I think not, and I left a response at the site which I am reproducing here as well.

”

A whole lot of numbers and data and views are thrown up by the author, but in my opinion, he has missed the wood for the trees.

Locavorism is not just about energy costs, it is also about building sustainable local economies.

“It makes no sense at all for Keralites to grow their own wheat or Punjabis to grow coconuts. That will condemn them to low yields and correspondingly high prices.”

The author has just picked on the literal meaning of the word locavorism. How much of locally growable stuff do we still get from long distances? Actually, it is quite a lot. How much of stuff that could be produced within US (say) is still procured from outside the USA, because the cost of labor in Brazil is cheaper than the cost of transporting it by ship (which is in itself a subsidized cost as fossil fuels would cost a lot more if all the environmental costs are included)? Possibly a lot, once again.

Marshall Mcluhan might think we are living in a global village, but that is not the only right perspective. We might also be forced to live in villages that are globes in themselves.

When we start living in severely constrained economies in which all three aspects of sustainability – profits, people and planet – have to be desperately taken care of, strange things will start happening.
”

Do let me know what your thoughts are, in this regard

Details discussed at the pre-bid meeting between NVVN and prospective bidders for the grid connected (5MW ) solar PV power plants and Solar thermal plants

Source: Link

==
NTPC Vidyut Vyapar Nigam Ltd (A wholly-owned subsidiary of NTPC) Welcomes & appreciates An overwhelming response from the Bidders & interest shown in the developing of Solar Power Projects under JNNSM Scheme of GOI
==
Main issues identified are related to
1. Net Worth
2. Companies Eligible
3. Land
4. Water
5. PPA
6. Grid Connectivity
7. Other General Issues
==
1. NET WORTH
Calculation of net worth will be based on the total capacity of the Project applied for, as mentioned below:
For up to 20MW @ Rs 3 crore/MW
Any addition thereafter @ Rs. 2 Crore/ MW i.e. for 35 MW the net worth required will be Calculated as:
20MW@Rs3 Cr/MW +15MW@2Cr/ MW= 90 Crore
* The financial strength of the parent/ultimate parent/group company or an affiliate can be taken for calculation of networth for qualifying at the time of submission of RfS, but before singing of PPA the required net worth is required to be infused in the company registered in India which will be known as project company.
* In case the strength is drawn from parent / ultimate parent / affiliate / group company, copy of Board Resolution authorizing to invest the committed equity for the project company /Consortium is to be submitted with RfS along with an unqualified opinion from a legal counsel of such foreign entity stating that the Board Resolution are in compliance with applicable laws of the respective jurisdiction of the issuing company and the authorization granted therein are true and valid.
* No individuals net worth will be considered for arriving at the figure of qualifying the net worth.
* Only the asset forming part of the balance sheet shall be considered for arriving at the net worth of company.
* The intangible assets will not be considered for arriving at the value of net worth.
* In case of land only the book value will be considered.
* The value of land/any other assets will not be revalued for calculating the net worth.
* No commitment letters from Investment companies will be considered as part of net worth for qualifying requirement. Similarly any form of loan to the company will not be part of the
net worth
* Net worth means the free reserves plus equity excluding revaluation reserves and intangible assets if any. The debts can be drawn over and above this from the bankers/financial institutions.
==
1.A WHO CAN CERTIFY
* Owning of net worth either by the bidding company / bidding consortium need necessarily be certified by practicing Chartered Accountant of India or equivalent qualified accountant of respective countries ,in case bidding company/ consortium member is of foreign origin.
* The Board Resolution can be signed either by a Director/ Managing Director / Company Secretary.
* Only the applicable Board Resolutions are required to be submitted.
* The RfS and all the supporting documents to RfS are required to be signed by the authorized signatory of the bidding company or the bidding consortium.
* The net worth certificate can even be signed by the Statutory Auditor also.
==
1.B Selection on the Basis of Discount
* In case of bidding ,it will be the amount of discount in paise/Kwh which will be the basis for selection of the project irrespective of the tariff chosen i.e.whether with normal rate of depreciation or with accelerated rate of depreciation.
==
2. Companies Eligible to Bid
1. Companies incorporated under Indian Companies Act, 1956. Bidding on stand-alone basis.
2. Companies incorporated under Indian Companies Act, 1956 and forming consortium for the purpose of
bidding.
3. Companies as above along with Foreign Companies and forming a consortium for the purpose of bidding.
4. Foreign Companies forming a consortium for the purpose of bidding.
5. Foreign Companies registered under the equivalent laws of the respective countries. Bidding on a Standalone basis.
6. Consortiums consisting of Indian Companies or Consortiums consisting of Foreign Companies or a mix of both shall be required to form a Project Company registered under the Companies Act, 1956 before signing of PPA.
7. Foreign Companies bidding on a Stand alone basis also required to form a Project Company registered under the Companies Act, 1956 before signing of PPA.
8. Guarantee/Bonds submitted by Foreign Companies must be submitted through Banks having branches in India/correspondent banks in India and such Bank Guarantees issued by Foreign Banks should be endorsed by the Indian branch of such Foreign banks. In case of claim on Bank Guarantee, same shall be paid by the Indian branches of such foreign banks.
==
3. Land
1. Location details shall be indicated by the bidder in the Format 6.8 and a letter from STU for technical feasibility. However, undertaking is to be submitted as per Format 6.7 for ownership of the land, suitability of the land for industrial use, and an Affidavit certifying the total land required will be in clear possession with the bidder at the time of Financial Closure.
2. Change of Location is not desirable, however, if the bidder is required to change the location of land after submission of RfS due to exceptional circumstances, the bidder would seek approval for the same from NVVN. On approval documentary evidences as per Format 6.7 will be required to be submitted.
3. Change of location of land from one state to another state after submission of RfS is not permitted.
4. For any change of location within State if accepted,fresh letter from STU as per Format 6.8 has to be submitted.
==
4. Water
1. Bidder shall make arrangement for Water required for the project as per the technology finalised and submit documentary evidence in the form of inprinciple approval from State/Local Authority for the quantity of water required for the project along with response to the RfS.
2. Quantity of Water for the technology considered shall be furnished as assessed by the bidder along with RfS will be accepted.
3. Ground water as source may be accepted only up to 10MW capacity.
4. In the case of a consortium, If water commitment is arranged by a member of the consortium other than lead member, disclosure has to be made in the Application for RfS that the same commitment is specific for the project and that same water approval has not been considered in other application for any other project.
==
5. PPA
1. Payment Security has been provided to solar Power Developers in form of Letter of Credit.
2. The default in payments is backed by the opening of Escrow account having pari-passu charge for both SPD & NTPC Coal stations power from the incremental receivables on account of sale of bundled power from the Discoms.
3. Diversion of Power is envisaged in case of default in payment by Discoms.
4. Further, an arrangement to make payment from the budgetary support is envisaged from the GOI for which modalities shall be worked out in case of continuing default of payments for more than 3 months.
5. Other provisions related to Rebate on timely payments, Late payment surcharge on delay beyond the due dates have been reviewed and shall be maintained.
6. The guidelines specify the maximum time duration of commissioning of Projects. These shall be maintained as per the guidelines.
7. Delay caused due to Force Majeure is subject to review on case to case basis. No change in Force Majeure provisions is envisaged at this stage in PPA.
==
6. Grid Connectivity
1. The connectivity from the pooling Sub-station up to the STU Grid Sub-Station to be arranged by SPD in consultation with STU.
2. Metering of Energy shall be at the point where power is delivered to the STU.
3. Transmission Line charges/Losses for the STU system shall be paid by NVVN and recovered in the bundled tariff from the Discoms.
4. Deemed generation is not admitted.
==
7. Other General Issues
A. Bank Guarantee
1. All the Bank Guarantees are required to be submitted by the Bidding Company / Consortium from the list of Banks mentioned in PPA/RfS.
2. Bank Guarantee towards EMD/Bid-Bond in case of Bidding Consortium shall be submitted by Lead Member.
3. If Bank Guarantee is submitted by a Foreign Company, the Bank Guarantee can be issued from the list of banks mentioned at 1 above from outside India also.
4. Such Bank Guarantees are to be routed through the Indian branches of such Banks and endorsed by the Indian branch.

