India has set up ambitious targets of meeting 15% of its Energy Needs from Renewable Sources up from around 5.5-6% in 2010.WIth India’s Electricity Capacity expected to rise to 450 GW from around 165 GW,this would imply that around 67.5 GW of Electricity Capacity would be needed up from around 16 GW.This would mean around 5 GW of Capacity addition every year in the next decade which is a very tall order.20 GW could be met by Solar Energy according to the Jawaharlal Nehru Solar Mission (JNNSM).Most of the rest would have to met by Wind Energy.Biomass Energy has high costs and reliability problems which mini hydro potential is only 1 GW.Note this is just the capacity I am talking about,for meeting the electricity generation,capacity additions would have to be greater as Solar Energy and Wind Energy have only 20-30% Load Factor compared to 60-80% for Fossil Fuel Energy Sources.Nuclear Energy can contribute another 20 GW.
Renewable Energy in India is growing at a rapid pace increasing its share of the total capacity from 2% in 2003 to around 10% in 2010.However the share of electricity generation is still quite low at 3% due to the lower capacity load factors of Green Energy Sources compared to Fossil Fuel Sources.The Total Installed Capacity of Renewable Energy in India is around 16 GW with Wind Energy taking the Lion’s share at almost 70% followed by Small Hydro at 15% and Biomass Energy at 12%.Solar Energy in India till now has a capacity of just 6 MW which is estimated to grow to 22 GW by 2022 making Solar Energy one of the Biggest Growth Opportunities in the Field of Indian Energy.
Wind Energy Companies are increasingly facing competition from a host of new entrants into the industry.The dominants firms Vestas,Gamesa and Suzlon have seen their stock prices fall steeply due to declining revenues and margins.A number of Giant Industrial Firms have entered the Wind Energy Industry to diversify from the slow growth in their own sectors.Korean Shipbuilders have invested heavily in the Wind Turbine Manufacturing en masse to take advantage of the secular growth of Wind Energy.Chinese companies have risen from virtually nothing 5 years ago to become Top 5 Global Wind Energy Players.Companies like Sinovel,Goldwind,Mingyang Power are now trying to spread their wings outside of China.India’s Wind Energy Industry is comparatively small but it has also seen a number of wind power companies setting up facilities with technology licensed from the West.The slowdown in the Western Markets has led to huge problems for dominant Western firms like Gamesa and Vestas.It has led to painful restructuring for Vestas which has fired thousands of workers from its domestic manufacturing base in Denmark.Gamesa has also seen management and ownership turmoil as WTG Orders have evaporated and its competitive position has eroded.GE,Suzlon,Gamesa and Vestas are all investing in the Chinese market which has grown exponentially in recent times and which is expected to form 50% of the Wind Energy Demand till the next few years.
Renewable Energy Certificate (REC) Policy is starting in India tomorrow which will allow Green Energy Generators to earn additional tariff.Note the REC Mechanism is also present in different forms in Italy,USA and Australia and has proven a good incentive to promoter Renewable Energy in those countries.India’s Electricity Regulator (CERC) has been actively implementing different orders to boost Green Energy Generation.CERC had earlier mandated a 6% Renewable Energy Percentage from Alternative Energy which would go upto 15% by 2020.The REC Policy will help in achieving those targets by providing a pseud market linked mechanism to inentivize Green Power Producers.
Who will Benefit
Renewable Energy Companies and Green Utilities are set to benefit the most from this Policy.Suzlon has already welcomed the policy saying that Financing will ease for Renewable Energy Projects.Orient Green Power,the largest Green Focused Utility will also be a big beneficiary.Local Indian Wind Turbine Companies should also benefit from the Scheme.It also provides companies outside the JNNSM to get decent returns from solar generation as the REC band for Solar REC has been set between Rs 12-17/Kwh.India need to increase Renewable Energy Capacity by at least 50 GW in the next 10 year to meet the 15% CERC Target
Giant Chinese Utilities Datang and Huaneng are doing roadshows for the IPOs of their Renewable Energy Arms which would raise more than Billion Dollars Each.Note Green Utilities have become a separate Green Investment Class with lots of Asian and European Utilities already doing an IPO of their Green Subsidiaries or are in the process of doing so.However 2010 has been a bad year for Green Energy Stocks and Green Utilities have been no different.While First Wind Holdings a pure play USA Wind Farm Developer failed to get listed despite lowering its Issue Price,Indian Orient Green Power and Italian Enel Green Power have performed miserably even after listing at a much lowered stock price.Despite the negative sentiment towards Green Utilities mainly due to the Headwinds being faced by Wind Industry in 2010,Green Utilities are one of the safest ways to invest in the Alternative Energy Sector given the nascent highly volatile nature of the industry.
The South Korean government is the most aggressive administration when it comes to establishing a Green Economy of the future.The Koreans have established the biggest Green Stimulus as a percentage and are following it up with massive investment in different parts of the Green Economy.Korean Chaebols LG,Hyundai,Samsung,Daewoo,Posco,SK Energy,Hanwha have taken the cue from their home country in charting out an ambitious roadmap in solar,wind,green vehicles.Hyundai has ramped up investment in the Solar Energy sector tying up with Glass Giant Saint Gobain,while LG and Samsung are going it alone putting up facilities to produce crystalline solar panels.Hanwha has bought a big Chinese solar panel producer while Daewoo is setting up WTF facilities.
The US Wind Industry has been facing headwinds since the beginning of 2010 due to a confluence of adverse factors.This has continued till the 3rd quarter of 2010 with AWEA reporting just 395 MW of capacity installation and a 72% fall in wind capacity since the beginning of 2010.This is a drastic fall and the main reason for the Wind Industry falling into a coma is the legislative lethargy of the US Government.Despite lots of noise,no climate change or energy legislation has passed the Congress and Senate leading to the moribund state of the US Wind Industry.Note China and Europe are pressing full throttle on Green Industry Growth with a climate laggard like UK also taking a leadership in the offshore wind industry.China will continue its strong wind growth in 2010 installing around 50% of the overall global capacity.Its Wind Companies like Sinovel,Goldwind and Ming Yang are now trying to penetrate foreign markets while US Wind Turbine makers like Clipper have sold themselves unable to survive independently.