In the barren fields of Bogampatty village in Tamil Nadu’s Coimbatore district, Suzlon’s engineers, Parthasarthy and Arivu, sweat it out to get the windmills to rotate. It has been a long day, and they still have 733 windmills to attend to. The mills are spread over 2,800 sq. km, and supply 713 MW to the grid. Parthasarthy and Arivu are part of a team of more than 200 engineers stationed at the village to monitor the windmills, set up and managed by Suzlon on behalf of spinning mills in the state. Tamil Nadu has an installed capacity of 6,969 MW, or 40 per cent of our total wind energy capacity of 17,352 MW and 28 per cent of the total renewable energy capacity. Wind energy also accounts for 12.64 per cent of the electricity generated in the state (9,763 MU out of 77,218 MU). More than 95 per cent of the country’s wind energy potential is in the coastal states of Tamil Nadu, Andhra Pradesh, Karnataka, Maharashtra, and Gujarat. And while Karnataka has the largest potential, best wind sites are in Tamil Nadu. Four prominent passes in the state — Palghat, Shencottah, Aralvoimozhi and Kambam — have average annual wind speeds ranging from 18 km/hr to 25 km/hr. In Karnataka, the average is about 10 km/hr. Tamil Nadu, however, is power deficit — the average power availability in 2011-12 was around 8,000 MW with demand at 11,000 MW. In fact, the state recently moved the Supreme Court on grounds that the Centre was not providing enough power to it. The deficit results in power cuts for more than 10 hours in most districts and for a minimum of two hours in the cities. In June, though, wind power, which feeds 30 per cent of the state’s peak power demand, aided by strong monsoon winds, brought some relief. But not to the producers. Sweating It OutSpinning mills and Independent Power Producers (IPPs) have not been paid by the Tamil Nadu Electricity Board (TNEB) for the power that they sold. TNEB, which has more than Rs 50,000 crore in accumulated losses, owes Rs 3,500 crore to more than 400 members of the Indian Wind Power Association (IWPA). TNEB could not be reached for comment; an e-mail sent to the board’s CMD Sudeep Jain remained unanswered. Payment delays and poor grid infrastructure are among the industry’s major woesPayment is not the only problem plaguing Tamil Nadu’s wind energy industry. Lines for transmission and evacuation of electricity are few in number and the one’s that exist can hardly take any load. Captive wind power generators — 300-odd spinning mills with 3,000 MW captive windmill capacity — are peeved over the loss of tax incentives such as accelerated depreciation, which has been revoked for wind power producers. “With these problems, banks have been auctioning off the windmills of a few companies,” says K. Kasthurirangaian, chairman of the Indian Wind Power Association (IWPA). All 850 of IWPA’s 1,395 members in Tamil Nadu are struggling to meet their interest payments. Investors, too, seem to have lost interest. During 2010-12, countrywide capacity addition grew only 8.6 per cent compared to 65.6 per cent in 2009-11. “Most discoms (power distribution companies) in India, including in Tamil Nadu, are in the red,” says Shivanand Nimbargi, MD & CEO of IDFC-funded Green Infra. The company has close to 75 MW operational wind power projects in Tamil Nadu and projects worth another 50 MW are in the pipeline. He suggests that the Centre should expedite the restructuring package to discoms. Credit rating agency ICRA in a recent report says that future installations hang in the balance unless the state’s discoms improve their books. IPPs will have to knock on lenders’ doors to restructure their loans and renegotiate power purchase agreements. “The problem with distribution utilities is that they have relied on subsidies from the state government. Their health is obviously deteriorating. They have to provide free power and cannot raise tariffs easily,” says Mahesh Makhija, director of business development (renewables) at CLP, which has 99 MW operational capacity in Tamil Nadu. The company has ruled out plans for more capacity. (BW Pics By Tribhuwan Sharma, Subhabrata Das andJagadeesh N.V.)Bringing some relief to the industry, and in a bid to bail out loss-making transmission and generation company Tangedco, Tamil Nadu in March announced an average tariff hike of 37 per cent — after nine years. The move is expected to boost revenues by Rs 7,874 crore. Poor Capacity HandlingTransmission and evacuation are tripping investors. Says Kameswara Rao who heads energy, infrastructure and mining practice at PwC: “It’s not easy to manage the system when there is a lot of wind.” Unlike conventional sources, renewable energy is variable — the speed of wind can drop or pick up any time. The state is inept at grid management and balancing power. The Tamil Nadu Electricity Regulatory Commission (TNERC) in its latest tariff order echoes the sentiment: “As Tangedco has no balancing capacity to take care of this infirm power during unexpected meteorological changes (wind speed), the deficit rises to 3,000-3,500 MW.” break-page-break Perhaps having a national grid would help, along with better forecasting and generation planning. Denmark, a leader in developing wind energy — it supplies more than 25 per cent of the