represent a significant share of the green power sold in the United States. One of the federal
incentives, the production tax credit (PTC) dating back to 1992 has also resulted in the boom for
new wind power installed capacity.

The US carbon market is a voluntary one against any major regulatory action at the
federal level, majority of states have entered into a regional coalition as either a
participant or observer. US carbon market runs on two systems (i) Voluntary offsets traded at
Chicago Climate Exchange (CCX) and (ii) Over the Counter (OTC) markets. As of 2007, the total
voluntary carbon market transacted a total of 65MT (CO2e) which was 331million US$ worth, out of
which 80% is from the US market. There are 4 initiatives that would drive the market in US in the
future:

i. Regional Greenhouse Gas Initiative (RGGI) (target - reduce GHG emissions to 10% below
2009 levels by 2018; applies to “fossil-fuel fired electric generating units >=25 MW; based
on a 3 year compliance periods which begins in 2009),

ii. Western Climate Initiative (WCI) (target - aggregate emission reduction of 15% below 2005
levels by 2020; various designs across different states; market design still in proposal
stage),

iii. Mid Western GHG Accord (targets - aggregate emission reductions of 60%-80% below
current levels by 2050; multi-sector cap-and-trade mechanism),

iv. California Greening (targets to reduce the emissions to 1990 levels by 2020)

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The experiences in EU, US and the current developments in the clean energy space globally
highlight the following:

• An increasing focus on wind, solar, biofuels and other RETs

• Clean coal is a very important focus. All new plants are Carbon Capture and Storage (CCS)
ready

• EU countries have binding commitments for carbon intensity reduction.

• Copenhagen talks reached a stalemate due to differences between Annex 1 and Annex 2
countries

However, irrespective of the outcome, there will be massive pressure on fast growing developing
countries like India and China. India has already proposed non-binding commitments;
hence, morally it is committed to reduction in carbon intensity of its economy. Renewable
energy will play a very important role in this process.

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IV. NATIONAL ENERGY OUTLOOK

The national energy outlook for India is summarised in the following section of this paper.

1. INDIA’S ENERGY CONTEXT

India as a country suffers from significant energy poverty. The per-capita energy consumption,
while increasing progressively is significantly below global averages and in many instances below
developing country averages as illustrated in figure 6.

The low level of per-capita consumption is incompatible with India’s aspirations to be an economic
superpower. The proportion of the Indian population is disproportionately high. As per the 2001
census more than 55% of the households did not have access to electricity, which is otherwise
recognised as a basic need in all comparable developing economies. As indicated in the following
sub-section, the electricity deficits in the country are pervasive, and the rate of supply is unable to
keep pace with demand. With an economy projected to grow at 9% per annum, it will indeed be a
difficult challenge to keep pace with the growth, in-spite of considerable efforts that are being
made by the country.

In terms of the energy basket, India is heavily dependent on coal, as the following chart indicates.

Figure 6: India’s composition of energy sources and usage

Source: Planning Commission of India 2007

The contribution of renewable energy in this basket is negligible. With increased global pressure on
developing countries to migrate to cleaner forms of energy, RETs (as well as energy efficiency
measures) will take the centre-stage. This is the international trend, and India cannot be divorced
from it.

Further, the energy poverty of the country makes it mandatory to explore all possible ways to
expand the energy supply basket. This would have to include conventional sources as well as new
and renewable energy sources. In particular, the electricity sector has an urgent need to explore
ways for rapid expansion to cover the deficits and keep up with the growing demand as much as
possible. The following section elaborates on this further.

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2. ELECTRICITY DEMAND-SUPPLY SCENARIO

2.1. CURRENT STATE

As on March 2010 the total installed capacity is 159398 MW, out of which thermal constitutes 64%,
hydro 25%, nuclear 3% and renewable 8%. In thermal, generation from coal with 82% share
comprises the majority, followed by 17% Gas and Diesel with just 1%. Most of the coal and diesel
based generation is owned by Central and State Sector but the private sector share in the total
generation is witnessing an increase over the years. The details are presented in the table below:

Table 4: Installed Capacity (MW) as per Technology Break Up, March 2010

Nuclear Hydro Renewable Total

Region Thermal (MW) (MW) (MW) (MW) (MW)
COAL GAS DSL TOTAL

Northern 21275 3563 13 24851 1620 13311 2407 42189

Western 28146 8144 17 36307 1840 7448 4631 50225
Southern 17823 4393 939 23155 1100 11107 7939 43301
Eastern 16895 190 17 17103 - 3882 335 21319
N. Eastern 60 766 143 969 - 1116 204 2289
Islands - - - - - - 5 75
All India 84198 17056 1200 102454 4560 36863 15521 159398

Table 5: Installed Capacity (MW) as per Ownership, March 2010

Nuclear Hydro Renewable Total

Sector Thermal (MW) (MW) (MW) (MW) (MW)
COAL GAS DSL TOTAL
State 44977 4046 603 49626 - 27065 2701 79391
Private 8056 6308 597 14961 - 1233 12820 29014
Central 31165 6702 - 37867 4560 8565 - 50993
All India 84198 17056 1200 102454 4560 36863 15521 159398

It follows from the above table that generation mix continues to be following a flat trend for the
past 5 years with coal being the dominant source. As per ownership, although overall, the state
sector continues to be dominant accounting for around 50% of the total installed capacity, in the
wind power sector, private sector has contributed to 83% of the total renewable energy installed
capacity.

In the recent years, India’s energy consumption has been increasing at one of the fastest rates in
the world due to population growth and economic development. However, resource augmentation
and growth in energy supply has not kept pace with increasing demand and, therefore, India
continues to face serious energy shortages. The availability of power has increased but
demand has consistently outstripped supply and substantial energy and peak shortages of 10.1%
and 12% respectively prevail in India in the year 2009-10, details are presented below.

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Figure 7: Regional Power Supply Position (Energy and Peak), March 2010

The peak deficit has declined from 16.6% in 2007-08 to 12.7% in 2009-10 but is still high. In most
parts of the country, demand peaks are also ‘shaved off’ on account of lack of adequate supplies.
Several parts of the country (e.g. ER, NER) have very significant differences between peak and off
peak load levels, necessitating establishment of peaking capacity. Without such peaking capacity it
would not be possible to serve the peak demand requirements. The policy objective of ‘Power for
All’ at 5% spinning reserves cannot be practically met by an overwhelming baseload dominated
system.

2.2. FUTURE SCENARIO ON DEMAND AND SUPPLY FOR ELECTRICITY

Forecasts by Mercados EMI of the energy demand and supply situation indicates reduction in
deficits and even periodic surpluses as is indicated in the chart below.

Figure 8: All-India Power Supply Position (Energy) till 2016-17

This clearly illustrates that all the regions and the country as a whole are in deficit till 2012-13 but
turns into surplus from 2013-14. Though there is energy surplus, the peak deficit continues to
exist. Even as the above demonstrates the beneficial impact of past policy measures, these
estimates are extremely sensitive to:

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• Increase in demand of electricity: With increasing demand for electricity services,

coupled by the high GDP rate, the demand could well exceed the 9% annual growth
projection used for the above estimates.

• Availability of coal and natural gas: The country faces a severe shortage of coal and
natural gas. It has been the experience of the past that plants have been stranded for the
lack of fuel, and this remains a key risk in the future as well.

• Delay in commissioning of projects: Conventional power projects are very prone to

delays. Even as project execution capabilities in the country have improved substantially in
recent years, delayed environment and forest clearances, lack of fuel availability as well as
natural challenges (particularly for hydro projects) pose serious challenges.

Renewable energy can help address these issues. The challenges in execution of RE
projects are far lesser than conventional projects. Further, off-grid, energy efficiency
and demand side management (DSM) projects help reduce grid based energy demand.
Hence RETs can help address India’s energy challenges like never before.

