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An Indian Engineering major with global footprint wanted to explore opportunities in the renewable energy space
Situation Approach Solution
Client
Situation
The client wanted to understand possible play in the renewable energy space in India power generation since it is the most significant user of energy globally. It also has seen maximum application of Renewable Energy. Hence, the study was limited to renewable energy for power generation. The penetration of renewable energy (RE) sources in power generation has grown over the years but is still miniscule. Hence the client believed that there was potential of investing in this space. The client wanted to understand which of the various energy sources had the most potential and which part of the value chain was most attractive
AVALON
Identifying opportunities in renewables
2
Consulting
The relative penetration of various types of renewable energy in power generation was mapped
Situation Approach Solution Example
Biomass elements like coal, wood or dung are burnt and heat generated is used to power traditional thermal power mechanisms
PV Biomass
Tidal
Solar
Solar Thermal
RE Sources
Heated water from the earths core accessed through natural springs and cavities used to generate power
Solar energy is concentrated onto a fluid which is heated and then used to power traditional thermal power mechanisms
Geothermal
Hydro
Dams create water bodies whose potential energy is used to power turbines connected to a generator
Wind
Ambient wind rotates large rotors which are connected to generators
AVALON
Consulting
The evolution of technology and hence, the technology risk was mapped
Situation Approach Solution Example
Readiness Wind
Wind power has evolved over the years and has attained prominence in the renewables space Technology and business models both have become more refined Capacities of individual plants have grown from 500 KW to 3MW today; 5MW plants are being considered It is expected to be the future of renewable power generation Solar technology both thermal and photovoltaic are fairly nascent though they have been around for long Among the two, PV is more evolved and attracts greater interest and investment globally than thermal Crystalline silicon technology is well-developed but expensive Currently research is on to develop next-gen solar PV thin films which will revolutionise renewable power Biomass is widely used for power generation since all kinds of waste can be used as feedstock However procuring large scale and high quality feedstock is a challenge for biomass plants Conversion efficiencies are also low in biomass
Solar
Biomass
Geothermal
Geothermal power generation involves deep drilling which is capital intensive & technologically challenging The geothermal reservoirs also have limited life and low conversion efficiency Most geothermal sites are regionally clustered in the Pacific region Therefore the potential for geothermal power generation is limited Tidal movement lateral or vertical is used to move turbines which are used for power generation However significant tidal activity is required which again regionally limits this source There are also ecological issues around marine life conservation These issues therefore limit the large scale adoption of tidal power
Tidal
AVALON
Identifying opportunities in renewables
4
Consulting
Based on technological maturity and growth potential, wind and solar energy was chosen for a deeper evaluation
Situation Approach Solution Example
21% In India also RE power is expected to grow driven mainly by wind power
Geothermal Biomass
2000
2010
2020
AVALON
Identifying opportunities in renewables
5
Consulting
Off-Shore
On-Shore
2008
2009
On-Shore
2010
2011
2012
Off-Shore
Growth Drivers
Lack of reliable grid supply Policy Initiatives 16 out of 29 states have setup RPOs mandating gencos to purchase 10% of their requirement from RE sources
Refers to land-based wind farms and are more prevalent Easier to setup and manage -- erection and maintenance is less complicated Issues around availability of land which are expected to further aggravate as the average size of wind turbines increases
Typically erected in the highseas Setup and maintenance more complicated due to the added complexity of working in a more temperamental environment (much like off-shore oil rigs) Issue of evacuation of power Increased wind turbine size higher conversion efficiency and reduced cost No issues of land availability
Mechanisms for wheeling and banking of power, feedin tariffs have been defined by some states
Central Government is offering incentives such as accelerated depreciation, 10 year tax holiday, no income tax on power sales to utilities and fast clearance of FDI
Availability of reliable suppliers of wind power equipment in India India will mainly witness on-shore growth in the short term given the high untapped potential
AVALON
Consulting
The wind value chain was mapped and based on the industry structure, competition and value captured at each stage, the attractive opportunities were identified
Situation
A range of specialised equipment manufacturers serves the OEM for components like fan blades, motors, turbines, etc. Over 8000 components go into making a wind turbine
Approach
Technology is a key success factor and hence the early starters have a definite advantage The entry barriers for new players are very high on account of this
Solution
Currently this role is played by the OEMs though there is an opportunity to delink this from the OEM business since the skills sets required are very different Utilities are being forced by legislation and lack of strong alternatives to buy wind power
Example
OEMs
EPC Companies
Power Utilities
Customers
Global Market Shares of Key Equipment Suppliers of Wind Power, 2007 Others Siemens Vestas
Suzlon GE Wind
Enercon
Gamesa
Enercon
AVALON
Identifying opportunities in renewables
7
Consulting
The wind value chain was mapped and based on the industry structure, competition and value captured at each stage, the attractive opportunities were identified
Situation Approach Solution Example
Solar Photovoltaic
Solar Thermal
Refer to the use of solar concentrators to generate heat which is then used to generate power The technology is still nascent due to its low conversion efficiency The sizes of the resultant plants also necessitate large land area and these are therefore typically found in the deserts While these are popular for standalone applications, grid-tying them will pose challenges
Crystalline Silicon
Used to manufacture solar cells using wafers cut from silicon ingots The process is capex intensive and results in significant consumption and wastage of silicon Currently it is not economically comparable to wind power due to above reasons Low concentration technology is being experimented with to improve electrical characteristics
Thin Film
Developed with a view to reduce silicon consumption Film of silicon material is sprayed onto a substrate or other surfaces (windows, outer walls, etc.) Is expected to reduce the capex in solar PV by 80% Significant investments are being made here
AVALON
Identifying opportunities in renewables
8
Consulting
Similarly attractive niches were identified in the solar space, based on the value captured, competitive intensity and ease of entry in different stages of the value chain
Situation Approach Solution Example
Capex and power intensive process; silicon supplies may become an issue in the future requiring long term sourcing contracts
Systems
Customer
Most of the action in this market is taking place in this space in the form of R&D to reduce the cost of solar cell. Huge investments are being made by a variety of companies
Of the installed capacity for solar power in 2007, majority was grid-tied and a minority was off-grid applications
AVALON
Identifying opportunities in renewables
9
Consulting
mumbai
Raj Nair or K.A. Ramakrishnan or Naimish Dave or Jaldeep Sodhi Casa Avalon 61, Dr. S. S. Rao Road, Parel Mumbai 400 012 - India Phone : 91-22- 66191100 Fax : 91-22- 66191122 E-mail : mumbai@consultavalon.com Website : www.consultavalon.com
chennai
Premchand C. No: 10, 3rd Floor, Spur Tank Road, Chetpet Chennai 600 031 - India Phone : 91-44- 43455345 Fax : 91-44- 43455338 E-mail : chennai@consultavalon.com
new delhi
Sridhar V. E-141, Okhla Industrial Estate, Phase III New Delhi 110 020 - India Phone : 91-11- 40516600 Fax : 91-11- 40516650 E-mail : delhi@consultavalon.com
AVALON
10
Consulting