A. Bank Guarantee
4. In case these are submitted by other than the project company (Indian company which is ultimately going to sign the PPA with NVVN) these BGs are required to be of transferable nature so that these can be transferred on or before signing of PPA in favour of Project Company.
5. Bank Guarantee submitted by an Entity other than the Bidding Company or Lead member in case of Bidding Consortium shall not be accepted.
6. In the event of any claim on the bank Guarantee, the same shall be claimed on the Indian branch endorsing the Guarantee and the amount shall be payable by the concerned Indian branch of such Foreign bank.
7. Validity of Bank Guarantee for EMD required is 210 days from the last date of submission of RfS.
8. The value of the bank guarantee required to be submitted along with RfS has to be split into 3BGs of the required value in the ratio of 20:40:40.
9. Guarantee Formats and commitments for EMD and Bid Bond are different from that of Performance Guarantee Format and thus EMD amount and Bid Bond amount is required to be converted into Performance Guarantee Format for successful
bidder after issue of LOI so that total Guarantee amount as Performance Guarantee is valid up to the required end date.
10. At the time of signing of PPA the total Bank Guarantee value (after conversion of EMD, Bid Bond and Performance Guarantee) shall be submitted
11. Performance bank guarantee is required to be submitted at the time of signing of PPA.

B. Project Report
* No Project Report is required to be submitted along with RfS.

C. Availability of RfS & PPA document
* RfS and PPA Documents for Solar PV & Solar Thermal Projects are available as free download from web-site of NVVN.
* However, RfS and PPA Document can also be purchased from NVVN Office against payment of Rs.5,000/- for each of Solar PV & Solar Thermal project.

D. Payment Security Mechanism
* The following mechanism has been considered for payment security to Solar Power Developers:
i) NVVN shall make the payment to the SPD on raising of Bill between 5th to 15th of the month
ii) Letter of Credit – A irrevocable revolving Letter of Credit (LC) amounting to 100% of average monthly billing shall be opened in favour of the Solar Power Developers.
iii) Escrow Arrangement
An Escrow Arrangement shall be provided in favour of Solar Power Developer so that incremental receivables received by NVVN shall directly flow to the SPD & NTPC Account.
The SPD & NTPC shall have a pari-pasu charge on the incremental receivables.
iv) Open market Sale
In case there is continuous default in payment by Discoms, then NVVN shall sell the bundled power on Short-Term basis and the amount so realised realized shall be utilised for payment to SPD & NTPC.
v) Government Support
GOI, Ministry of Finance has given the consent that a mechanism shall be developed by MOP, MNRE and NVVN so that any Revenue loss to NVVN shall be provided by Ministry of Finance.

* In a foreign company, in case calendar year instead of financial year is used for compilation of accounts the same will be considered.
* They will be required to submit the accounts for the calendar years 2006,2007,2008 & 2009.
* In case the accounts for the financial year 2009-10 are not audited , the unaudited account are required to be certified as true and fair by practicing chartered
accountant.
* Bidding Company can form a project Indian company before signing of PPA.
* The equity structure offered at the stage of submission of RfS has to be maintained till the execution of PPA.
* Once PPA is executed, at-least 26% of the committed equity (having voting right) has to be maintained for atleast one year from the COD of the last unit of the
project.
* The controlling shareholder being the lead member has to be nominated at the time of submission of RfS,
* This can not be changed till the expiry of one year from the COD of the last unit of the project.
* The power to direct in case of group company can be drawn through the ownership of securities, some agreement or any other
arrangement or otherwise.
* In a bidding consortium each share holding company needs to satisfy the net worth requirement on a pro rata equity commitment basis.
* Equity equivalent to 74% of the project company can be divested after signing of PPA without disturbing of controlling share holder and lead member equity atleast to the extent of 26% of the net worth.
* Ultimate parent shall mean a company, which controls/owns at least 26% equity either directly of indirectly in the parent and affiliates.
* A company having share less than 10% in two bidding companies then both the bidding companies can be considered provided it does not have any other relationship such as affiliate/parent/ ultimate
parent/group company with each other or with any other bidding company/consortium.
* The copies of all the Balance Sheets whether of parent /affiliate from where the financial strength is drawn has to submitted along with the RfS documents.
* No specific format has been designed for issuing an unqualified opinion by the legal counsel of the foreign entity. The intent used in the format must be clear.
* The company having the maximum number of shares (having voting right) has to be a lead member.
* The bidding company and project company could be the same company or it can be separate companies.
* An appropriate object clause of the memorandum must contain a provision for entering into this business of generation of electricity.
* Any member having ownership/leasehold rights over
the required land must satisfy the criteria of land possession. Further, it must not have applied with any other Company/consortium.
* There is no restriction on the number of companies joining the consortium.
* If at any point of time it is known that the asset are not owned by the project Company, the applicable tariff will get changed to the tariff based on accelerated rate of depreciation with the applicable discount from the COD of the first unit of the project.