The key challenge for scaling up RETs has been the relatively high cost of deployment, resource
intermittency, and relatively small scale of operation. Fortunately, in the past few years certain
useful developments have occurred that should help address these issues. These are as follows:

• Evolution of specific benchmarks that define the value of energy better in commercial
terms. In the electricity sector this has happened in the form of electricity spot markets
that help discover the value of energy for the utilities and consumers. The figure below
provides the past trends in short-term market prices

Figure 9: Weighted Average Price of Electricity Traded by Licensees and Power

Exchanges

Weighted Average Price of Electricity Traded by

Licensees and Power Exchanges
Rs/kWh
8 7.31

7
6 5.25
4.51 4.52
5
4 3.23

3 2.32

2
1
0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Source: CERC Monthly Market Monitoring Reports

• Development of a supply base for some of the key RETs – wind, small hydro and to a
significant extent solar PV

• Better resource forecasting capabilities have developed in the country that will permit
address some of the risks of intermittency.

In the electricity sector, a more favourable regulatory framework is actively being promoted by
CERC, initiating the creation of an environment that should make wider deployment of RETs
possible in the coming years.

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V. KEY TRENDS IN RENEWABLE ENERGY TECHNOLOGY

DEVELOPMENT
This section discusses the recent trends and improvements in wind, solar, small hydro and off-grid
technologies in the country.

1. WIND

The wind turbine generator (WTG) technology has evolved very rapidly in the country. State-of-
the art technologies are now available in the country for the manufacture of wind
turbines. All the major global players in this field have their presence in the country. The unit size
of machines has gone up from 55-100kW in the 1980s to 2MW. Table 6 provides information on
Indian manufacturers and their turbine capacities.

Table 6: Some Indian Manufacturers and their Turbine Capacities

S.No Indian Manufacturers Capacity

1. Enercon Indian Ltd. 600kW, 800kW

2. Suzlon Energy Ltd. 1000kW, 1250kW,

1500kW, 2100kW

3. Vestas Wind Technology India Pvt. 750kW, 950kW,

Ltd. 1650kW

4. Vestas RRB India Ltd. 500kW

5. Pioneer Wincon 250kW

6. Pioneer Gamesa 850kW

7. Regen 1500kW

8. Shriram EPC Ltd. 250kW

Wind turbines are being manufactured by 14 manufacturers in the country. The technology is
moving towards better aerodynamic design; use of lighter and larger blades; higher towers; direct
drive; and variable speed gearless operation using advanced power electronics.

In summary, the technology is characterized by:

• Large sized WTGs

• Mature technology

• Improvement in availability of equipment – now available at reasonable prices

• Competition in equipment space

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 MERCADOS EMI

Hence, given the way the wind power technology has evolved in the country and is constantly
adapting to global developments, currently there exists no technology risks that may challenge
further development of the sector.

2. SOLAR – PV AND THERMAL

In India, during the first half of the 1990s, the average growth rate of the solar energy market was
54 percent. The growth was largely driven by demand from the Department of
Telecommunications. However, the growth has now tapered off to about 9 percent per annum. As
of 2007, approximately 320MW equivalent of aggregate solar modules were installed for various
end-use applications like lighting, water pumping and battery charging.

There are currently eight private manufacturers of solar cells and 23 private manufacturers of solar
modules in the country. The total turnover is over $500million. The key players in the Indian solar
PV market are Bharat Heavy Electricals Limited (BHEL), Bharat Electronics Limited (BEL), Tata BP
Solar, Maharishi Solar Technology, Synergy Renewable Energy, Schott Solar, Moser Baer and
Signet Solar India. Recently, companies such as Moser Baer and Signet Solar have announced
large-scale manufacturing plans.

However, Solar PV production in India is hampered by the fact that over 80 percent of the country’s
silicon wafer requirement is met through imports. Domestic production is low and inadequate
compared to the fast increasing module production capacity base. Bringing down costs is a major
challenge currently faced by the domestic PV industry. Crystalline silicon cells, which are
predominantly in use today, continue to be extremely expensive. No low-cost thin film based
alternative is available yet. The need of the hour is to focus on material development.

Success of the solar thermal power industry will depend heavily on the reduction of costs
and increasing the local inputs for project development. India has at present a strong local
supply base to help to achieve this objective. For the power block there are ready suppliers
(Siemens, BHEL, Alstom) who have local manufacturing capabilities for small sized steam turbines.
In addition there are others like L&T, Bharat Forge and JSW, who have strong manufacturing
capabilities – including in large size steam turbines – that could start manufacturing smaller
turbines if the necessary volumes become available.