country’s electricity — boasts of excellent grid balancing for integrating wind energy. And the key is its linkage to larger grid systems of Norway, Sweden and Germany which can absorb the variations of wind. “There are no major 400 or 765 kilo-volt (KV) lines to evacuate large capacities of power,” rues Nimbargi. This begs the question: with such poor infrastructure, why did the state go ahead with capacity additions? Between 1999 and 2012, 6,241 MW of capacity was added. “In many areas, a no-objection certificate (for new windmills) was given and transmission lines were not strengthened to effectively evacuate power,” points K. Venkatachalam, chief advisor at Tamil Nadu Spinning Mills Association (Tasma). Sixty per cent of Tasma’s members have invested in windmills, which account for more than 50 per cent of the state’s total installed capacity. Out of the total installed capacity of windmills in Tamil Nadu, 6,000 million units are consumed by industries; 80 per cent of this by spinning mills. The Tamil Nadu Transmission Corporation (Tantransco) is attempting to improve the infrastructure. It has started work on three 400-KV sub-stations for wind power evacuation; these will be linked to a 765-KV sub-station to be set up by the Power Grid Corporation at Salem. This is part of their plan to increase capacity by 5,000 MW over five years. But Tantransco’s expansion plans need funds, and there is certainly no queue: “If you were a banker, you would throw the proposal on their face. How will they repay?” asks a senior member of the wind energy fraternity. It had to approach the Ministry of New and Renewable Energy for assistance under the National Clean Energy Fund. Click To View Enlarged Image(BW Pic By Jagadeesh N.V.)Testy TariffsWind energy tariffs, after a two-year delay, have been marginally hiked. Windmills installed between 1 August 2012 and 31 July 2014 can now sell power at Rs 3.51 per kWh against Rs 3.39 per kWh for units commissioned between 19 September 2008 and 31 July 2012. Then there is the debate that rages over “banking” — a system where power can be banked. Wind energy generators (WEGs) can supply electricity to the state grid and can also draw it back within a year. This was introduced in the 1980s to attract investments. But Tangedco’s contention is that WEGs push excess power into the grid when demand is low; when the demand is high, they draw back the power for captive use. To meet its contractual obligations, Tangedco is forced to purchase power at much higher rates from the open market leading to losses of Rs 200 crore. Tasma refutes these claims saying it actually gives Tangedco Rs 77 crore in profit. Others like GIL’s Nimbargi point out that high charges for banking facilities in wind has adversely impacted investment plans of wind IPPs as the nature of wind power makes banking a much-needed support from the state grid. For captive users, open access and banking charges went up to Rs 1.50 a unit in August from less than Rs 0.50. Tasma has filed an appeal in the Appellate Tribunal for Electricity (New Delhi). These developments have helped little to serve the industry’s cause. “It has resulted in a situation where the promoters are less interested to invest in wind energy owing to the frustration of not being able to use the energy with all the restrictions,” says Venkatachalam. A Tasma report says that when the Centre announced the Technology Upgradation Fund Scheme in 1999, it included windmills for interest subsidy; almost everybody invested in windmills. It got a boost from Section 80-IA which exempts income from windmill from tax for a decade after being set up. “The market now permits only those with deep pockets to invest in wind energy. This is not competitive,” laments Kasthurirangaian. Despite the roadblocks, Tamil Nadu is crucial. As Nimbargi from Green Infra puts it, “You have to be there if you want to be a big, long-term wind player.” If Tamil Nadu can play it right, the success story can be saved from going sour. But if delay in payments, poor grid infrastructure and expensive captive power is not dealt with, its clean energy potential could be all but lost. bweditor(at)abp(dot)in (This story was published in Businessworld Issue Dated 12-11-2012)
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In July, India’s northern and eastern power grids collapsed plunging nearly 40 per cent of the country’s population into darkness. While in Delhi metro lines stopped, in Asansol 200 coal mine workers were trapped as the electric pulley shafts stopped. The blackout provided the perfect setting for proponents of decentralised green power to push their case — harness the sun. India gets around 300 days and 2,300-3,200 hours of good sunshine in a year. And unlike wind, biomass or hydro, availability is more dependable. Gujarat, Rajasthan, Tamil Nadu and parts of Ladakh get the highest radiation in the country.The ConsumersWhile sceptics say solar power is futuristic, even idealistic, rural India has adopted it in earnest. “Their power cuts are massive. There are no grid connections or they get power only for 4-5 hours a day. Even if solar is costly, two hours of extra power a day is enough,” says Narasimhan Santhanam, director of Energy Alternatives India, a Chennai-based