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India Energy Market

Sector Name: Renewable Energy equipment
ITA Industry Code: REQ

The Indian renewable energy (RE) industry is diversified and offers strong business prospects to U.S. companies. The market in India for RE business is estimated at USD 500 million and is growing at an annual rate of 15 percent. The major areas of investment are: solar energy, wind energy, small hydro projects, waste-to-energy, biomass and alternative fuel. The new RE policy of the Government of India (GOI) aimed at generating 10,000 MW through renewable and a non-conventional source by 2012 is expected to further boost the growth rate of this sector.

Key factors responsible for growth in this sector include:

Large demand-supply gap in electricity
India is generously endowed with RE resources like solar, wind, bio-mass materials, urban and industrial wastes and small hydro resources
Low gestation periods for setting up RE projects with quick return
Conducive government policies
The large number of financing options available for capital equipment
Increasing awareness among industry that being environmentally responsible is economically sound.

The annual turnover of the RE industry in India is approximately USD 500 million. The investment in RE is estimated to be about USD 3 billion. Of the estimated potential of 100,000 MW from RE only about 3500 MW has been exploited to-date. The federal government has set a medium scale goal of electrification of 18,000 remote villages and meeting 10 percent of the country’s power supply through RE by the year 2012. These targets are in addition to those fixed for other RE devices or programs including establishing 1 million biogas plants, 1 million SPV (Solar Photovoltaic) systems for lighting, 8,000 SPV pumps for irrigation, 10,000 SPV generators, stand-alone SPV power plants, solar water heating systems, solar air heating systems, solar cookers including large steam cooking systems, 360 energy demonstration parks and establishing more solar retail outlets and solar passive buildings, among other projects.

The GOI is implementing various programs for utilizing solar energy such as solar PV (Photovoltaic) lighting and water pumping systems, solar cookers, solar thermal water heating systems and solar power generation throughout the country. Incentives include central financial assistance; 80 percent accelerated depreciation; relief in customs duty, excise duty and sales tax; soft loans; and government policies covering wheeling, banking, buy-back, and third-party sale of power are being formulated to encourage the use of non-conventional energy sources and to offset the initial cost.

India has not been successful in keeping pace in this sector, despite a large demand supply gap with respect to energy requirements and ample renewable resource availability. The U.S. is the pioneer in this sector. Several U.S. companies such as GE Power Systems, Solar Wall, NRG System, Alstom Power, Astro Power, Shell, Duke Solar and Sundanzer play a major role in the Indian market.

Although a few U.S. companies have market presence in India, industry experts feel that U.S has played a minimum role in tapping opportunities in this sector. There are projects for development that U.S. companies should consider if they are keen to enter the Indian market. Sub-sectors that continue to show a high growth rate and are expected to drive the RE market are briefly discussed below:

Solar Energy: The scope of generating power and thermal applications using solar energy is promising. Only a fraction of the aggregate potential in renewable resources and in particularly solar energy is being used so far. Processed raw material for solar cells, large capacity SPV modules, film solar cells, SPV roof tiles, inverters, charge controllers etc., have good market potential in India.

Biomass Energy: In a country like India, biomass holds considerable promise as 540 million tons of crop and plantation residues are produced every year, a large portion of which is either wasted, or used inefficiently. Conservative estimates indicate that even with the present utilization pattern of these residues and by using only the surplus biomass materials, estimated at about 150 million tons, about 17,000 MW of distributed power could be generated.

Hydro Projects: With numerous rivers and their tributaries in the country, the small hydro sector presents an excellent energy opportunity with an estimated potential of 15,000 MW. About 10 percent of this has been exploited so far. In order to accelerate the development of small hydropower in the country, the GOI also provides concessions for existing hydro projects including financial support for renovation, modernization and capacity upgrading of aging small hydro power stations.

Energy from Wastes: The rising piles of garbage in urban areas caused by rapid urbanization and industrialization throughout India represent another source of non-conventional energy. Good potential exists for generating approx. 15,000 MW of power from urban and municipal wastes and approx. 100 MW from industrial wastes in India.

Biofuels: The GOI recently mandated the blending of 5 percent fuel ethanol in 95 percent gasoline in 9 states and 4 union territories as of January 1, 2003. This mandate has created an approx. 3.6 billion liter demand for fuel ethanol in the entire country, and also further increase in the fuel ethanol component of the blend to 10% as of October 1, 2003. The significant demand growth creates a tremendous manufacturing opportunity for the U.S. fuel ethanol industry seeking to expand its investments internationally. A substantial import of fuel ethanol will be necessary to supply the product required to meet the burgeoning demand created by the currently effective GOI mandate.

Note: We are not providing a data table because, in most of the segments of this sector, no reliable statistics are available.

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Last updated 2005-03-07