1. Narasimhan Santhanam Renewable Energy Finance, Singapore Apr 13, 2010 Elephants Can Dance Renewable Energy in India – Implications for Investment

2. Leading Indian renewable energy business intelligence, market strategy consulting firm Work on all primary renewable energy sectors – solar, wind, biofuels/biomass, waste-to-energy and small hydro Work on market research, entry and diversification strategy, economic and financial modelling and pre-feasibility analysis Team comprises professionals from IITs and IIMs, with renewable energy, industry research and economics backgrounds Based out of Chennai More from www.eai.inwww.eai.in About EAI Elephants Can Dance

3.  India Energy - Current Status  India Energy – Strategy for the Future  Electricity Grid Improvements  Focus on Renewables  Investments in Renewable Energy www.eai.in I’m here to talk about… Elephants Can Dance

4. India Energy - Current Status The Elephant Has Just Begun to Roar www.eai.in Elephants Can Dance

5. www.eai.in GDP Growth Elephants Can Dance PeriodGDP Growth (%) 1900-19501 1950-19803.5 1980-20006 2000-20078.9

6. www.eai.in Electricity Demand Growth Elephants Can Dance

7. Energy Sources But…the Elephant Has a Problem www.eai.in Elephants Can Dance

8.  India's peak power shortages are projected to worsen from  17% peak deficit in 2009 (shortfall of 23 GW), to  25% peak deficit by 2015 (shortfall of over 60 GW)  Electricity generation capacity, most of it coal fired, will more than treble from 2005 to 2030. www.eai.in Peak Electricity Shortage Elephants Can Dance

9.  More than 60,000 villages without access to electricity  Ministry of Power has accelerated the Rural Electrification Program with a target of providing Power to All by 2012 www.eai.in Villages without Electricity Elephants Can Dance

10.  Consume 3 million barrels per day  Produce 1 million barrels per day  Import about 700 million barrers per year  At $75 per barrel, that’s about $50 billion outflow  Easily wipes out all the gains we make from FDI (about $30 billion per year). www.eai.in Huge Oil Import Bill Elephants Can Dance

11. www.eai.in CO 2 Emissions Increase Elephants Can Dance

12.  Total primary energy usage – approx 600 MTOE (2008)  Primary energy will be more than double this by 2030.  For its electricity, transport and other industrial and domestic needs, India needs energy. Current sources of primary energy are: Coal, Natural Gas, Oil Renewables – Hydro, biomass Nuclear www.eai.in Energy Sources Elephants Can Dance

13.  Consumed 3 million barrels per day in 2009, up from about 1.2 million barrels per day in 1990.  Production - from 0.7 million barrels per day in 1990 to about 1 million barrels per day in 2009.  Recent findings of oil in Rajasthan by Cairn Energy. Cairn estimates that it will be able to achieve peak production of about 0.24 million barrels per day in 2011  India currently imports about 70% of its oil www.eai.in Oil Elephants Can Dance

14.  Demand expected to nearly double to 320 million standard cubic meters per day by 2015 (Source: McKinsey Study)  Current demand of 166 mmscmd (million cu meter per day) made up of 132 mmscmd from domestic and rest from imported LNG  Hydrocarbon Vision 2025 – increasing proportion of natural gas in total energy consumption from 8% now to 20% by 2025. Will require investments of $40 - $50 billion across value chain.  Country currently imports 20% of its requirements www.eai.in Natural Gas Elephants Can Dance

15.  Uses about 600 million T per annum  Coal imports will increase almost seven-fold, accounting for 28% of India's total coal needs in 2030 from 12% in 2005  In 2009-10, imported about 60 million T (10%); expected to hit 100 million T within the next three years. This for a country which has the fourth largest coal reserves in the world – about 100 billion T of proven reserves www.eai.in Coal Elephants Can Dance

16.  Natural gas - imports about 15% of consumption; imports could increase with the fast growth of industrialization  Coal - imports a little over 10% of its requirements, likely to increase steeply over the next five years  Oil - pleasantly surprised by the recent oil finds in Rajasthan, but over 60% reliance on outside countries for oil for the foreseeable future. www.eai.in Fossil Summary Elephants Can Dance

17.  Increases India’s reliance on outside countries for critical energy inputs  Makes a big hole in our $ reserves  Causes harm to the environment www.eai.in The Problem with Fossil Elephants Can Dance