renewable energy consultancy. Rooftop solar harnessing is more lucrative in commercial and industrial sectors as volumes are highAcute power shortage in rural areas is also the business case for Mera Gao Power (MGP), a social enterprise. Run by American entrepreneurs Nikhil Jaisinghani and Brian Shaad, who worked on energy projects in Africa before moving to Sitapur, Uttar Pradesh, MGP’s model targets 50-household villages. They put solar panels on a cemented roof, two batteries in a small wooden cabinet in a room, and run 100-metre-long distribution lines around the village. This micro-grid serves up to 35 customers. Says Jaisinghani: “After an hour of engagement, about 20 per cent of the village signs up. By the time we have finished construction, another 20 per cent signs up. Our goal is to get 60 per cent, and we have found ourselves in a great position in almost every village from the start.” “As far as they know, we could take their money and never come back, but they still pay the fee because they are excited about the service,” he adds. While it can cost up to Rs 100 a week to get poor quality light from kerosene for few hours a day, it costs Rs 25 a week for solar power through this model. MGP’s typical micro-grid can power two LED light bulbs for seven hours and charge a mobile phone — which is what most customers want. MGP invests Rs 50,000-55,000 in each village and recovers the amount in two years. The duo had invested Rs 15 lakh of their own (in 2010 and 2011), and were lucky to get a $300,000-grant from US Agency for International Development soon after. They have spent a third of it so far. MGP is present in 105 villages in UP, where it has about 10,000 users. MGP aims to have 30,000 customers by the end of 2013, 100,000 by 2014, and add a few hundred thousand customers every year after the third year. (BW PIcs By Bivash Banerjee) There are others like MGP. Such as Gram Power, a start-up founded by Yashraj Khaitan and Jacob Dickinson from the University of California, Berkeley, which is working on a pay-as-you-go micro-grid system for rural India. Even solar energy service provider SunEdison is reportedly scouting for similar projects. Can rooftop solar energy be a viable option in urban areas as well? Urban SolutionsThe rooftop solar market has two segments: 1-5 KW households units, and 100 KW-plus commercial and industrial units. It is the second kind that has the most potential, but has not caught on as the initial costs are high, financing is not easy to get, and awareness is low. But Santosh Kamath, partner at KPMG India, feels people would adopt solar if they knew the advantages. “A hotel, mall or an office in Gurgaon pays a very high rate (for grid power). Solar rooftop would be cheaper.” For commercial units, the tariff difference between solar and grid power may become minimal by 2014. Moreover, at Rs 8 a unit, solar power is cheaper than the Rs 14-15 per unit from diesel generators. Kamath adds that net metering would make rooftop solar more viable since the houseowner would pay for net energy consumed — the difference between the solar power he feeds to the grid and what he draws from it. Kolkata’s New Town has introduced a solar-powered 1.76- acre housing complex with net metering. There are other models as well. For instance, utilities can have a direct agreement with developers to buy and sell power. Since solar is high on upfront costs, leasing would make the equipment more affordable for retail customers. break-page-break “We approach commercial customers in two ways,” says Shubhra Mohanka, director of Solid Solar. “For people with high bills, we put up a grid-connected system without a battery back-up for captive consumption.” Most of their commercial customers use this system as it suits those who can consume all their solar power. “If you are trying to save on the diesel bill, we employ the back-up solution. Lights, fans, computers and LCD TVs can be put on solar. This has battery back-up and the appliances can run for four hours a day,” she says. Domino’s has approached Solid Solar to manage requirements in off-peak hours with solar power instead of diesel generators, says Mohanka. Solid Solar has rural users as well in U.P., Bihar and Haryana, and some commercial units in Gurgaon and Manesar. It selects places where banks are willing to lend to set up the systems. Last year, it earned Rs 10-13 crore from its rooftop solar business, and expects 45-50 per cent year-on-year growth. The commercial and industrial sector is more lucrative because of higher volumes. “Once domestic financing improves, it will be easier for us to service households,” says Mohanka. It will also require change in regulations, grid parity and net metering, say experts. Azure Power, run by Inderpreet Wadhwa, has a different model. It harnesses 2 MW from rooftops of government buildings and 500 KW from private buildings in Gandhinagar. It bears the project cost but sells all the power to the grid. Of the Rs 11 per unit it earns, Rs 3 a unit goes to the building owners. But customers need to have commercial understanding and be willing to sign long-term agreements, says Wadhwa. “It is a challenge for private companies to pay a lot upfront for something that works over 25-30 years,” he says. “But