The boiler industry in India is well developed with several large and medium sized players having
strong capabilities. The key players in this field would include BHEL, Thermax, Alstom, Cethar
Vessels, and a host of other smaller but sophisticated manufacturers located in southern and
western India.

The Main Plant EPC and Balance of Plant (BoP) services are also well developed primarily on
account of a well developed coal and gas based project development industry.

Given the strong manufacturing and project execution base for the CSP industry, the costs are
expected to come down significantly as the volumes improve.

3. SMALL HYDRO

In India, hydro projects up to 25 MW station capacity have been categorized as Small Hydro Power
(SHP) projects. The Ministry’s aim is that out of the total grid interactive power generation capacity
that is being installed, 2% should come from small hydro. This translates to 2000 MW capacity
addition during 2002-2012. The Indian SHP development programme received a new dimension
and tempo after the liberalization of economy and invitation to private sector for investment in
power. Today the SHP programme is essentially private investment driven. Electricity
generation from small hydro is becoming increasingly competitive with preferential tariffs and some
other concessions. The challenge is to improve reliability, quality and reduce costs.

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 MERCADOS EMI

Six SERCs from Andhra Pradesh, Madhya Pradesh, Karnataka, U.P., Uttaranchal and Maharashtra
have issued orders for determining tariffs for small hydropower. So far, over 130 private sector
SHP projects with an aggregate capacity of about 500 MW have been set up mainly in Andhra
Pradesh, Karnataka, Himachal Pradesh, Punjab, Uttaranchal and Maharashtra.

India has a wide base of manufacturers of equipment for small hydro power projects. State-of-
the-art equipment is available indigenously. About ten manufacturers fabricate almost the
entire range and type of SHP equipment. Manufacturer’s capacity is estimated at about 250 MW per
year. In addition, there are about five manufactures that are producing micro hydel and watermill
equipment.

The Ministry is strengthening technical institutions to provide Consultancy services in the field of
small hydro projects. Alternate Hydro Energy Center’ (AHEC) at IIT Roorkee is providing full range
of technical services in the field of small hydro including survey and investigation, DPR preparation,
project design etc. On site testing facility has been created at AHEC to test SHP stations for their
performance.

Small hydropower has emerged a viable power generation option in India.

• Over 130 private sector SHP projects are currently operational in the country.

• Growth of small hydro expected to be in the range of 250-300 MW per year.

• Micro hydro projects have also emerged as a reliable source of electricity generation for
remote and isolated areas.

• Efforts are being made to strengthen hydrological data base and identify new potential sites
on one side and evacuation facilities on the other for effectively harnessing small hydro
potential in the country.

• Appropriate selection of site and sizing of projects to give higher plant load factors are
important to further improve economic viability of commercial SHP projects.

The discussions above highlight that while there is still some distance to go, particularly for
emerging technologies, the stage is well set.

4. OFF-GRID TECHNOLOGIES

Distributed/decentralized renewable power projects using wind energy, biomass energy, micro and
pico hydro power, solar home lighting systems, solar mini grids and hybrid systems are being
established in the country to meet the energy requirements of isolated communities and areas
which are not likely to be electrified in near future.

Poor families use energy mainly for cooking. The cooking stoves they use are mainly made of mud
and brick, and they are 10-15% efficient. Thus, the first technology to be considered for improved
access in rural areas are more efficient cooking stoves, called improved chulas (IC), which
continue to burn wood, but have much higher efficiencies, reaching up to 40%. Today, a number of
low-priced modern wood-fuelled ICs have been developed, with improvements based on enclosure
to retain heat, maximization of heat transfer to the pot and improvement in combustion. Aside
from being more efficient and thus enabling women to spend less time finding wood, emissions of
indoor pollutants are also reduced. A second technology for cooking is thermal solar cooking, which
uses the heat from the sun. Solar thermal cookers can be 30% to 70% more efficient than
regular cooking stoves, and the production costs are decreasing dramatically.

Solar thermal energy can also meet certain other niche energy demands of rural, urban, industrial
and commercial sectors in the country. This includes - solar water heating, solar air heating /
cooling /crop drying, solar green buildings and solar cities. Efforts are being made to

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 MERCADOS EMI

mainstream incorporation of solar water heating systems in design of new buildings and multi-
storeyed housing complexes, as well as to integrate these systems in existing buildings through
awareness campaigns, guide-books and design aids for planners, architects, developers, builders,
engineers etc. Rebate in personal income tax has been proposed for installations in homes.