18. India’s Energy Strategy The Elephant Starts Thinking www.eai.in Elephants Can Dance

19.  Strengthen Ties with Existing Sources – Realpolitik www.eai.in Energy Strategy Elephants Can Dance

20.  Diversify Sources - buying up stakes in oil and natural gas fields worldwide www.eai.in Energy Strategy Elephants Can Dance

21.  More Support from Domestic Supplies - increasing the investments and by easing the restrictive policies for private sector investments www.eai.in Energy Strategy Elephants Can Dance

22.  Increase Efficiency – A key strategy here is to make the Indian electricity grid more efficient www.eai.in Energy Strategy Elephants Can Dance

23.  Focus on Renewables - Increase reliance on renewable energy www.eai.in Energy Strategy Elephants Can Dance

24. Overhauling the Electricity Grid The Elephant Begins to Act www.eai.in Elephants Can Dance

25. Generation capacity of about 150 GW; 663 billion units produced; CAGR of 5% over the last 5 years The fifth largest electricity generation capacity in the world Transmission & Distribution network of 6.6 million circuit km - the third largest in the world www.eai.in Electricity Grid - Overview Elephants Can Dance

26.  Majority of Generation, Transmission and Distribution capacities are with public sector companies or State Electricity Boards (SEBs)  Private sector participation is increasing  Distribution licences for several cities are already with the private sector  Three large ultra-mega power projects of 4000MW each have been recently awarded to private sector www.eai.in Electricity Grid - Overview Elephants Can Dance

27.  Poorly planned distribution networks – cross country grid not good enough  Overloading of system components  Low metering efficiency and bill collection  Power theft  Low operational efficiency of the public sector utilities www.eai.in Grid Problems Elephants Can Dance

28.  Inter-regional power transfer capacity end 2009 was 20,000 MW; plan to take it to 37,000 MW by 2012.  Unbundling State Electricity Board’s assets into separate entities for generation, transmission, and distribution - intention of eventual privatization  Improving metering efficiency  Auditing to create transparency and accountability at the state level  Improved billing and collection  Mandating minimum amounts of electricity from renewables; requiring preferential tariff rates for renewables www.eai.in Grid Progress Elephants Can Dance

29.  Policy framework: Electricity Act 2003 and National Electricity Policy 2005  100% FDI permitted in Generation, Transmission & Distribution  Incentives: Income tax holiday for a block of 10 years in the first 15 years of operation; waiver of capital goods' import duties on mega power projects  Independent regulators: Central Electricity Regulatory Commission for central PSUs and inter-state issues. Each state has its own Electricity Regulatory Commission www.eai.in Grid Progress Elephants Can Dance

30.  Implementation of key reforms is likely to foster growth in all segments  Unbundling of vertically integrated SEBs  “Open Access” to Transmission and Distribution networks  Select distribution circles to be franchised/privatized  Tariff reforms by regulatory authorities www.eai.in Grid Progress Elephants Can Dance

31.  Mobilising resources from private sector – Two routes for private sector participation:  Joint Venture (JV) Route, wherein the CTU/STU shall own at least 26% equity and the balance shall be contributed by the Joint Venture Partner (JVP);  Independent Private Transmission Company (IPTC) Route, wherein 100 percent equity shall be owned by the private entity. www.eai.in Grid Progress Elephants Can Dance

32.  Smart Grid  Demand-side management to selectively curtail electricity use for delinquent customers or neighbourhoods, while improving power quality for better customers.  Another driver behind the need for a smarter grid in India is its need for energy efficiency and increased use of renewables. www.eai.in Grid Progress Elephants Can Dance

33.  Additional 60,000 circuit km of Transmission network expected for the period 2007-2012  Private sector participation possible through JV and 100% equity mode  Total investment opportunity of about US$ 150 billion over a 5 year horizon (2007-2012) www.eai.in Opportunities in Transmission Network Elephants Can Dance

34. Focus on Renewables A New Elephant www.eai.in Elephants Can Dance

35. RE% of RE contribution Wind76 Small Hydro16 Cogeneration4 Bio-power2 Others2 www.eai.in Renewables Contribution to Electricity Elephants Can Dance

36.  Less than 0.5% of total transportation fuels comprises biofuels  Total production of ethanol and biodiesel combined were less than 0.25 million T (2009) www.eai.in Renewables Contribution to Transport Fuel Elephants Can Dance

37.  Solar  Solar PV  Solar CSP  Wind  Biofuels  Biodiesel  Ethanol  Second Generation Biofuels  Hydro  Small Hydro  Large Hydro  Biomass-based electricity  Waste to Energy www.eai.in Renewables with Short and Medium Term Potential Elephants Can Dance