that is the opportunity — converting capital expenditure into operational expenditure and ensuring performance.” Lack of financing is a major hurdle. “I have gone to SBI, IREDA (Indian Renewable Energy Development Agency) and so on to get funding for my customers... But banks do not get any revenue from this,” says Rajeev Agarwal, founder of Chennai-based Ardor Green Solar & Wind. Costs can be high. Ardor, for instance, has a Rs-7-lakh system that can also run air conditioners. Despite 30 per cent subsidy, it would still cost Rs 5 lakh. Incidentally, the Reserve Bank of India has included loans to individuals setting up off-grid solar (and non-solar) projects under priority sector lending. Agarwal’s biggest success story is Jayaraj Chandran, who started with a solar water heater. Chandran saved up and bought the Rs-7-lakh system in March this year. His testimonial on Ardor’s website says he has “escaped from the clutches of very poor grid supply”. For Sunny Days AheadStates, social enterprises and companies are making forays into rooftop solar. Gujarat has installed solar capacity of 654.8 MW — 66.8 per cent of the national capacity. It is now looking beyond large-scale solar units to smaller decentralised ones, and has allowed residences to sell from rooftop units to the grid. But challenges abound. Rooftop solar power cannot substitute conventional power. Limited space, ownership of panels are just some of the other issues. But KPMG’s Kamath feels that with grid parity nearing, the economically viable rooftop market could grow to 4,000 MW over the next five years. He expects the price of generating solar power to decline 5-7 per cent per annum, provided there is economy of scale in equipment manufacturing, efficient technology and low-cost manufacturing locations. Even though the overall situation is tough, some big companies have entered the sector. Lanco Solar set up its first rooftop project on Parliament House. It has another in Delhi’s Safdarjung airport, and atop government buildings and cement plants. Their current year’s target is 10 MW. “Government, commercial and industrial units are interesting for us,” says V. Saibaba, CEO of Lanco Solar. Grid-interactive rooftop systems are already an integral portion of the solar market in countries such as Japan, Spain and Germany (80 per cent). In India, the grim power situation is reason enough to push for rooftop solar harnessing. KPMG’ report, The Rising Sun, says power demand will push our energy import dependence from 30 per cent now to 59 per cent by 2032. Coal shortage is expected to increase imports four times in the next five years. By 2030, the share of oil imports could increase 90 per cent. The increase in power demand is what will spur the rooftop solar market, feels Lanco’s Saibaba. “If we have to realise a GDP growth of 7-8 per cent, we have to add at least 100,000 MW in the next five years. You have to decentralise power generation. Fortunately, three-fourths of India has excellent solar radiation of almost 5-6 hours.” Bring on the sun! yashodhara(dot)dasgupta(at)abp(dot)in (This story was published in Businessworld Issue Dated 12-11-2012)
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For India, energy security has never seemed more real, more urgent than now. Forty per cent of the country’s 1.2-billion populace is yet to have access to electricity. Even those getting grid supply suffer poor quality of power. Towns see power cuts more than half the day. The country’s energy deficit, according to the Central Electricity Authority, is 9.3 per cent. The peak shortage is nearly 11 per cent. And, of late, even power grids have started collapsing at will. The 12th Five-Year Plan envisions adding 80,000 MW. But will that be enough? A McKinsey report, ‘Powering India-The Road to 2017’, says India’s power demand will be as high as 335 GW by 2017. And coal, which makes up 57 per cent of India’s energy, is in short supply. In 2012 itself, there was a gap of 137 million tonne (mt) between the demand and supply of coal, up from 83 mt in 2011. Add to that the fact that a third of the world’s CO2 emissions come from coal. The policymakers have turned to renewable energy sources to solve part of this puzzle. To this end, the government set up the Department of Non-Conventional Energy Sources back in 1982. This was morphed into an independent body in 1992. Later, in 2006, it was rechristened the Ministry of New and Renewable Energy (MNRE). The ministry now aims to have 15 per cent of the total electricity generated from renewable sources (excluding large hydro projects) by 2020. Investors, too, are optimistic. For instance, India clocked the sharpest increase in renewable energy investment in 2011, up 62 per cent to $12.3 billion. Ernst & Young’s August 2012 Renewable Energy Attractiveness Index placed India as the fourth most attractive destination for investment in renewables. Foreign direct investment in renewables stood at about $1.5 billion between April 2000 and March 2012. Click To View Enlarged ImageThat said, progress has been quite uneven in India’s renewable sector. Renewable sources such as wind, solar, small hydro, waste-to-energy and biomass projects play only a peripheral role, supplementing only 12 per cent of the total energy