Interesting. That’s a lot of money. And Asian Genco is not exactly a household name. I thought it was worth doing a bit of research to understand the company better.

The company web site ( http://www.asiangenco.com ) says the following:

“Asian Genco Pte Ltd is an infrastructure development company with investments in power generation assets and services business. The company has a target to build a portfolio of 10,000 MW of power generation assets by the year 2012. At current portfolio size of nearly 4000 MW with an estimated total capital outlay of ~ USD 4.5 bn our presence in India already establishes us one of the largest clean power companies in the country.”

The company was incorporated in November 2004 in Singapore (That’s not a lot of time). Since then, it has invested in a portfolio of hydro, thermal and non-conventional generation assets for an aggregate capacity of nearly 4000 MW. AGPL owns controlling stakes in all the portfolio assets. During the same period, AGPL has also built a complementary portfolio of service businesses focused on engineering, technical and project development for power projects.

The projects include three hydel power projects in the states of Himachal Pradesh and Sikkim, one gas based & one coal fired thermal projects in the state of Andhra Pradesh and a wind farm in the state of Gujarat. Among these is a project called Teesta III, among the largest hydro projects in the Indian private sector, with a capacity of 1,200 MW, and a coal-fired supercritical thermal project in Andhra Pradesh with a 1,320 MW capacity.

Well, it’s fairly clear that the company is thinking big, but was that the key reason for the large fund infusion? Was there something special about the team? I thought I’d look into the team at the helm – but unfortunately the team page at the web site does not say much ( http://bit.ly/bQ8dqc ).

Two other divisions of the company throw some light on the additional strengths of the company: Its fuel division and services division.

Fuel – Global Fuels, its wholly owned subsidiary engaged in acquisition of coal mine interests in Indonesia, and developing the transportation and port related infrastructure for supply and trading of coal in India. Global Fuels is expecting a targeted annual production of 30 Million Metric Tons by 2012. This is getting interesting. It is well known that Indonesia is likely to be the source for increasing amounts of Indian coal imports. Global Fuels securing a supply chain for coal imports naturally makes it hot property.

Services – Asian Infratech Pte Ltd is its wholly owned subsidiary that holds a controlling interest in Energy Infratech Pvt Ltd and employ about 500 engineering, construction, project management and project finance professionals. The project development team of Energy Infratech has collectively more than 1600 years of project management experience. Energy Infratech provides project management services from concept to commissioning. Now, this could have been an important factor as well – a large, skilled manpower force could prove to be an invaluable asset.

I think I’m getting the picture. What’s reported in general news about the company barely scratches the surface. I see the following as the key reasons why the company got such a huge funding:

1. It is definitely thinking big
2. It appears to have a diverse portfolio of energy assets, and in different parts of the value chain – from feedstock, to logistics, to project implementation and power production.
3. Its diverse assets provide for a well-balanced portfolio in which specific assets could be leveraged well and excellent synergies achieved.
4. Most of its projects are in traditional energy (as opposed to alternative energy), which implies achieving scales and profitability with a high degree of certainty, even if the IRRs are not very high.

I’d like to keep an eye on this company. It sure is an interesting one.

The total primary energy supply in India has grown at a compound rate of around 3.4 per cent since independence to reach 537.7Mtoe (million tonnes of oil equivalent) in the year 2005 (IEA 2007). While commercial primary energy grew at 5.3 per cent over the period, non-commercial energy grew at only 1.6 per cent, which is a reflection of industrialisation.

Let’s look at the energy consumption picture slightly differently: India country needs energy primarily for electricity, transportation and for industrial and domestic heating. Transportation fuels are currently primarily diesel and gasoline, electricity is mainly produced from coal, and to some extent from natural gas, large hydro power and nuclear energy. Industrial and domestic heating and cooling uses coal predominantly and to some extent, biomass. On all these three fronts, India faces shortages. On electricity, India’s peak power shortages are projected to worsen from a 17 per cent peak deficit in 2009 (shortfall of 23 gigawatts of peak supply) to close to a 25 per cent peak deficit by 2015 and a resultant shortfall of more than 60 GW of peak supply. On coal, our domestic production is short of our demand, even though we have large reserves of coal. On natural gas, our imports have been continuously increasing, even though the country has been successful in identifying rich natural gas deposits in the last few years.

The following is a summary of the International Energy Agency forecasts in its World Energy Outlook for India for 2030: ( Source: http://eai.in/blog/2009/03/india-energy-outlook-to-2030-iea.html )

• India’s primary energy demand will more than double by 2030, growing an average 3.6 percent every year.
• India will become the third largest net importer of oil before 2025 after the United States and China.
• Net oil imports will rise to 6 million barrels per day in 2030.
• Electricity generation capacity, most of it coal fired, will more than treble from 2005 to 2030.
• About 96 percent of the population will have access to electricity in 2030 from 62 % in 2005.
• Coal imports will increase almost seven-fold, accounting for 28% of India’s total coal needs in 2030 from 12% in 2005. (Wow! This for a country which has one of the largest reserves of coal in the world!)

The above data make it abundantly clear that India needs to do something, and fast, in order to get its energy supply chain in order.

Let’s look at what India is doing for the three main inputs – coal, oil and natural gas.

Coal
For a country that is supposed to have coal for the next 200 years at current consumption rates (it has about 100 billion T of proven reserves), it is indeed surprising that the coal industry would be acquiring coal assets worldwide. But that precisely is what’s happening. Coal India for instance has been acquiring coking and non-coking coal blocks in Indonesia and Mozambique in the last few years. The current consumption of coal is about 600 million T per year. Here’s an interesting white paper on India’s coal sector – http://bit.ly/cy8I0R . For the past three years, India has imported as much coal as is possible, limited more by lack of port capacity than international prices. In the year 2009-10, it imported about 60 million T and this number is only expected to increase – it is expected to hit 100 million T within the next three years. What’s the main reason for us to import coal when we have adequate reserves? Simply put, increased coal production will not come cheaply. The estimated investment need outlined in Vision Coal 2025 is US$ 28-30 billion to enhance production capacity to over 1 billion T /year. The actual investments that have been put in so far have been much less than this required amount.

