Opportunities & Obstacles in India for Distributed Energy Generation by Pinaki Bhadury

1. New Energy Strategy of the EU& CRwithin the framework of the world power supply & development Opportunities & Obstacles in IndiaforDistributed Energy Generation by Pinaki Bhadury Thermax Limited India 13th September 2007

2. Prozdravit ze Indie Greetings from India AEM Conference, Prague

3. Topics • DE in India • DE Opportunities • Obstacles for DE • Way forward • Indian DE Market Developments • About Thermax AEM Conference, Prague

4. Indian DE was born 107 years back! 1899 CESC installed the 1st Power Plant of 1 MW for Calcutta (Kolkata) city 1905 BEST installed 4.3 MW Power Plant for Bombay (Mumbai) for supply to city & its tramways Soon followed other cities Surat Ahmedabad With rapid increase in demand Larger capacity power plants took birth Lead to decline of DE in India Distributed Energy (DE) in India CESC : Calcutta Electricity Supply Company BEST : Bombay Electricity Supply & Tramways Company Pics courtesy CESC & BEST AEM Conference, Prague

5. DE in India • Re-Emergence of DE • Captive Power Plants • Sugar Cogen • Refineries • Cement • Textile • Small hydro in the hilly regions • Today, about 19% of India’s installed capacity is in DE Photograph courtesy : Arvind Mills Limited & Thermax Limited AEM Conference, Prague

6. DE Opportunities • Drivers for DE in India • Increasing Demand-Supply Gap • Poor implementation of projects • Inadequate capacity addition • Poor availability & reliability • Most of small cities & towns get electricity only for 5-6 hrs/day! • Rural areas get electricity only for 3-4 hrs/day! • Industries have to live with • Frequent interruptions • Frequencies between 48.5 – 51.5 Hz! Presently in India the Peak Demand shortage is 20% average and Energy Supply shortage is 17%! Source : Ministry of Power, India, India Census,CIA Factbook, Xinhua New agency, Chinese State Regulatory Commission AEM Conference, Prague

7. DE Opportunities • Drivers for DE in India • Poor & inadequate T&D network • Many areas do not have access to any grid • In parts of India, grid can not reach due to terrain • High T&D (ATC) loss – 35% national average!! • India will need to invest in transmission as much as in generation in the next 20 years • High cost of electricity for Industries • Average cost is US 10¢/kWH • Indian Electricity Act 2003 • Captive Power Plants delicensed • Excess capacity allowed to be sold to others • For Rural Electrification, distributed generation has been planned for areas where grid can not reach • Stand alone systems for supply to rural households AEM Conference, Prague

8. DE Opportunities • Business opportunities • Captive Power Plants (On-site generation) • Presently estimated to be at 40 GW • Addition at 3000 MW per year • Estimated addition 12 GW by 2012 (conservative) • Commercial Complexes (CHPC / Trigen) • Multiplexes • Malls & Recreation Centres • Industries (Cogen & Stand-alone systems) • Cement Plants • Sugar Cogen Plants • Textiles • Chemical • Industrial Parks • IT Parks AEM Conference, Prague

9. DE Opportunities • Business Opportunities • Rural Electrification • 60% (600 million) of India’s population is Rural • They reside in about 630,000 villages & towns • 44% (250 Million) of the Rural population have no access to electricity • Target to electrify all villages • Provide electricity to every household by 2012 • Remote villages will have DE, 18,000 villages to be electrified • Rural Business Hubs • Increasing economic activity around a cluster of villages • Electricity generation using local resources • Target to achieve 10000 MW in next 8 years AEM Conference, Prague

10. DE Obstacles • Energy Planner’s Mindset – “Bigger, the Better” • “Small & Medium sized plants are sub-optimal” • Power should be generated at source • Pit-heads • RLNG terminals and distributed to consumers • Regulatory • Though Electricity Act 2003 allows sale of excess power to 3rd party • It requires distribution license • State Regulators do not permit 3rd party sale • Supreme Court of India recently ruled in favour of a State Regulator • Government has amended the Act so as to allow third party sale without a licence AEM Conference, Prague