generation of 207,004 MW. Thermal sources fuel 67 per cent. Wind, more mature of the lot, is dogged by grid balancing and incentive issues. The power grid has to be able to absorb, balance and manage the ups and downs in wind power generation when wind seasons come and go. Wind power producers and investors also seek clarity on incentives they receive. Power producers used to get Rs 0.50 per unit of electricity fed in to the grid for a period up to 10 years. But the centre is reviewing the policy now. “The uncertainty on whether you will qualify (to avail incentives) is discomforting,” says Rahul Shah, chief of business development for India business and renewables at Tata Power. The other option is solar, which is still too expensive. For instance, it costs Rs 10-12 per kWh for power generated from solar photovoltaic, while for solar thermal, it is Rs 9-11 per kWh. For coal-based power plants, the cost is about Rs 3 per kWh. But thankfully, solar tariffs — Rs 8.5 per unit now — are falling. While commercial and industrial units already pay up to Rs 9 per unit, resident users pay Rs 5-6 per unit. Analysts expect parity as early as 2016-17. But technology improvements, particularly in efficiency of solar panels, are some way off. Key areas within solar like concentrated solar thermal are yet to pick up largely because of low awareness. As for biomass, industry experts fear it is not scalable as agri-waste availability is fragmented. It also lacks policy support. Initially, the world took to the idea with much gusto. But interest among investors is waning. MNRE estimates India has a potential of at least 18,000 MW in biomass. Companies who still want to invest lament the lack of policy on pricing and availability. “That was why we have had to stall our 25 MW biomass project,” says Joy Saxena, executive director of strategy and planning at Kolkata-based Techno Electric & Engineering. break-page-break But research and development in renewable energy is underdeveloped. While India does have the Council of Scientific and Industrial Research, a government body set up in 1942, the industry has been slow to utilise the infrastructure, says Prodipto Ghosh, distinguished fellow at think tank Teri. “It seems they would rather buy Western technology than go through the hassle of developing their own.” Overall, wind has performed the best; its installed capacity is 70 per cent of the country’s renewable energy pie. India is the world’s fifth largest wind player, behind China, the US, Germany and Spain. The wind power sector is maturing from being driven by tax benefits to serious independent power producers. But the current installed capacity is still one-fourth of the total commercially exploitable capacity and only 7.5 per cent of total electricity generation. There is also the capacity from old wind sites that is being overlooked. Repowering old wind pockets can tap 45,000 MW. With only 3-4 years to go before the country runs out of new sites, says Shah, it is imperative to frame a policy on repowering. Despite the concerns, many are bullish on renewables. Vivek Mehra, managing director at Aloe Private Equity, says wind power will continue to be the “darling” of investors. Solar too has many enthusiasts, given its easy availability. The Jawaharlal Nehru National Solar Mission, launched in January 2010, has given a fillip to the sector. It aims to add 20,000 MW by 2022. States such as Gujarat — which houses Asia’s largest solar park with 600 MW capacity in Charanka — and Rajasthan have taken it up aggressively. Gujarat is even installing solar panels on the Narmada canal. And Tata Power, in a tie-up with Australian firm Sunengy, has come up with a prototype of a floating solar plant. A KPMG report, titled ‘The Rising Sun’ and released in September 2012, says solar power can meet about 7 per cent of India’s power demand by 2022; mitigate 2.6 per cent of its carbon emissions and 30 per cent of coal imports. The report also says solar has $110 billion worth of investment opportunities over the next decade. The government is also keen on small hydro power (SHP) projects, where installed capacity increased from 1,909 MW in March 2006 to 3,300 MW in January 2012. That makes sense, given the fact that large-scale hydro projects, which supply 19 per cent of the country’s power, is besieged with land, rehabilitation, environment issues. Small hydro projects, on the other hand, are cleaner, competitive cost-wise and can meet demands of isolated, remote areas, believes Sabyasachi Majumdar, senior vice-president at rating agency ICRA. While the current installed capacity of SHPs accounts for 22 per cent of India’s total 15,000 MW potential, MNRE plans to increase this to 8,500 MW by 2021. But its biggest disadvantage is the fact that glaciers and river flows are susceptible to climate change.Power Without PollutionAre renewable energy sources the key? Or are there other alternatives? India is yet to estimate its shale gas reserves. Guesstimates range from 300 trillion cubic feet to 2,000 trillion cubic feet. But like fossil fuels, it is dirty. The US now faces intense domestic criticism over fracking — the extraction procedure for shale gas — and contamination of local water bodies. That takes one to nuclear energy. In