Natural Gas
India’s natural gas demand is expected to nearly double to 320 million standard cubic meters per day by 2015, global consultancy firm McKinsey said in a study recently. The company said the current demand of 166 mmscmd (million cu meter per day) made up of nearly 132 mmscmd supplies from domestic fields and the rest from imported LNG – is likely to rise to at least a minimum of 230 mmscmd and a maximum of 320 mmscmd by 2015. The Hydrocarbon Vision 2025 envisages increasing the proportion of natural gas in total energy consumption from 8% now to 20% by 2025. To manage this impending growth in the natural gas industry, the industry will require investments of around $40 billion to $50 billion across the value chain. With these investments and demand growth, the industry revenue pool could double to $50 billion by 2015 from $25 billion today.

Oil
This is obviously where India faces a steep problem. Our country has little oil by itself. The country consumed 3 million barrels per day in 2009, up from about 1.2 million barrels per day in 1990. The production has however increased relatively less – from 0.7 million barrels per day in 1990 to about 1 million barrels per day in 2009. (Source: EIA – Govt of USA). The country thus imports about 70% of its oil, the main sources being S Arabia ( 23%), Iran (17%), Nigeria, Iraq, Kuwait & UAE (about 10% each). These numbers will illustrate why India is ever careful when it comes to criticising whatever is happening in the middle east (and there is always a lot happening out there that is worthy of criticism!). The recent findings of oil in KG Basin by Reliance and in Rajasthan by Cairn Energy are likely to add significantly to domestic production. (Cairn Energy estimates that it will be able to achieve peak production from its Rajasthan fields of about 0.24 million barrels per day in 2011 – http://bit.ly/bt5UVn ).

Thus:

1. In natural gas, India imports about 15% of its total consumption, but the imports could increase with the fast growth of industrialization
2. For coal, India imports a little over 10% of its requirements, and this again is likely to increase steeply over the next five years with production unable to keep pace with increase in demand
3. In oil, while India has been pleasantly surprised by the recent oil finds in Rajasthan, it will predominantly (over 60%) rely on outside countries for oil for the foreseeable future.

So, what is India’s strategies to ensure that its imports of oil, coal and natural gas are secure, given that geopolitical uncertainties can seriously jeopardise such security? (One needs to only look at the troubles many European countries faced when Russia decided to cut off gas supplies to them, possibly to show that they can still be a bully worth fearing).

1. Strengthen Ties with Existing Sources – The most obvious strategy is to make sure that the ties with Middle East are actively maintained. Well, there is little doubt that the policies of many Middle East countries are unacceptable to India (Iranian nukes for instance), but that is realpolitik for you.
2. Diversify Sources – India is buying up stakes in oil and natural gas fields worldwide, and is also working overtime to please many countries that have rich deposits of fossil fuels. For instance, India has offered to help Nigeria to build infrastructure, especially power plants, emulating China’s strategy to secure access to oil and gas blocks in energy-rich Africa. India is also actively scouting deals in countries other than Middle East and Africa as well. Recently, Oil & Natural Gas Corp., India’s biggest energy explorer, expressed interest to buy oil-sands assets in Canada, according to latest news ( http://bit.ly/9EFMWB ).
3. More Support from Domestic Supplies – The country is trying hard to ensure that the domestic supplies can support it more than what it does right now. It is doing this by increasing the investments (though not to the extent that is required) and by easing the the earlier restrictive policies for private sector investments (For instance, the NELP – New Exploration Licensing Policy – has allowed private players to participate in the exploration of oil and gas fields).

Of the above three, the second (Intensifying Efforts to Diversify Sources) is probably getting the most attention as we read day after day how ONGC Videsh is acquiring this oil asset or how our petroleum minister has had a newfound interest in visiting some African countries.

I guess the smartest long term strategy is to invest heavily in renewables, but then that is long term. In the short and medium term, we have to be more of actioneries than visioneries when it comes to fuel. Call it Realfuelitik.

References
Energy Strategies in China, India and Major Countries’ Views – http://bit.ly/cfs1ID
The Future of India’s Energy Security – http://bit.ly/bzisdV
The Oil and Gas Sector Overview in India 2009 – http://bit.ly/jTMZX

Renewable Energy Investment Could Hit $200 Billion in 2010 – A new report by Bloomberg finds that renewable energy investment may increase by 23% worldwide this year and could hit $200 billion. Renewable energy investment was $162 billion last year, but Bloomberg predicts that it will be somewhere between $175 and $200 billion this year. $200 billion. That’s some number.

Astonfield to Invest $2 Billion in India’s Renewable Energy Sector – Renewable energy player Astonfield ( http://www.astonfield.com ) is planning to invest around $2 billion in India over the next five years to generate about 1,000 MW of power. Astonfield Renewable is the Indian unit of the US-based infrastructure major Astonfield Management. Much of the proposed $2 billion investment will be for building solar-powered projects with a capacity of 500 MW. Astonfield has also announced an agreement with French energy major Areva for building biomass power generated plants of 100 MW at an estimated cost of Rs.550-630 crore. See also: http://bit.ly/cMcov6

Renewable Energy Investment Increase in Emerging Countries – Financial investments in renewable energy in emerging nations increased from $1.76 billion in 2001 to $65.86 billion in 2009 at a CAGR of 57.63% for the period 2001-09. China led the investments in Asia, with a total investment of $11.48 billion, mainly in wind and solar PV projects. Total investment in India grew over 100% to $7.17 billion in 2009, of which equity offerings accounted for $3.6 billion. In 2008, India’s renewable energy investment had grown by 12%, with an investment of $3.7 billion – http://bit.ly/9CVPl6

Indian Solar Investment Signals Greater World Bank Support for Renewable Energy – The first commercial utility solar project in India by Azure Power received a $10 million investment from IFC, a World Bank affiliate as the international lending agency steps up its support of renewable energy in emerging economies. It also marked IFC’s first investment in solar power and its first clean tech investment in South Asia. The World Bank Group has pledged to increase its investments in alternative energies by more than 20% a year. In fiscal 2009, the group boosted support by 24% to $3.3 billion. – http://bit.ly/b9cC48

India Renewable Energy Investment Break-up – In 2008, the total investments in renewable energy was about $ 3.7 billion. It is instructive to see where the money went. * Wind energy sector grew at 17% from $2.2 billion to $2.6 billion. Well, in fact wind dwarfs everything else. * Investments in solar grew an impressive 1800% to $ 347 million over 2007, but this awesome number was possible only because the investment in 2007 was pathetically low – $18 million. The major part of investment in solar energy has been spent for setting up module and cell manufacturing facilities. * The investment in small hydro projects grew about four-fold to $543 million in 2008. * Biofuels – The growth in biofuels fell by 80% from $251 million in 2007 to $49 million in 2008.

