strategy paper on renewable energy

7/28/2019 Strategy Paper on Renewable Energy

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Energy Sector in India:

A Strategy Paper on

Renewable Source of

Energy with special

Reference to Wind and

SolarHarihar Panigrahi - U211029

Sridhar Chakravarthi M - U211069

Vijay Dewangan - U211081

In this report, attempt has been made by the team toanalyse 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


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Table of Contents

Abstract 2

Introduction 2

Overview of Power Industry in India 2

Business Scenario 8

Government Incentives for the RE sector in India 10

Renewable Energy Options 14

Assumptions and Critical Success Factors 16

Proposed Business idea 16

Business Strategy 18

Strategy Deployment using Balanced Scorecard framework 21

Implementation Plan 22

Risks and mitigation plans 24

Conclusion 24

References 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 energyimports 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 alltechnologies.

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 reducedistribution 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 non-

conventional 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, hasbeen 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 PolicyFDI

Foreign investors can enter into a joint venture with an Indian partner for financial and/or technicalcollaboration 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 automaticapproval.

Hundred per cent foreign investment as equity is permissible with the approval of the ForeignInvestment 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 ForeignDirect 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 toFDI as well as for promoting investment into India

The Board is chaired by the Secretary (Department of Industrial Policy & Promotion), Governmentof India

It provides appropriate institutional arrangements, transparent procedures and guidelines forinvestment 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 andremove bottlenecks

The Board considers all investment proposals with or without technical collaboration and/orindustrial license

FIPB has made available a mailbox facility for filing applications: The e-mail address for the same [email protected]. 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 theendeavour 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 andimplementations

It is headed by the Secretary (Department of Industrial Policy & Promotion) and is serviced by theSIA

FIIA would provide a one-stop after-care service to foreign investors by helping them to expediteapprovals 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 agenciesincluding 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 FIIAIndustrial Policy

MNES is promoting medium, small, mini and micro enterprises for manufacturing and servicing ofvarious 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 obligationsRenewable 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 priceCapital 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

Solar collector system for direct heating applications

3600

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. State / UT Wind Power Small Hydro Powe Biomass Power

1. Andhra Pradesh 3.50 / kwh

fixed for 10 yrs

2.69 (04-05) 2.63 (05-06)

Esc @ 1% for 5 yrs

2. Arunachal Prade - - -

3. Assam - - -

4. Bihar - - -

Chhatisgarh - - 2.71 (05-06)

5 Gujarat 3.56

fixed for 20 yrs

- 3.00

No escalation.

6. Haryana 4.08

escalation 1.5%

base year 07-08

2.25 (94-95) 4.00 biomass

3.74 - cogen.

Esc. @ 2% (base 2007-

08)

7. Himachal Prades - 2.50 -

8. J & K - - -9 Jharkhand - - -

10. Karnataka 3.70 2.90 2.74-cogen.


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fixed for 10 yrs 2.88 - biomass

Esc @1% for 10 yrs

(base04-05)

11. Kerala 3.14

fixed for 20 yrs

- 2.80 (2000-01)

Esc @ 5% for 5 yrs

12. Madhya Pradesh 4.03 - 3.36 (constant)

Reducing @ 0.17 per yr for

first four years

2.25 3.33-5.14

Esc. @ 0.03-0.08 for 20

yrs.

13. Maharashtra 3.50 / kwh

Esc. of 0.15 per yr for 13

years from DOC of the

project

2.25

(99-00)

3.05- cogen.