India, nuclear plants already generate 4,780 MW and the government plans to increase this to 20,000 MW by 2020. But nuclear is a minefield. Disasters like Chernobyl and Fukushima have shaken up people over potential catastrophes and the aftermath. There are mass protests in India as well. To top it off, nuclear is water intensive and the country is completely dependent on uranium imports and foreign technology to build plants. India saw the sharpest increase in renewable energy investment in 2011, up 62 per cent to $12.3 billion “In the next 15-20 years, it’s going to be coal,” says Girish Shirodkar of consultancy Strategic Decisions Group. But 50 years into the future, he says, it would be solar and nuclear energy. Countries such as the US and China are racing to make the best use of this potential. They lead in installed capacity of renewable energy — China, thanks to government incentives, and the US with its immense focus on R&D in cleantech. Germany, too, has clear and certain policies. Canada has MaRs — a public-private enterprise that coaches startups on innovative ideas to come into the market. Time for India to learn from such global best practices and move ahead. In the following pages, BW takes a look at issues within wind, solar and hydro power sectors in the country. We examine examples, such as Tamil Nadu’s wind energy efforts, while mapping the potential for rooftop models in India. We also track the case of Uttarakhand seeking a balance between power through large hydro and the impact on citizens. Read on. yashodhara(dot)dasgupta(at)abp(dot)in (This story was published in Businessworld Issue Dated 12-11-2012)
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The price of non-subsidised cooking gas (LPG), which consumers buy beyond the cheaper quota of six cylinders, was hiked on 01 November' 2012, by Rs 26.50 to Rs 922 per unit on firming international rates. The 14.2-kg cooking gas cylinder that consumers buy beyond their entitled six bottles at subsidised rates, will now cost Rs 922, up from Rs 895.50 in Delhi, according to Indian Oil Corp, the nation's largest fuel retailer. The government had in September restricted the supply of subsidised domestic LPG cylinders to six per household in a year. Any requirement above this will have to be bought at market rate, which is more than double the subsidised price of Rs 410.42 per cylinder in Delhi. State-owned oil firms revise rates of non-subsidised LPG on 1st of every month based on the average imported cost and rupee-US dollar rate during the previous month. There is no restriction on the number of non-subsidised cylinders that a consumer buys beyond the six subsidised bottles. The price of commercial 14.2-kg LPG cylinder in Delhi will be Rs 1,105.5, while that of a 19-kg bottle would be Rs 1,551. A commercial or non-domestic cylinder was previously priced at Rs 1,075 per 14.2-kg bottle. Similarly, the 19-kg cylinder was priced at Rs 1,536.5. Rates of non-subsidised 14.2-kg cylinder and those of commercial bottles of the same size differ because the government has granted exemption from customs and excise duty on non-subsidised LPG cylinders only for domestic consumption to reduce the price burden on the common man.(PTI)
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Shale gas is the new buzzword. India is believed to have enormous amounts of shale gas deposits, according to studies conducted by Oil and Natural Gas Corporation of India (ONGC) in the Damodar (West Bengal) and Cambay (Gujarat) basins. P.K. Bhowmick, head of Dehradun-based Keshava Deva Malaviya Institute of Petroleum Exploration, which provides geo-scientific backup to the exploratory efforts of ONGC, goes as far as predicting that India's shale gas reserves may be higher than its natural gas reserves (40 tcf or trillion cubic feet).However, no exploration and production (E&P) firm can tap gas from shale, because India is still to formulate its shale gas policy. India has been putting up oil and gas blocks for auction on a competitive basis under Nelp (new exploration and licensing policy), which was formulated in 1999. Nelp only allows exploration of crude oil and natural gas; there is no provision for shale gas whose exploration requires a different technology as well as equipment.This scenario is set to change by next year, when the oil and gas field regulator, Directorate General of Hydrocarbons (DGH), will auction off shale gas fields. Indications are that there will be an integrated policy, which will allow shale gas companies to explore gas alongside E&P firms in the same blocks that have already been allocated under Nelp. The US, a major shale gas player, follows an integrated policy."We are trying to develop the fiscal regime for shale gas," says DGH chief S.K. Srivastava. The current exploration licences allow only one operator to work at one location. Srivastava is working on legislations to allow oil and gas, coal bed methane (CBM) and shale gas operators to work on the same location.Damodar, Cambay, Krishna-Godavari basin (Andhra Pradesh), Assam-Arakan basin, and Vindhya basin are the most prospective areas for shale gas exploration, according to ONGC's director (exploration) D.K. Pande. A Question Of FeasibilityThe moot question is: even if the