Biogas digesters also hold great promise in delivering change in rural areas, where there are
large amounts of cattle. Some of the advantages of biogas are that there are many animals in
India, thus it can be produced at low cost, and that the technology to make biogas can be produced
locally as well. Small-scale biogas production in rural areas is now a well-established technology.

Other modern uses of biomass are also useful alternatives for replacement of traditional forms.
Alternative biomass consists mainly of agricultural residues, like rice and coffee husk, and sugar
bagasse. The biggest problem with agricultural residues for energy is the low energy per volume,
which makes it difficult to handle and transport, but there are several ways of solving this problem,
like the making of briquettes. One of the main advantages of biomass residues is that they can
replace traditional fuel wood directly.

Solar Photovoltaic Panels have recently become a popular solution to target energy problems in
disconnected areas. PV panels are particularly good for independent systems for the production of
electricity, like street lighting, community facilities, or solar home systems (SHS).

For electricity micro-grids, there are two particular technologies that have a great potential-
micro hydropower, and biomass gasifiers. Biomass gasifiers basically convert biomass into
producer gas which is then cleaned, and then powers an internal combustion engine for generation
of electricity. Biomass gasifiers are advantageous because they use local resources in a sustainable
manner, yet they have higher operation and maintenance costs.

Small wind energy systems, namely water pumping windmills, aerogenerators and wind-
solar hybrid systems, have been found to be useful for harnessing wind and solar energy in un-
electrified areas or areas having intermittent electric supply. These systems can be set up in rural,
semi urban/urban areas having annual average wind speed of about 15 km/hr (4.17 m/s) or above,
at 20 m height. The Wind-Solar Hybrid systems consisting of aero-generator (s) and photovoltaic
panels of suitable capacity with the battery bank are capable of mutually supplementing power
generation from wind and solar energy to offer a reliable and more cost effective electricity supply
in decentralized mode.

5. NEW AND EMERGING TECHNOLOGIES

Apart from these, some of the new and emerging technologies that are being promoted by the
MNRE include - Chemical Sources of Energy, Hydrogen Energy, Geothermal Energy, Ocean
Energy and Alternate Fuels for Surface Transportation. The focus of Chemical Sources of Energy is
on development of fuel cell technologies. A fuel cell is a device that uses hydrogen (or hydrogen-
rich fuel) and air/oxygen to generate electricity through an electrochemical process. The fuel cell is
a highly efficient device. In combination with the use of waste heat, the overall energy efficiencies
of fuel cells can be up to 70% or more. Fuel cells can be used for powering automobiles and also
for decentralized power generation. MNRE is supporting a wide-ranging programme covering
research and technology development on all aspects of fuel cells including materials,
components, devices, sub-systems and systems. MNRE has been supporting development
and demonstration of fuel cell application for small scale power generation and for
transport application. Hydrogen energy can be used for decentralized power generation,
transportation and other applications, either by direct combustion in internal combustion engines or
in fuel cells. MNRE is supporting research and technology development activities on all
aspects of hydrogen energy including its production from renewable energy sources,
storage, applications and safety aspects.

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 MERCADOS EMI

VI. PRINCIPAL PROPOSITIONS EMERGING FROM THIS

PAPER

In view of the trends observed, the very substantial developments in policy and regulatory
developments, and the urgent need to enhance supply and access of energy the following
propositions have been arrived at:

• A maximalist approach needs to be adopted in the expansion of India’s renewable energy

resources. In other words, the country needs to monetise as much of the resources as
possible within the shortest timeframe;

• Wherever possible, market prices for energy should be adopted as a

reference/benchmark for the monetisation process. Many of the technologies can
achieve grid parity (or better) if power market prices are used as a reference;

• Both grid and off-grid measures should be promoted actively. Apart from increasing
access, off-grid applications and demand side management will help reduce demand on
conventional and non-renewable resources;

• MNRE needs to play a very significant role in the promotion process to facilitate
investments. The promotional measures would include:

o Creation of baselines with regard to demand, supply, resources, etc.

