Hydro Projects and Renewable energy for power generation
Renewable energy is the way to go
Renewable sources of energy are the key to solving two of the country`s (even the world`s) most pressing yet seemingly irreconcilable problems.
On the one hand we need to electrify our villages and after all these years renewable energy appears the only bet to get power to 80,000 villages that currently do not have power supply. On the other hand, we are having to pay a high price, both in terms of oil import bills and in terms of environmental damage, for using conventional fossil fuel based energy.
Renewable energy sources such as wind and solar could contribute greatly to break this impasse. While renewable source have their drawbacks, wind and solar systems may never be able to stand alone as energy provides because they are, by their very nature, intermittent sources, a judicious mix of conventional and renewable energy could make a big difference. Cost of power generationthough is a concern, particularly with solar power.
Project cost per MW for Hydro Projects is Rs 50-70 million;
for Thermal Project it is 50-60 million; for Wind Projects it Rs 60-65 million; for Waste heat recovery projects it is Rs 45-50 million; for Biomass Project it is Rs 50-60 million and for Solar project it is Rs 120-150 million.
Project implementation period for Hydro Projects is 30-48 months;
for Thermal Project it is 20-24 months; for Wind Projects it is 3-6 months; for Waste heat recovery projects it is 15-18 months; for Biomass Project it is for 18-21 months and for Solar Project it is for 24-30 months.
Feedstock availability for Hydro Projects is depends on terrain water availability,
site conditions peak water flow; for Thermal Project it is thermal coal, subject to price fluctuation, proximity to the port for transportation of coal to the power plant site; for Wind Projects it is locality is very crucial as it depends on the wind intensity, direction, velocity; for Waste heat recovery projects the feedstock availability linked to the waste heat generated during the manufacturing process, which is imported, converted into steam and transported into steam and transported to the turbine; for Biomass projects it is rice husk, mustard husk, which are available in requisite quantity only in certain agri based belts in the country and for Solar Projects location is very crucial as it depends on the sunlight availability.
Green credit is not available on Hydro, Thermal, Wind Projects. It is available on Wind, Wind heat recovery, Biomass & Solar Projects.
Plant load factor is for 35-60% for Hydro Projects, 80-90% for Thermal, 25-35% for Wind Projects, 70-90% for Waste Heat Recovery Projects, 70-80% for Biomass, 16-19% for Solar Projects.
Land area per 100 MW for Thermal Projects is 20-25 acres, for Wind projects it is for 100 acres, for Waste Heat Recovery Projects it is for 3-5 acres, for Biomass projects it is for 3-5 acres and for Solar Projects it is for 50-60 acres.
On the back of abundant solar energy availability, several institutions are working on bringing down solar energy generation costs. With better R & D and greater adoption, costs are expected to drop considerably in the next few years. With about 300 clear sunny days in a year, India`s theoretical solar power reception, just on its land area, is about 5 Peta watt hour/year (i.e. 5 trillion kilo watt/yr 600 Terawatt). The daily average solar energy incidence over India varies from 4 to 7 kW/ a meter square (m2) with about 2,300-3,200 sunshine hours per year, depending upon the location. This is far more than current total energy consumption. For example, even assuming 10% conversion efficiency for PV modules, it will still be thousand times greater than the likely electricity demand in India by the year 2015. Solar PV market in India is at nascent stage but has huge potential to grow.
Some of the key benefits from renewable energy are:
PV Lighting systems:
Estimates suggest that between Rs 100 and 200 billion (USD 2 to 4 billion) is spent by the government every year on subsidizing the price of kerosene. PV lighting systems would greatly improve the quality of lighting and reduce health and safety risks due to inhalation of fumes and from the widespread use of combustible kerosene fuel.
Irrigation pumps:
Solar irrigation pumps are potentially an enormous market. The estimated cost of subsidy for State and regional governments in India towards electricity for irrigation pumps and agricultural use would be between Rs 300-400 billion (USD 6 and USD 8 billion) each year. Electricity consumption by irrigation pump-sets alone account for between 10-15% of India`s total consumption. Besides off-setting this huge consumption of electricity, PV also offers the prospect of diesel and kerosene replacement for the other 9 million pumps, which run on these fuels.
Power back-up for cellular towers:
There is an estimated requirement of 5,54,000 telecom towers by 2015. The vast majority of towers are powered by diesel generator back-ups. Solar power solutions can potentially replace the diesel back up power systems used currently.
Captive power generation:
Estimates suggest that net captive power generation capacity (from all fuel sources) could be as high as between 20-25 GW (2007-08) and diesel accounts for a sizable portion of this. This is also a huge potential for solar PV.
These days, home owners use roofing tile materials to cover up the homes and protect them from natural elements. Solar power Shingles are known to blend in well with conventional Shingles. One might not believe it, but using photovoltaic roofing, it is possible to actually save the home owner almost 60% of the cost of power that he consumes very month. For those who have small businesses such as grocery or a convenience store or even a small office, such technology can definitely work to provide alternative energy in the form of solar power. Efficient use of such technology has the potential to considerably reduce shortage of power plaguing India.
Existing players in the renewable energy sector
Renewable energy is still a `sun-rise` sector that is only recently beginning to see action. There are currently very few organized players in the industry; names such as Suzlon Energy, NEPC India, Tata Bp Solar, Moser Bear Projects, Websol Energy, Surana Ventures and Indo Solar etc., but there are many large players who have announced their intent to join the bandwagon, names like, Reliance, Lanco Infra, KSK Ventures etc.
These are the select few list of players in the sector who have gone public. Considering that it is a capex heavy sector, and most of the players are still in the nascent stage, the financials doesn`t seem that attractive. However, renewable energy has turned out to be a popular investment avenue amongst Venture Capitalists and Private Equity players.
Conclusion:
India is facing a shortage of electricity as well as high carbon emissions through conventional power generation. In our day to day life, we look up at the sun and wind as `powerful` and it might do good for us to understand that they offer real power with practical applications. Considering our energy needs, renewable energy can make a big difference in modern life and it is a cheaper, more efficient, and much more environmental friendly energy source than what we use today.
From an investment perspective, there are very few listed players; the financials of the players in these industries are also not that attractive at the currently.. This sector provides an opportunity to deliver multibagger returns if one can identify winners early enough. At this point we suggest that one holds on to current positions and on market dips one could start investing. There is no great hurry to invest considering that most companies are in nacent stage and financials are not yet impressive. Next few quarters could also provide some direction on fundamentals and help identify companies that one can invest in. As a guideline, it would be good to look at companies that are not over leveraged.
(Contributed by Anil Rego, CEO & founder, Right Horizons)
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