policy is in place, will it make shale exploration economically feasible? Experts say the economics of shale exploration might not excite companies right away. While the cost of drilling wells for shale gas is cheaper than that for natural gas or crude, the overall cost turns out to be higher. There are two reasons for this. One, unlike in natural gas exploration, shale gas exploration requires horizontal drilling, which necessitates acquisition of large tracts of land. Two, the shale-fracturing technique is very costly.Experts say shale gas well would cost $5-7 million, compared to $70-90 million for deepwater drills. This is because the volume of gas per well is lower than that of natural gas."The (Indian) cost would be 25-30 per cent more than the US's," says a top official from a technology services company. Moreover, India doesn't have good pipeline infrastructure. "In India, it would be difficult to produce gas at present APM (administered pricing mechanism) of $4.2 per mmbtu (million metric British thermal units)," says an industry source. While the exact costing is yet to be worked out, experts say it would be in the region of $7-8 per mmbtu. So, unless the price of gas reaches $8-9 per mmbtu, it would be unviable to trade shale gas.India's Shale ExplorersUntil India's shale gas policy is penned, only state-owned E&P companies are allowed pilot exploration projects for shale gas. ONGC has a Rs 168-crore project in the Damodar basin (West Bengal) in collaboration with Schlumberger. Similarly, the Gujarat State Petronet Corporation (GSPC) has a project in the Cambay basin. Meanwhile, BPCL has acquired two acreages in Australia. Oil India (OIL) is also scouting for joint ventures for shale. var intro = jQuery.trim(jQuery('#commenth4').text()) var page = jQuery.trim(jQuery('#storyPage').text()) if (page.indexOf(intro) < 0) { jQuery('#commenth4').attr('style', 'display:block;') } The buzz has gone around. More than a dozen firms have sought details of the ONGC-Schlumberger findings. Interestingly, it is not just E&P companies that are interested. "There are queries from non-E&P companies... varying from large infrastructure firms to those who consume gas as a fuel," says an industry source. Global players such as Oilex, BP, ExxonMobil, Shell, and Joshi Technologies, and Indian players such as Reliance Industries (RIL) and Essar are among the interested. RIL seems to be the most aggressive. It has already invested about $3.5 billion in three shale gas companies in the US. Insiders say RIL's aim is to gain the technical know-how of shale exploration and jump on to the Indian scene the moment it is allowed. The US experience will also come in handy for RIL to qualify for an exploration licence in India. Game Changer? In the US, the leading producer of shale gas in the world, shale gas played a role in reducing dependence on other countries for gas and, thus, reducing the price of gas. As much as 17 per cent of natural gas produced in the US comes from shale gas reserves. At present, the US is trading gas at $3.8-3.9 per mmbtu, while the production costs are $4-8 per mmbtu. Selling gas at this price isn't hurt the US E&P firms as most supply contracts in the US were signed when the gas price had touched the $8-9 per mmbtu mark in 2005-06. Shale gas production reaches its peak and stays there for the initial 12-15 months; and the shale well returns the investment within this period. Can India follow on the footsteps of the US and make a success story out of shale? ONGC officials are optimistic. But experts say that the Indian shales are complex and lie buried much deeper than the US ones. Trouble Spots Notably, major shale deposits in India happen to be in sensitive areas. In fact, Damodar basin is a Naxal hotbed. So, land acquisition in such places would be a headache for the government as well as the E&P company. Also, the fact that shale gas is not so clean a technology and that it needs large tracts of land, are likely to invite trouble. "Land acquisition would be a challenge," concedes an official at the Ministry of Petroleum and Natural Gas. The government will find itself in a quandary if environmentalists take up the issue. What is Shale?Shale is underground rock formations — which are normally found more than 1 km below the earth's surface — that hold reserves of oil and natural gas. To extract gas from shale, a mix of large quantity of water, some chemicals, and sand is sprayed onto the rocks at extreme high pressure. The water jets crack the rock open and the sand particles get stuck in the crevices formed by the water strike, keeping the cracks of the shale rocks open. Through these cracks flow shale gas. This process is known as fracturing. Environmentalists claim when shale rock is broken, the crust on which it rests moves and the cascading effect will result in mini earthquakes. Besides, the chemical-laced water used for fracturing can mix with groundwater and contaminate it. However, officials at a leading technology servicing company play down the danger. There is very limited risk of breaching the groundwater. The water table is generally at 100 metres, and shale would be at a minimum of 1,000 metres. The government needs to do three things: formulate a pragmatic land acquisition policy, articulate the economic feasibility of shale gas exploration, and assuage the environmental and ecological repercussions. Or else, shale gas reserves may remain underperforming assets. anilesh(dot)mahajan(at)abp(dot)in var intro = jQuery.trim(jQuery('#commenth4').text()) var page = jQuery.trim(jQuery('#storyPage').text()) if (page.indexOf(intro) < 0) { jQuery('#commenth4').attr('style', 'display:block;') }