Energy Efficiency Could Save India 183.5 Billion kWh – With an investment of US $10 billion dollars in energy efficiency improvements, India’s economy would benefit from its potentially vast annual energy savings of 183.5 billion kilowatt hours, according to a new report from the World Resources Institute (WRI). http://bit.ly/c0JJH1 . One can expect significant investments to pour into the energy efficiency segment in India, as this is a low hanging investment fruit that can produce almost immediate returns with attractive payback periods for the companies investing in such projects.

India’s Power Sector will Require Hundreds of Billions Over Next Decade – India could require about $250 billion investments over the next eight-nine years if it wants to grow at a moderate 7.5-8 percent compound annual rate, according to a CII report (http://bit.ly/9TWNOK). Oh OK, another report says that would be $600 billion, not $250 billion, thank you! – “India will need to spend $600 billion on adding capacity to meet electricity demand, which may triple to 3,35,000 megawatts by 2017 if the current growth rate is maintained, according to consultant McKinsey & Co.” – http://bit.ly/dN5oM

The topic of disruptive business ideas has been hotly debated for the past few years, and deservedly so. Let’s look at some of the disruptive technologies and the ones they replaced:

• Desktop publishing <- Traditional publishing
• PCs <- Minicomputers and mainframes
• Telephones <- Telegraphy
• Cell phones <- fixed line telephony
• Retail medical clinics <- Traditional doctor’s offices

(For those who like to know more about disruptive technologies, here’s a nice reference from Wikipedia – http://en.wikipedia.org/wiki/Disruptive_technology ).

I was trying to see how, using insights from this paper, one could create markets for renewable energy, which is considered to be a disruptive technology. While thinking along these linkes, I was specifically struck by one of the six key strategies provided in the paper: “Disruptive businesses either create new markets or take the low end of an established market.” Specifically, Prof Christensen says that it might be a good idea for a disruptive technology to attack an underserved market niche before expanding to other segments.

For renewable energy to become a truly disruptive technology, this could be a fairly effective idea.

Right now, many companies in renewable-based power production or fuel production are trying to attack mass markets for their products. And as a result, many of them are failing to impress. The key reason for failure is that most of these segments really might not need an alternative that costs more than the traditional.

A typical example is solar PV.

Power from solar PV costs a lot – heck of a lot. It costs about Rs 15 to produce one unit of power (coal produces it at Rs 2.5!). If you are looking at residences using solar PV, the payback period is 15 years or more, depending on the region of your residence. 15 years payback period is a very long time, and is unacceptable unless the product is critically required.

Governments all over the world want their people to adopt solar PV. So what do they do? Provide huge subsidies and incentives. The logic is, as more and more countries start using solar PV using these subsidies, there will be more investments in solar PV manufacturing and eventually, larger investments in R&D and economies of scale will bring the costs down. Everybody is happy.

This indeed is a possible scenario, and let’s all hope it happens.

My question is: Would it be better if producers and investors in renewable energy try to ensure that their products are targetted at segments underserved by the currently available options?

I’m not sure if it would be better, but I do think it is an attractive option.

Sticking to solar PV, let’s consider the following segments:

1. Companies utilizing diesel gensets
2. Telecom towers in remote areas

Currently, generating power using diesel generators costs about Rs 15 per kWh, and will only increase in future because diesel prices are unlikely to go down. This means that solar PV can produce power at a competitive price, today, and WITHOUT SUBSIDIES.

Similar is the case for remote telecom towers which do not have grid connectivity or have erratic grid power. In their cases, in addition to the cost of power using DG sets, there is an additional logistics cost involved in transporting diesel to such remote locations. Solar PV could win hands down over traditional solutions, with NO GOVERNMENT SUPPORT.

The above two segments face problems that require solutions. On the other hand, I do not understand what problem is being solved by providing electricity to urban consumers who in many parts of the world are getting uninterrupted power at costs that are only about a quarter of what solar power costs today.

Yesterday, I read about a rather unique area where solar PV is being used in the US. Here, the traditional trash cans have been dumped for trash cans with solar converters. Listen to the idea – The regular trash cans in the US are being replaced by solar compacters that compact the trash in the can, thus storing more in the same volume and requiring regular visits from the trash trucks. The cans sure cost a lot ($4000 a piece) but because of the compaction, there are cost reduction economics that could eventually justify the cost. ( http://bit.ly/dqmaPm )

Yet another example of using renewable energy to underserved segments is the use of solar lanterns for unelectrified villages in India. To those folks who have no electricity, having access to electric light must be such a wonder that many of them might not mind the premium they pay for it.

It was a somewhat similar experience I had earlier today. I had a call early in the morning. The caller asked me if I could help him in getting solar panels set up in his house. I politely informed him it was an expensive idea and told him it could take close to twenty years for a break-even. He insisted that I still put him on to a dealer of solar panels. Intrigued, I asked him where he was calling from. He was calling from a village near Villupuram, a town in south India. He said he might not mind the long payback period because he wanted to get rid of the long hours of power cut he faces everyday.

In all the above examples, these are segments that have specific problems that can be solved by renewable energy. In addition, these segments have not been targetted by any specific business, at least not in a big way (though it is changing now in India, with a number of solar companies keen on targetting the telecom towers). Thus, most of these segments, being underserved by the traditional options, will more readily adopt renewable energy, and even be willing to pay a premium for the same.

In my opinion, entrepreneurs will do well to identify such underserved segments that have a real need for renewable energy. At the very least, they will not have to worry about depending on government dole-outs.

Originally I was asked to co-ordinate a workshop in which I would be meeting with a few people interested in investing in the Indian renewable energy sector. But I was later asked if I could also present at the conference that came after the workshop.