38.  Current installed capacity (grid connected) : Approx 6 MW for PV and 0 for CSP  Targets under the National Solar Mission : 20,000 MW by 2022 (for PV + CSP)  2000 MW BY 2013  10000 MW by 2017  Attractive Feed-in-tariffs and other incentives www.eai.in Solar PV + CSP Elephants Can Dance

39.  Potential: 90000 MW  Installed capacity – Approx 12,000 MW, expected to reach 17,000 MW by 2012  Investments in wind energy  2007 - $2.2 billion  2008 - $2.7 billion (63% of total RE investments)  2009 – Over $3 billion (EAI estimate)  Accelerated depreciation benefits, or GBI www.eai.in Wind Elephants Can Dance

40.  Potential: Significant for both biodiesel and ethanol, esp with second gen crops - Jatropha (biodiesel) and Cellulosic feedstock (ethanol)  Currently, biofuels contribute less than 0.5% of total transport fuel  Feedstock availability, prices major concerns  Mandatory blending of 5% in petrol and diesel  Future depends on both government incentives and feedstock availability www.eai.in Biofuels Elephants Can Dance

41.  Potential of up to 15,000 MW  Current installed capacity – about 2500 MW  Small hydro investment in India grew by 300% 2007- 08  $543 million in 2008 (15% of total RE investments)  $140 million in 2007  Concerns  Delays & long timelines  Poor transmission and distribution  Geological and social uncertainties  Regulatory challenges www.eai.in Hydro – Small Hydro Elephants Can Dance

42.  Total potential of 150,000 MW  Installed capacity – 36,000 MW  Most investments are government dominated, but private investments beginning to happen  Total investments of 28,000 crores planned in the 11 th five year plan (2007-12)  Concerns  High capex  Large gestation periods  Geological surprises  Societal and environmental impacts  Uneven distribution of hydro resources and possible demand-supply mismatch www.eai.in Large Hydro Elephants Can Dance

43.  Total available potential – 19500 MW  Exploited potential – 795 MW  Expected installed capacity by 2012 – 1000 MW  Dominated by small MW plants (1-5 MW)  Feedstocks used - waste biomass such as rice husk, cotton seed husk, crop waste  Gasification/pyrolysis is the process used for power production  Incentives from government - duty exemption on components, exemption in sales tax, depreciation benefits  Concerns - feedstock availability and price stability www.eai.in Biomass Power Elephants Can Dance

44.  Types of waste considered – MSW, industrial waste  MSW – biodegradable household waste and sewage  Industrial waste – non-hazardous biodegradable waste  Potential - over 20,000 MW of power generation  Typical process used is anaerobic digestion. Gasification being explored  Concerns  Collection and segregation of waste  Cost and efficiency of technology www.eai.in Waste to Energy Elephants Can Dance

45. The most attractive renewable energy investment opportunities for the short and medium term:  Solar PV  Wind  Small Hydro  Biomass-based Power www.eai.in Attractive RE Sectors Elephants Can Dance

46. www.eai.in Investments in Indian Cleantech ($ billion) Elephants Can Dance 20042005200620072008CAGR 0.70.81.13.33.750% Over 80% of the investment through project finance, rest through VC and PE investments

47.  Abengoa Solar – CSP  Centrotherm PV – Polysilicon processing  Signet Solar – thin film module manufacturing  Vestas – wind turbine manufacturing  Gamesa – wind turbine manufacturing  eSolar – solar CSP power plants  Siemens – wind turbine manufacturing  Refex Energy – Solar PV  BP – Biodiesel  GE – wind turbine manufacturing  Biogas Nord – biogas plants www.eai.in Foreign Companies that Have Invested in Renewable Energy Elephants Can Dance

48.  India is likely to have about 38% of its total electricity powered by renewables, from about 33% today (including large hydro)  About 300 MW of electricity installed capacity, with a more efficient grid network  Most of its villages electrified  Much larger participation from private sector in energy  Hopefully much less reliance on foreign sources of energy www.eai.in By 2020… Elephants Can Dance

49. All you need to do is to look at India to see an elephant dancing, and DANCING PRETTY WELL. Thank you! Narasimhan Santhanam narsi@clixoo.com Mob: +91-98413-48117 www.eai.in Who Says Elephants Can’t Dance? Elephants Can Dance