Resource identification and mapping

o Evolving and promoting new business models for development that are
commercially attractive. Guidelines in this regard

o Development of processes for transparent selection of developers and service

providers

o Promotion of local manufacturing base development. Development of

standards (wherever required)

o Identification of critical subsidisation requirements and mechanisms for

administration of the same

o Monitoring and evaluation with respect to the above

o Policy and guideline development and refinements based on the above

The above envisages a refocusing of MNRE’s roles. As an example, the technology development
role will evolve more into a standards creation and monitoring responsibility.

The scale of developments will call for significant capacity enhancement in the MNRE, and this
would need to be a prime focus. MNRE officials also need to be at the forefront of global climate
related initiatives, both influencing the debate based on initiatives and experiences at home and
also dovetailing domestic initiatives in a manner that creates global benchmarks. The present
energy scenario in India provides an excellent basis for strategic initiatives in this regard, since it
provides the space for a large number of technologies to be deployed to meet the burgeoning
demand for energy supply.

Comments are invited from stakeholders on these propositions based on the

questionnaire attached.

Five year strategy for MNRE – Briefing Paper 21

DEVELOPMENT OF A FIVE YEAR STRATEGY FOR
MINISTRY OF NEW AND RENEWABLE ENERGY

STRUCTURED QUESTIONNAIRE
Prepared for:

MINISTRY OF NEW AND RENEWABLE ENERGY,

GOVERNMENT OF INDIA
For:
CONSULTATION WITH STATE NODAL AGENCIES AND
OTHER STAKEHOLDERS

Prepared by:
MERCADOS – ENERGY MARKETS INDIA PVT. LTD.
DATE: July 22, 2010
 Ministry of New and Renewable Energy, Government of India
Structured Questionnaire for External Consultation

1. Specify your role in the renewable energy sector.

a. Policy/Regulatory

b. Deployment

c. Financing

d. Industry (please specify sector)

e. R&D

f. Any other (please specify)___________________________________

2. What have been the highlights of the major activities that have been undertaken by your
organization during the last one year?

___________________________________________________________

___________________________________________________________

___________________________________________________________

3. In your opinion what should be the vision, mission and objectives of the renewable energy
sector? Please be brief.

Vision

___________________________________________________________

___________________________________________________________

___________________________________________________________

Mission

___________________________________________________________

___________________________________________________________

___________________________________________________________

Objectives

a.___________________________________________________________

b.___________________________________________________________

c.___________________________________________________________

2
 4. In your opinion what should be the aspirations of the renewable energy sector? Please be
brief.

a.___________________________________________________________

b.___________________________________________________________

c.___________________________________________________________

5. Which renewable energy resource/applications do you think should be the priority for
promotion? Please rank the following options, with 1 being highest priority.

S. Resource/ Application Priority/ Inter-se Reasons

No. Ranking ranking of for the
of application priority
Resource under each accorded*
resource
1 Wind Energy 1/2/../9 1/2/3/4
• Aerogenerators/decentralized power
• Grid-interactive power

2 Hydro power
• Watermills/ microhydel units
• Mini/small hydel -grid power
3 Solar PV
• Off-grid/ Decentralized systems
• Grid power
4 Solar Thermal
• Water Heating (Household)
• Water Heating (Industrial)
• Solar Driers (Rural/ Industrial)
• Solar Cookers (Box/ Dish/ Conc.)
• Water desalination
• Cooling/ refrigeration systems
• Power generation (Grid/ off-grid)
5 Biogas
• Family type plants
• Institutional/ community plants
• Power generation
6 Biomass (non-fuel wood)
• Grid-power
• Bagasse cogeneration
• Biomass Gasifiers for rural electrfn.
• Biomass Gasifiers for industrial energy
7 Waste to Energy
• Urban/ Municipal Waste to Energy
• Industrial Waste to Energy

8 Emerging Technologies
• Geothermal
• Tidal/Wave
9 Any Other (please specify)

* A-Techno-economically viable B-Environmentally benign C-Large potential

D- Community benefit E-Any other –please specify

3
6. What are the outcomes desired from the renewable energy sector? Please rank the
following options, with 1 being highest priority.