My presentation focussed on the renewable energy sectors with potential in India, details of investments into these sectors, and also the opportunities opening up in the revamping of the electricity grid.

I am providing the highlights and the key take-aways from the event.

1. The workshop was attended by about 10 people; this group comprised 3-4 investors (private equity companies and banks), while the rest were either from government departments or companies keen on knowing more about investing in renewable energy, and not always specifically in the Indian context.

2. The key inputs that the attendees wanted were the potential for India for various renewable energy sectors, the government incentives for the sector, and the costs and cost breakdowns for each sector. I provided these details for the following renewable energy domains: solar PV, solar CSP, wind (onshore), biofuels, biomass-based power, geothermal, small hydro and large hydro. Most interest was for solar (both PV and CSP), biomass-based power and small hydro.

3. The conference was attended by about 70 delegates, with a majority of them from the investing community. That was a bit surprising, as I would have thought that those who needed the money would be present in as high a number (if not higher) than those who had it. But well, there it is! I was able to collect a lot of useful inputs from the conference as the speakers represented both the invested community (mostly private equity companies) and the investee community (developers of renewable energy projects).

4. The overall impression I had of the investing community was that they are keen on investing in renewable energy (in India as well as elsewhere) but would like better clarity on the risks involved and the exit route. As expected, most PE firms would rather not get in very early but wait until a growth stage had been reached. The developer/investee community were as expected bullish about their sectors, but I felt some of them still were not entirely sure about the how to make their projects far more cost competitive – it’s of course well known that government incentives are the key to make these projects economically sustainable, but some insights on how these projects could eventually stand on their own would have been very useful.

It was thus a very useful three days I spent in Singapore (not to forget the fourth day when I took time off and went round the city in a hop-on-hop-off bus trip – some pictures from my shoots on sustainability in Singapore – http://www.enexions.com/diary.php?id=117&act_id=29 ).

If you are interested in obtaining the presentation I made at the conference, please send a note to me ( Narasimhan Santhanam) – narsi@clixoo.com .

Motivated, I decided to put together an article on offshore wind trends worldwide, with attention being given to specific efforts in the Indian context.

Here’s a bit of background on offshore wind, and some comparisons with onshore wind.

Efforts into commercialization of offshore wind have been underway for the past few years. Most of the initial efforts were in the waters of Northern Europe, where wind speeds in excess of 8 m/sec are frequently available ( to make offshore wind generation economically viable, a wind speed of more than 6.5 m/sec is needed ).

The advantages which offshore wind farms offer over onshore wind farms are quite well known. Onshore wind farms are often subject to restrictions and objections – objections based on their negative visual impact or noise, restrictions associated with obstructions (buildings, mountains, etc.), and land-use disputes or limited availability of lands. These reasons explain part of the growing importance of offshore systems, but the critical advantage offered by offshore wind farms is really the higher and more consistent wind speeds, and consequently, higher efficiency.

Offshore wind systems are costlier than their onshore counterparts, both in capital and operating costs. A summary of indicative cost data provided below is insightful.

Onshore
Investment of about $1.5 million per MW
Levelized cost of 6-7 cents per kWh
O&M – 1-3% of capital costs
May be built in smaller units

Offshore
Investment of $2.3 million per MW
Levelized cost of about 10-11 cents per kWh
Higher O&M – 40$ per kW and 0.7 cents per kWh variable
Large turbines and farms required

In spite of the higher costs and the uncertainties involved in offshore wind, research in this sector has been significant, and the main reason is the potential offered by offshore wind turbines, especially in lands close to water.

Before any others, the continent of Europe made rapid strides in offshore wind farms.

An EWEA (European Wind Energy Association) report estimates that between 20 GW and 40 GW of offshore wind energy capacity will be operating in the European Union by 2020. A fully developed European offshore wind resource could deliver a capacity of several hundred GW to supply its future energy demands. (Source: http://bit.ly/bxlEKi )

Among the European countries, the UK and Denmark have been leading in offshore wind.

UK has a current installed capacity of about 700 MW, with 228 offshore wind turbines operating in UK waters. A further 1,407 turbines are in construction and approved, totaling 4,598 MW. Just a few days back, E.ON flicked the switch on Scotland’s first full-scale wind farm, bringing the 180 MW Robin Rigg project in the Solway Firth online. Within a few months, the UK will have 1 GW of installed capacity in offshore wind farms. This is a large number, even if it pales in comparison to the total amount of onshore wind worldwide (by end of 2008, the onshore wind energy capacity was over 120 GW), because unlike onshore wind, offshore wind is a much less explored resource. Worldwide, the total installed capacity was less than 1.5 GW end of 2009 – clearly, the leadership that the UK has in offshore wind is significant.

Other European countries that are prominent players in offshore wind are: Denmark, Netherlands, Sweden and Ireland. All these countries already have operational offshore wind farms.

Recently, at the Copenhagen climate summit in December 2009, nine European nations vowed to create a supergrid for sharing offshore wind power. The North Seas Countries’ Offshore Grid Initiative includes Denmark, Germany, France, Belgium, the Netherlands, Luxembourg, Sweden and Ireland. A supergrid connecting all those nations may not only create a wider electricity market, but also encourage offshore wind power development.

Clearly, when it comes to offshore wind, Europe is way ahead of the rest of continents.

The Chinese entry

China has big plans for offshore wind. China’s total wind potential is about 1000 GW onshore and about 250 GW offshore ( http://www.chinadaily.com.cn/bizchina/2009-06/18/content_8296706.htm ). China’s total installed electricity capacity is about 650 GW, so offshore wind has the potential to supply a large percentage of China’s growing electricity needs.

USA

USA is supposed to have an offshore wind energy potential of about 1000 GW. That’s a lot, and it is almost the same as USA’s total installed capacity ( about 1100 GW ). The country is thus keen on offshore wind as well (they even have an exclusive association for that – http://www.usowc.org), though the progress in USA is admittedly much slower than the happenings in China in this context (for more, see here – http://news.cnet.com/8301-11128_3-20001369-54.html ). There also exists a nice white paper on on the US efforts in offshore wind – http://www.windpoweringamerica.gov/pdfs/workshops/2005_summit/musial.pdf .