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India-focussed Essar Energy Plc said it received forest clearance for its Mahan coal block, bringing the company a step closer to be able to supply coal to its captive power project located in the Indian state of Madhya Pradesh. The approval will help speed up the start of mining and supply of coal to Essar Energy's 1,200 MW Mahan phase I power project, which is due to be commissioned shortly. "This is a major step forward in our strategy of providing full fuel security for all of our power generation assets, thereby eliminating price and delivery risks," Chief Executive Naresh Nayyar said. The company, 77-per cent owned by privately held Indian conglomerate Essar Group, has been facing delays in gaining environmental approvals for coal mining and coal supply shortages, forcing it to delay some of its coal-fired projects. Essar Energy currently operates six power plants in India and another in Canada with a total capacity of around 3,055 MW. Shares in the company, which have fallen 23 per cent this year, closed at 131.50 pence on 30 October' 2012 on the London Stock Exchange(Reuters)
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Here's yet another negative story on the Commonwealth Games (CWG). Out of the five power projects that were supposed to be up and running in time for the CWG, four are sure to miss the deadline. The power plants had been planned in such a way that they would provide buffer power during the Games so that Delhi's power situation doesn't go awry.The laggards are the 1,500-MW Jhajjar project being set up by Aravali Power Company (a joint venture between NTPC, Haryana Power Generation Co. and Indraprastha Power Generation Co.), the 1,500-MW Bawana project, which is being set up by the Delhi government, and two 1,000-MW projects of the Damodar Valley Corporation. The only face saver is the 980-MW Dadri power project by NTPC, which went online on 9 September. To be fair, the CWG Organising Committee has nothing to do with the delays. In the case of the Damodar Valley Corporation projects, government officials say the delay is because of slow land acquisition. The Jhajjar and Bawana projects have excessive rains to blame. While the delay in Jhajjar could have been avoided had adequate preparation been taken to deal with rains, nothing could have been done at Bawana because the site simply got flooded. The silver lining is that the projects are likely to be ready by November, immediately after the Games are over. The delay is only by a whisker. But it is like missing the flight by a minute. Now the important question is: with these power projects missing their date with the Games, how much will the overload affect the power situation in Delhi? var intro = jQuery.trim(jQuery('#commenth4').text()) var page = jQuery.trim(jQuery('#storyPage').text()) if (page.indexOf(intro) < 0) { jQuery('#commenth4').attr('style', 'display:block;') } (This story was published in Businessworld Issue Dated 04-10-2010)
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Suzlon Energy, which defaulted on a $200 million convertible bond redemption earlier this month, has begun talks with senior secured lenders to restructure its debt over 10 years. The world's fifth largest maker of wind turbines is negotiating for a two-year moratorium on principal and interest payments with banks, it said in a statement on 29 October, a move that could help the beleaguered company streamline its debt and lower costs. At the group level, Suzlon had net debt of RS 13,017 crore at the end of June. It was not clear how much of this amount will be restructured by banks. Bondholders earlier this month rejected a four-month repayment extension sought by Suzlon. Read more about Suzlon Energy State Bank of India which has about $659 million exposure to Suzlon, is the lead lender to the company. A senior executive at the bank declined to comment immediately. Indian banks, especially state lenders, tend to help big companies get through tough times by easing loan terms through a corporate debt restructuring mechanism. Suzlon said on Monday its ongoing discussions with bondholders continue to be "constructive and progressive", and it expects "an acceptable solution for all stakeholders will be reached at the earliest possible date." Meanwhile, the company said it is suspending guidance for the current fiscal year ending March 2013 as liquidity constraints, a volatile market and the debt restructuring process are likely to impact its performance. Suzlon has been under pressure in recent years from a slowdown in global turbine sales as well as its debt, and it has lost money for the past three years. While it has an order book of $7.2 billion, tight working capital squeezed its operations in the June quarter. (Reuters)
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