3.04-3.43-biomass

Esc @ 1% for 13 yrs

14. Manipur - - -

15. Meghalaya - - -

16. Mizoram - - -

17. Nagaland - - -18. Orissa - - -

19. Punjab 3.66 with five annual

escalation @ 5% upto 2012

2.73 (98-99) 3.01 (01-02) Esc @ 3%

for 5 yrs limited to 3.48

20. Rajasthan 4.50 for Jaisalmer, Jodhpur

etc. and 4.28 for pther

districts (base year 08-09)

2.75 (98-99) 3.60-3.96

water-air cooled

21. Sikkim - - -

22. Tamil Nadu 3.39 / kwh (Levelised) - 2.73 (2000-01)*

Esc @ 5 % for 9 yrs

23. Tripura - - -

24. Uttar Pradesh - 2.25 2.86 existing plants

2.98 new plants

Esc @ 0.04/ year

25. West Bengal 4.00 / kwh

To be decided on case to

case

2.25 2.86 existing plants

2.98 new plants

Esc @ 0.04/ year

* 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. Windmay 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 bedeveloped 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 ofwind 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 smallclusters 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 inaccordance 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 forthe 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 typesof renewable energy developments in the country.

Planning considerations such as designated natural heritage areas and built heritage, scenicviews/routes and populated areas and infrastructure constraints should be identified.


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Environmental considerations arising from the strategic environmental assessment and ecologicalimpact 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 manpowerProposed 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 windpower 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 turbineas well.

Latest technologies and methodologies of continuous alignment of the PV panels towards the sun canbe 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 thewind mills

Most of the areas which are suitable for setting up wind farms are also suitable for solar powergeneration

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 StateGovernments, 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 bydeveloping 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 theprivate 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 helpimprove 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) Current consumer perceptions of the solar / wind energy and how to improve those perceptionsb) What price/value equation will make it attractive and help growthc) Who are the credible sources of product information as per consumersd) 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. - Leasearrangements, 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 forsolar/wind technology purchases or leases.

5) Work with installers. - Ensure to promote the financing options that are available to potentialcustomers.

6) Focus on how to pay for solar/wind. - Ensure that workshops and other solar/wind seminarshighlight 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 businessassociations, municipal and institutional customers, and developers.

8) Educate homeowners and commercial customers. - Work with local utilities to promote the value ofcombining 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/windseminars 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 institutionswho have installed solar/wind power.

Participate in or increase awareness of annual solar/wind home tours to broaden attendance. Createspecial VIP tours for target groups.

Create a speakers bureau of homeowners and business leaders who will speak about the effectivenessof 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 thesolar/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 addressingthe value strategy.

Perform a communications audit on solar/wind marketing materials to assess the effectiveness andconsistency of the message.

Identify what additional materials and outreach strategies are required to communicate the solar/windvalue 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 villagesOff 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 processEach 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 MarketingImplementation 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 medium-

term. 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 baselinestudy 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 incumbentto 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 Risk Mitigation

1 Regulation preventing installation of solar panels

around wind turbines

Understand the nuances of the regulation

and the rationale for the same, so as to

counter the issue and get approval.

2 Non-availability of solar power during nights and

cloudy days which creates a difference in

generating capacity

Create a load balancing system and controls

so that the system is adequately loaded and

monitored

3 Difference in power generation parameters

between solar and wind

Install the necessary monitoring and

equalizing mechanism for both the sources

4 ROI of the project due to low power buy-back

tariff

Identify and explore additional sources of

income generation. Ex: Carbon credits,

captive power supply to large private

consumers etc.

5 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.

6 Metering issues due to coexistence of

government grid power

Identify an automatic change over process

when the grid fails.

7 Non Availability of efficient photo solar cells for

generating higher power output per given area

Tie up with technical institutions like IITs,

NIITs for R&D and select talents to work on

the projects who can be employed back in

the organisation.

8 Delay in release of payments from Government

when the plant is connected to the Grid

Make arrangement of getting the payments

released through bankers who in turn to get

it from Government.

9 Availability of A wind class sites with adequate

sun lighting for combined output

Identification of sites and Government

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 thestakeholders 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 India3. Subsidy Pattern for Solar Thermal systems/devices : Ministry of New and Renewable Energy4. Taxes and Incentives for Renewable Energy KPMG International June 2012

strategy paper on renewable energy

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