Japan

Surprisingly, Japan has not proceeded as much as many European countries in offshore wind. Since 2003, the northern Japanese city of Hokkaido has been harnessing offshore wind with two 600-kilowatt turbines located inside a breakwater less than one kilometer off the coast. This also happened to be the first offshore wind installations anywhere in the world outside of Europe. But since then, not a lot of water appears to have flown under the bridge, save for some efforts that were reported in Aug 2009 when Tokyo Electric Power Company (TEPCO) and the University of Tokyo announced they were planning a new project to investigate offshore wind power using a wind observation system off the Pacific coast of Japan. The project is scheduled to be carried out from August 2009 through March 2014,

We finally return to India.

After the brief chat with Rex, I was wondering whether I had missed out on any happenings in the Indian offshore wind scenario. Upon returning to office, I tried digging up on this, and I asked my colleagues if they knew of any developments in this regard. Cutting a long story short, I drew a blank.

I drew a blank even after hours of search. There seemed to be almost no data about offshore wind potential or efforts in India. I decided to check out with CWET (Centre for Wind Energy Technology, http://www.cwet.tn.nic.in ) and I finally figured that some initial efforts had indeed been undertaken by CWET. A working group consisting of expert members from National Institute of Ocean Technology (NIOT), Indian Institute of Technology Madras (IITM), Nuclear Power Corporation of India Limited (NPCIL), National Thermal Power Corporation (NTPC), Indian Oil Corporation (IOCL) and C-WET had, in late 2008 or 2009, started studies for feasibility of offshore wind measurements. The team had initiated the work on getting the clearances for offshore measurements near Dhanushkoti ( close to Rameswaram ). For a project planning to kick start offshore wind measurements, the team visited Dhanushkoti and collected the GPS co-ordinates with the help of land surveyors.

The main objective was to take up wind resource assessment studies in the southern tip of India, particularly at two locations viz. Koodankulam (Kanyakumari) and Rameshwaram (Dhanuskodi), and to examine the feasibility for setting up offshore wind farms. The aim was to collect data set of wind speeds, wind direction and to gather sea temperature, sea current characteristics, and waves data for environmental research, design, and development of offshore wind farms, and to assess potential impacts of these measured parameters on the wind farms etc.

I was not able to get any more data about the results of this project, but my colleague was able to point me to some preliminary data which suggested that the wind power densities are about 250–300 W/m2 by the Arabian Sea (6-6.4 m/s), 250–600 W/m2 (6-7.8 m/s) by the Indian Ocean, and 150–500 W/m2 (5.1-7.4) by the Bay of Bengal (Rameswaram area). I am not sure how authentic the data is, but let’s say that this is some data for me to work around with.

A minimum wind speed of about 6.5 m/s is required for offshore wind farms, and as suggested earlier, many regions in Northern Europe oceans have wind speeds much in excess of 6.5 m/s. The data presented earlier indicates that India is not blessed with such high offshore wind speeds. At the same time, the data also shows that there is potential in certain regions, even if it is not as high as what is available in northern Europe. Given these data, I reckon that it at least merits more research?

Sadly, on the corporate side, there have been few, if any, efforts on offshore wind. The only piece of news that indicated some corporate interest was from the Oil and Natural Gas Corporation (ONGC), when, in April 2009, it announced its plans to tap offshore wind energy. After setting up its first 50 MW onshore wind energy farm in Gujarat, ONGC announced it was planning to tap offshore wind potential. In this context, ONGC held a series of meetings and collected a myriad of data related to offshore wind potentials. The company had mentioned at the time that a detailed study would be conducted to find out the viability of this offshore project. However, after this announcement, little detail has been forthcoming on this.

These are all the data I have on offshore wind developments and progress in India. Very little, as you will surely agree.

So, there we are. Many large economies worldwide (USA, China, UK, Japan…) are making efforts into offshore wind, albeit at different speeds…India is definitely lagging far behind these countries. At the very least, I reckon it makes sense to accelerate our research to identify the actual potential of offshore wind in India ( in terms of so many GW…). If the review shows a high estimate for the potential, it merits further investment and commercialization efforts.

References

Delivering Offshore Wind Power in Europe – http://www.ewea.org/fileadmin/ewea_documents/images/publications/offshore_report/ewea-offshore_report.pdf

A useful FAQ on offshore wind from AWEA – http://www.awea.org/faq/wwt_offshore.html

West Bengal Biodiesel producers looking for tie-ups with telecom tower firms – West Bengal pollution board has asked all telecom towers to use at least 30% biodiesel in their generators Producers of biodiesel, banned from selling the fuel as a transport fuel, are looking to enter long-term supply arrangements with telecom tower operators, who use diesel gensets for power backup purposes. India has more than 20 biodiesel producers with a combined capacity of 1 million tonnes a year – http://bit.ly/ajmLtq

GM, India’s CSMCRI ink pact for biofuel – General Motors on Monday said it has entered into a three-way agreement with the US Department of Energy (DOE) and India’s Central Salt & Marine Chemicals Research Institute to develop jatropha as a biofuel energy crop. Depending on the commercial success of the crop as a biofuel, General Motors India, the US based carmaker’s subsidiary, will consider introducing biodiesel-capable vehicles in the market. http://bit.ly/ac0QTd

Reliance considering feasibility study on algae-derived biofuel – Feasibility study of algae as an alternate feed stock for biofuels should be undertaken as a part of meeting challenges for biofuels in India, a top Reliance Technology group official has said. “Algae seems to be the most promising feed stock. Microalgae are uncellular biofactories that can provide oil from sunlight and carbon dioxide,” M. Ganapati, President, Corporate Planning, Reliance Technology Group told PTI after delivering a talk on ‘Biofuels Scenario in India’ – http://bit.ly/byPQwy

Solar Water Heaters obligatory in all new Governmental Buildings – Conservation Building Code (ECBC) mandates solar water heaters in residential facilities, hotels and hospitals. It is a voluntary code, which has recently been made obligatory for new governmental buildings. Also, from now on, all new government and public sector buildings in India are obliged to reach at least a three star rating in GRIHA. http://bit.ly/aFBW2M

Conergy Installs 3 MW PV System in India – Conergy AG has erected one of the largest photovoltaic plants in India. With the 3-megawatt (MW) plant, Conergy will contribute to the power supply of the local rural population around the city of Itnal situated in the province of Karnataka. Built on 17.3 acres, 13,000 solar modules supply over 4,000 megawatt hours of clean energy into the local grid. http://bit.ly/bC0Bqf