11. DE Obstacles • Financial Restraints • Imposition of unrealistic taxes & duties on DE generation • 10 – 37% of generation cost even if for own consumption • Cross subsidy charges on sale to third party as high as 50% of power price (as much as US 5¢/kWH) • Higher duties on capital equipment • DE plants are imposed 22% more duties than Mega Power Plants • Sales Tax (VAT) on inputs like fuel, lubricants • Not applicable on Utility Large & Mega Power Plants • Fuel Constraints • Non-availability of fuels • Natural Gas • Coal • Poor Distribution system • Absence of a National Gas Grid • High cost of coal transportation AEM Conference, Prague

12. Way Forward for DE in India • What needs to be done • Need to influence policy makers about advantages of DE for India in its generation mix • Study India’s long term generation & distribution needs • Design the generation mix based on Central & Distributed Generation • Lobby through International agencies • Create ‘Buy-in’ for DE at • Central level • State level Through seminars, conferences & references for DE India urgently needs to look at DE proactively as one of the options for meeting its burgeoning energy needs. Now is the time, or it will be too late AEM Conference, Prague

13. Indian DE Market Developments • On-site Industrial Power Plants (Captive Power Plants) • Encouragement from the government to sale extra capacity • Grid / Transcos / Power Traders • Direct Users • Capacity augmentation to National Generation capacity • Distributed Generation in Rural markets • Use of local resources • Hybrid systems of Solar / Biomass / Wind / Micro Hydro systems • Owned & operated by the village people • Quick to implement & start • No need of complicated and expensive distribution network AEM Conference, Prague

14. About Thermax • Thermax Limited • A major Energy & Environment Indian engineering company • Turnover of Rs 23.62* Billion (US$ 583 Million) • Addresses all the Utility requirements of the Industry • Three Manufacturing locations in India • One Manufacturing location in China *As of 31st March 2007 AEM Conference, Prague

15. Our Vision To be a globally respected high performance organisation offering sustainable solutions in energy & environment AEM Conference, Prague

16. Our Businesses Boilers & Heaters Vapour Absorption Chillers Air Pollution Control Speciality Chemicals Turnkey Power Plants Waste & Waste Water Solutions AEM Conference, Prague

17. Our Business Purpose Conversing Energy Preserving the Environment AEM Conference, Prague

18. Our Location Works : Chinchwad, Pune, 160 kms south of Mumbai (Bombay) H.O. : Thermax House, 4, Mumbai-Pune Road, Shivajinagar, Pune AEM Conference, Prague

19. Overseas Locations Thermax Ltd. Moscow, Russia Thermax Europe Ltd. Luton, UK Thermax Inc. Detroit, USA Thermax Ltd. Jebel Ali, UAE Thermax (Zhejiang) Cooling & Heating Engineering Co. Limited Thermax Ltd. Nairobi, Kenya Thermax Ltd. Kuala Lumpur, Malaysia Thermax doBrazil Sau Paulo, Brazil AEM Conference, Prague

20. Thermax Group AEM Conference, Prague

21. Thermax & Indian Power Sector • Offers unique solutions for Distributed Generation • Biomass based power generation • Waste Heat based power generation • Combined cycle plants • Has a dedicated turnkey power plant design, manufacturing and commissioning business • Have commissioned up to now 277 MW plants • Further 300 MW capacity under execution AEM Conference, Prague

22. Děkuji Thank You For further information & clarifications, contact: Pinaki Bhadury, Head – Business Analysis, Research & Strategy Thermax Limited D-13, MIDC, R D Aga Road, Chinchwad Pune 411019 INDIA Phone : +91 20 27475941, 66122802 (Direct) Fax : +91 20 27470648 email : pbhadury@thermaxindia.com AEM Conference, Prague