a. Large scale deployment

b. Enhanced consumer access

c. Reaching desired levels of investment and capacity installation

d. Ensuring desired output/quality

e. Cost reduction

f. Awareness created on applications

g. Others (please specify)

7. What should be the strategy for promotion of renewable energy? Please rank the following
options, with 1 being highest priority.

a. Facilitating investments

b. Identifying new deployment models for commercialisation of RETs

c. Technology innovation

d. Bridging funding gap for promoting technologies

e. Enhancing awareness and capacity

f. Creating standards

g. Strict monitoring and evaluation

h. Others (please specify)

8. What are the external factors (International and National factors external to the renewable
energy sector) that will impact the renewable energy sector in India?

International (e.g. price of oil, climate change, etc)

a. _______________________________________

b. _______________________________________

c. _______________________________________

National (e.g. coal availability, economic growth, etc)

a. _______________________________________

b. _______________________________________

c. _______________________________________

4
9. What are the internal factors (internal to renewable energy sector) that will impact the
renewable energy sector in India? E.g. cost, technology breakthrough, etc

a. _______________________________________

b. _______________________________________

c. _______________________________________

10. Who are the key stakeholders of the renewable energy sector in India?

a. _______________________________________

b. _______________________________________

c. _______________________________________

11. What according to you are the key opportunities for the renewable energy sector in India?

a. _______________________________________

b. _______________________________________

c. _______________________________________

12. What according to you are the key threats facing the renewable energy sector in India?

a. _______________________________________

b. _______________________________________

c. _______________________________________

13. Has your organization made any estimation of the available potential of any specific
renewable energy technology? Please elaborate.

___________________________________________________________

___________________________________________________________

___________________________________________________________

14. Please specify technology-wise projections for renewable energy achievement that you
perceive upto March 2017 at the State and National level, as per the table below.

5
 S.No Sources/systems State level National level

Cumulative Projections/Plan By Cumulative How much should

Achievements (in MW) 31.03.2017 (MW) Achievements (in MW) the country aim for
(upto 31.03.2010) (upto 31.03.2010) By 31.03.2017
(MW)

Grid interactive renewable power

1. Biomass Power (Agro residues) 865.60

2. Wind Power 11807.00

3. Small Hydro Power (up to 25 MW) 2735.42

4. Cogeneration-bagasse 1334.03

5. Waste to Energy 64.96

6. Solar Power 10.28

Sub Total (in MW) (A) 15691.43

Off-Grid/Distributed Renewable Power

7. Biomass Power/Cogen (non-bagasse) 232.17

8. Biomass Gasifier 122.14

9. Waste-to-Energy 46.72

10. Solar PV Power Plants 2.46

11. Aero-Generators/Hybrid Systems 1.07

Sub Total (in MW) (B) 404.56

Total (A+B) 17221.86

6
S.No Sources/systems State level National level

Cumulative Projections/Plan By Cumulative How much should

Achievements (in MW) 31.03.2017 (MW) Achievements (in MW) the country aim for
(upto 31.03.2010) (upto 31.03.2010) By 31.03.2017
(MW)

Decentralized Energy Systems

12. Family Type Biogas Plants 42.40 lakh

13. SPV Home Lighting System 5,83,429 nos.

14. Solar Lantern 7,92,285 nos.

15. SPV Street Lighting System 88,297 nos.

16. SPV Pumps 7,334 nos.

17. Solar Water Heating- Collector Area 3.53 n. Sq. mts.

7
15. Specify the type of support that you would like to receive from MNRE.

(a) Financial (Subsidy)

__________________________________________________________

__________________________________________________________

__________________________________________________________

(b) Fiscal

__________________________________________________________

__________________________________________________________

__________________________________________________________

(c) Policy

__________________________________________________________

__________________________________________________________

__________________________________________________________

(d) Implementation

__________________________________________________________

__________________________________________________________

__________________________________________________________

(e) R&D support

__________________________________________________________

__________________________________________________________

__________________________________________________________

(f) Others-Specify

__________________________________________________________

__________________________________________________________

__________________________________________________________

8
16. Any other remarks that you wish to make.

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

…………………….