Areva Renewable eyeing Indian solar-thermal projects – Areva Renewable, a unit of France’ Areva, is eyeing solar-thermal projects in India, in a bid to ramp up its presence in the Indian renewable energy market, its chief executive officer said on Friday. http://bit.ly/cezXzr

$75-m IFC loan to IDFC for climate change projects – The World Bank’s multilateral lending arm, International Finance Corporation (IFC), will provide $75 million (around Rs 338 crore) to Infrastructure Development Finance Corporation (IDFC) for investments in renewable energy, cleaner production and energy efficiency projects. This project is part of IFC’s climate change strategy of partnering with financial intermediaries to scale up the impact for climate change projects in India. IDFC, which has its registered office in Chennai, invests in infrastructure projects all over India. http://bit.ly/ckksBm

SBI ties up with wind energy giant Suzlon: forays into green power – State Bank of India is the first entity from financial services segment to enter into green power by setting up windmills. The bank has moved forward towards green energy so as to become energy neutral in the upcoming years, the bank said in a statement. It has undertaken the initiative as a tie up with wind energy giant, Suzlon Energy. The bank said that it has decided that in the first phase it would install 10 windmills in Gujarat, Maharashtra and Tamil Nadu to generate power for selected branches in these states. http://bit.ly/aVBQ9z

Solar Mission to award projects based on tariff discounts – Solar project developers offering the best discount on a tariff to be notified by the electricity regulator will figure higher in the pecking order during the allocation of identified projects under the Solar Mission programme. The tariff rates under consideration by the CERC for 2010-11 are Rs 17.90 a unit for photovoltaic (PV) and Rs 15.40/unit for solar-thermal. The tariffs are notified annually by the CERC – http://bit.ly/aNTg7g

UAE firm in $545 mn deal with Aditya Solar Power – UAE-based company Mulk Holding has announced an agreement with Bangalore-based Aditya Solar Power Industries to develop a 200 megawatt solar thermal project in the UAE. The holding company said one of its subsidiaries, Mulk Renewable Energy, will supply and install solar thermal power plants for Aditya Solar in a deal valued at 2 billion dirhams (USD 545 million). According to the agreement, Mulk Renewable Energy will create a joint venture with Aditya Solar to develop the project. http://bit.ly/do5ksc

Fersa builds 50MW Indian wind farm – Barcelona-based Fersa Energias Renovables has secured INR1.86bn (USD41.8m) in project financing to develop a wind farm in India. The project is being developed by Fersa subsidiary EN Renewable Energy, with financing provided by the Indian Renewable Energy Development Agency (IREDA). The Hanumanhatti wind farm, located in the southern Indian state of Karnataka, will comprise 63 Enercon turbines and have a 50.4MW capacity. The project is expected to become operational in the second half of this year. http://bit.ly/cPEXOi

India can produce up to 2 lakh mw wind power – Wind energy sector is emerging as an important segment in global renewable energy map and countries like India and China are expected to become leaders in the future. The total potential for wind power in India is expected to be much more than the government estimates of 45,000 MW and the industry places it at a high 200,000 MW. http://bit.ly/95MGA4

Like most who populate the libertarian society we live in, I am no lover of “dictates”; but I guess dictates aren’t exactly bad in circumstances that, well, deserve dictates.

The first mandate was about the West Bengal pollution board asking all telecom towers in the state to use 30% biodiesel in their generator sets – http://bit.ly/9hzXhH .

The second one was about how solar water heaters have been made obligatory in government buildings. The Conservation Building Code (ECBC) apparently mandates solar water heaters in residential facilities, hotels and hospitals, but this is a voluntary code. Recently, this has recently been made obligatory for new governmental buildings.

Now, we all know how well mandates have worked so far in India – we have seen the spotty way in which mandatory blending of ethanol and biodiesel had been implemented (not implemented) in the past. So I am not exactly going to go to town about these mandates  (this newsletter is as far as I will go!).

However, to me it appears that there is a good chance that the mandate could be followed in one of the two, while in another, I honestly do not expect anyone to walk the talk.

Let’s consider the idea of biodiesel for telecom towers. It is fairly well known that telecom towers have a serious problem when it comes to backup power, mainly owing to the remoteness of the towers. Many of them use diesel gensets for their backup power. Now, the government is asking them to use biodiesel instead. How much will they succeed in this effort? Not much, in my opinion.

The real questions are where these telecom towers are going to get biodiesel from and for how much. India has an installed capacity of over 200,000 T of biodiesel production, and less than 75,000 T is actually being produced. Why?

One, feedstock availability is a problem, with Jatropha hardly delivering even 30% of what it is supposed to deliver in its yield. If you have been reading newspapers last few years, it would not have escaped your attention that jatropha has so far been a non-starter. I personally feel jatropha has a good future, but well, that’s in the future. The present for jatropha is, well, tense.

Two, the government’s pricing policy puts the price of biodiesel at Rs 34 per liter (this is the price at which the oil companies are mandated to buy the product from the biodiesel producers).

Well, there are some who’d think 34 rupees per liter is a good amount of money . I am not so sure. By some calculations we have made, it will cost a minimum of about Rs 30 per liter just to procure the oil (say, jatropha oil). You need to trans-esterify the oil and refine it to make it into biodiesel, and my guess is, biodiesel producers will have little or no margins at a selling price of Rs 34. Well, the largest cost component that determines the final biodiesel cost is the cost of the feedstock – jatropha oil, for instance – and unless significant improvements are made in the cultivation and yields of jatropha plant, I do not see biodiesel producers being able to produce large quantities of biodiesel profitably at Rs 34 per liter. If you leave out jatropha, there’s hardly any other vegetable oil which can enable biodiesel producers to make biodiesel at those kinds of prices – castor oil, for instance, costs about Rs 50 per liter, and prices of groundnut oil, palm oil etc., are around 35-40 per liter.

In short, don’t expect much to happen on the biodiesel directive to telecom towers.

I’m far more sanguine on the “mandate” related to use of solar water heaters in governmental buildings. I have been a great fan of solar thermal based heating and drying applications, and rather than explaining the reasons, I’d request you to have a look at a blog post I had put in earlier – http://eai.in/blog/2009/12/india-solar-water-heaters-domestic-and.html. Solar thermal based heating and drying is a low-hanging fruit that provides clear benefits to the users, even without any significant external incentives. If I were a gambler, I would gladly bet that this directive has a good chance of success.

Time will tell how right (or wrong) I have been.