ENERGY

A good business proposition, first and foremost

When the renewable energy sector is confident and not constrained, business opportunities will grow fast. In India it’s become a simple equation: lesson the loads on the sector, and will increase its load of offerings for producers and users it is really Win-Win.

How often you have noticed how the privatization and public-private-partnerships have changed our languages, with new words, or new meanings to old words? In the world of energy, terms like “wheeling”,” banking” and “feed-in” are part of our verbal main stream, reflecting how these practices are firmly in the industry’s tool box.

The renewable energy scene is exemplary of this change. Its own amazing dynamic having been unleashed since the liberalization of the national energy market in early 1990s. The depth and scope, both highly promising, of the attention paid to renewable energy is reflected in the stately India Renewable Energy Development Agency (IREDA).The World Bank made one of its ever largest ever loans in the field of renewable to IREDA under Indian Renewable Energy Project., and helped the agency to an important position in developing market opportunities for the private sector. With a facilitating role played by ASTAE, it has accompanied IREDA along a long and fulfilling road, milestone with adjustments to the needs of the private sector and to the growing involvement of the financial sector in the renewable energy market

Go with the blow.

The national map of renewable energy in India is well dottedwithprojects underway. The resources enormous, even if, as elsewhere, tht are not yet fully mapped. And imperatives are high, given India’s high position in the league o nations with emissions of carbon dioxide from energy consumption growing per capita, and expected to have increased six-fold between 1985-2035.

It is the south of the country that the density of renewable energy activity appears to be highest-through, truth could be, dots on maps may deceive the eyes. In any case, if progress is indeed marked by the interplay between the public and private sectors, it is in the south-eastern state of Tamilnadu that the superlatives start to flow, or blow the most Tamil Nadu is the number 1 state in India, in renewable energy production especially from Wind.

The prime factor is natural: the terrain and wind are extremely favorable. At the India’s southern tip, the monsoons blow from south- west and the north-east. The state’s REDA claims that this makes for a plant load factor (PLF) of 25%, where as the PLF in other states is lower, usually around 21%. The agency under took detailed wind resources assesmentstudies, including a series on 67 sites in 1986 and came up with positive data on 41 of them. These studies, more latterly, have been assisted by wind radar data captured from satellites, through intermediary of an ASTAE partner, Winrock International. In many a conversatation with wind torm operators, they almost never cease to under line the crucial nature of such data in their decisions, after initial official reluctance, a demonstration site was set up followed by wind forms with an installed capacity of 19MW in 8 sites. That sparked of a migration of investors into commercial wind forms. By the end of September 2004, the state had a total of 1,639MW, having added 277MW in the last six months. This amounts to almost 27% to the state’s total installed capacity, from all sources which as energy professionals love to point out, is not synonymous with the share of energy actually generated from wind sources. But it’s impressive none the less.

The second factor comes from man-made measures Legislations have enabled private producers to become leading players in Tamilnadu power supply, both for captive energy (such as textile factory generating its own energy) and with wind forms feeding to the grid. This latter process requires not only laws that allow private production, but laws and quality procedures for feeding and selling energy. This involves” wheeling” privately-produced electricity over the grid to your factory. The electricity supply company imposes a service charge for “wheeling”, and another for “banking” the electricity whilst on the grid. Their charges are part and parcel of” private purchase agreements” (PPAs) between private producers and the public utility company, and they were greatly facilitated by the new national Electricity Act adopted in 2003. Their potential has suffered from a lack of agreement on tariffs.

In Tamilnadu “wheeling” and banking charges have been raised from 2% each to 5%. This has not diminished the fervor of private producers, even though they have eaten their income. Other measures are supportive: IREDA itself advances loans up to 70% of total project cost, for 7 to 10 years, at up to 10.5%. Alternatively, SIDBI can provide loans up to90% of the project cost repayable in5 years at 14% interest.

The revenue department helps by allowing accelerated depreciation of the initial investment cost of a wind farm: 80% is deductible in the first year. And then, especially for the competition-challenged textile sector, the Technology Up gradation Scheme reimburses eligible textile producers with 5% of their investment. And icing on the the cake, again for the textile sector textile producers who feed in power to the grid are exempt from taxation on their income for 10 years. No wonder you’ll often see a wind farm adjoins a textile plant.

INFORMATION IS POWER

One key to Tamilnadu’s wind energy surge is widely credited as having been accessible data on wind speeds and heights. In neighboring Karnataka state, where water resources seem to abound as much as Tamilnadu’s wind, some energy professionals and investors wish that they were as information-rich as their peers. Some early studies. Assisted by the World Bank and Energy Sector Assistance Program were useful for determining sites for small hydro plants on major rives. The plants must be operative 99% of time since every drop of water must be used. In such case, more detailed data would be of inestimable value.

Already, small hydro energy is a leading source of the state’s renewable, whose total potential value is estimated at 10,150 MW. According to the Karnataka Renewable Energy Development Company, the major potential is in the wind (68%) and small hydro (14%). But only 4% of potential wind power is already being captured. More than 13% of small hydro is in use (196 MW as at the end of 2006) , this would reflect a somewhat proactive regulatory approach to renewable in Karnataka than in Tamilnadu-more enabling than empowering- and and the preference for small hydro as well as an attraction that the private capital has found in the private sector power production.

Bankers, water turbine manufactures and-the litmus test of energy supply- consumers all attest to the benefits of power sources being boosted by independent producers. Fewer outages, less pollution, lower prices. And more time for other things.

MORE WATTSAND JOBS, LESS EMISSIONS.

Elsewhere in Karnataka, a start has been made in mobilizing the potential to another end of of the energy spectrum: the plant materials into energy. The privately-owned Malavalli Biomass Plant generates electricity through steam from burning agricultural wastes. Under a Power Purchase Agreement with Karnataka Power Transmission Corporation it supplies -46 villages-more than 100,000 households-with a reliable supply of 18 hours a day.

Project managers report their concerns that an inadequate regulatory framework for biomass generation may lead to the depletion of forests and ground resources.

All these have to be addressed for any use of tapping natural sources as methods to generate electricity.