India: Renewable Energy /Clean Tech Industry

Renewable Energy/Clean Tech Industry Review

Overview Page 1 of 5

Cynthia Torres
& Preetha Nair
Date: July 2008

Summary

Under the auspices of the Asia Pacific Partnership on Clean Development & Climate (APP) the following
update report has been compiled based on USFCS personal interviews with over 25 Indian renewable
energy (RE) companies and key governmental organizations. Additionally, information in the following
report has been supplemented by a number of recent reports analyzing the current state of the Indian
RE/Clean Tech market. The definition of clean energy technologies includes renewable energy, hybrid
and co-generation, and energy efficiency technologies for power generation; alternative fuels, and
advanced technologies for transportation. For the purpose of this market brief, we will focus on
renewable energy technologies.

India’s renewable energy resource potential is significant, with concentrating solar thermal (CSP), wind,
biomass, and small hydropower representing the technologies with the largest potential. To date, wind
leads the nation as the RE technology with the most installed capacity. However, India also receives
abundant solar radiation equivalent to over 5,000 trillion kilowatt hours (kWh) per year. Recently
announced solar incentive programs have spurred new interest and excitement about the widespread
development of utility scale concentrating solar (CSP) power plants.

India’s energy sector has undergone a significant renaissance over the last decade, as a number of new
policies have created not only the institutions to promote clean technology development but also the
momentum and government support needed to see projects through to completion. New policies include
the National Environment Policy, which provides guidance on air pollution reduction, climate change, and
GHG mitigation, promotion of clean technologies, and the measurement of efficiency per unit of economic
output. India’s Ministry of New and Renewable Energy has issued a draft renewable energy policy that
identifies the strategies for increased deployment of grid-connected renewable energy technologies and
the country’s Rural Electrification Policy goals include provision of access to electricity to all households
by the year 2009.

Market Overview

Clean energy technologies have received unprecedented attention in the last few years as India’s energy
demand has grown every year. As a result the Government of India (GoI) has set an aggressive target of
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electricity for all by 2012. In the 11 Five Year Plan, projections indicate that an additional 15,000 MW
from renewable energy could lead to $21 billion in investment over the next ten years. Three major
drivers exist for clean energy demand in India. First, the gap between existing electricity supply and
demand is large and expected to grow. Second, the need to strengthen energy security has caused India
to invest in renewable energy as a way to diversify their energy portfolio. Third, fossil fuels imports are
increasingly susceptible to price fluctuations, leaving India vulnerable to supply insecurity.

Additional trends indicate that different states are in the process of issuing tariff orders for renewable
energy electricity generation and specifying quotas for power from RE in accordance with the Electricity
Act of 2003. Investment opportunities are available for corporate users of power, long-term investors in
power, promoters of clean power, and trading credits for emission reductions. Foreign investors can
enter into a joint venture not only for RE devices/products but also for manufacturing RE based power
generation projects on a build, own, and operate basis.

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India’s Renewable Energy Potential and Targets

Potential (MW) Installed Capacity as of Target of 11th Five Year Plan
March 2007 (MW) (MW)
Small hydro 15,000 1,976 1,400
Wind 45,000 7,092 10,500
Solid biomass 19,500 569 500
Bagasse CHP 3,500 615 1,200
Waste-to-energy 1,700 43 400
Solar * 3 50
Distributed RE power * * 950
systems
Total 84,700 10,298 15,000
Source: Report of the Working Group on New & Renewable Energy for 11th Five-Year Plan.

* Note: Complete market data on solar and distributed generation technologies was not available at the time of the printing. There
is currently no available data on Concentrating Solar Power (CSP) power generation but renewable energy development agencies
coupled with the abundance of natural resources in the state of Rajasthan indicate that there is over 100,000MW of potential power
generation from CSP technology.

Competition

Given the existing market conditions, U.S. firms may encounter challenges in the area of competition from
local suppliers and equipment manufacturers in the small hydropower (SHP), wind and PV solar sectors.
U.S. firms may also find strong competition from China and several European nations (Germany, Spain,
Italy, and the Netherlands) across the RE/Clean tech spectrum.

U.S. firms should be prepared to provide solid examples of the competitive advantage offered by U.S.
technologies over their foreign competitors. Due to the low participation of U.S. firms in the India
RE/Clean Tech sector, U.S. firms may also need to present their case in such a way that challenges the
Indian buyer to rethink historical purchasing habits with Chinese, European, and Australian competitors
and offer a cost comparison analysis as part of their overall presentation. Some areas where the United
States can demonstrate a competitive advantage includes: product lifecycle, product quality, after sales
service support, overall product performance and efficiency levels. Additionally, U.S. firms may need to
adapt their product to address local India market needs.

India has manufacturing facilities for equipment and components used in solar photovoltaic (PV) systems,
though there is a need for megawatt-scale PV & Concentrating Solar Power (CSP) power-generating
systems. A number of solar thermal applications have also been developed & manufactured in India.
Manufacturing capability also exists in India for the equipment/machinery required in biomass projects.
Except for critical control equipment and high-efficiency turbines, most of the equipment can be procured
from indigenous sources.

India has limited local capacity for concentrating solar power/concentrating solar photovoltaic, waste-to-
energy technology, and large-scale operation of combustion/incineration, pyrolysis/gasification, landfill
gas recovery, and other technologies requires import of design, engineering, and equipment.

Regulatory & Policy Environment

RE policy and the corresponding regulatory environment provide a framework for the pricing signals and
projected viability and sustainability of projects and technologies. India’s central and state governments
have set aggressive policies to encourage the development and deployment of clean energy
technologies. However, in order to increase RE investment in India, there is a need for clear and
consistent alignment of policies across central and state jurisdictions with regulatory frameworks that
enable investors to meet their risk/return requirements and give them certainty over the timeframe for
their investments. In order to create the necessary framework for increased investment in RE in India, the

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Government of India could work toward reducing market distortions from fossil fuel subsidies and provide
a level playing field for all energy technologies, as well as enforce investor rights protection.

Additionally, ongoing concerns over weak enforcement in the legal and regulatory arena include issues
relating to Intellectual Property rights, delays in project permitting, approval and implementation during
the regulatory process. Policy concerns are also affecting capacity building along the supply chain and
with the recent spike in global investment activities; there is a clear need for investors and financiers to
understand early stage financing and capacity building.

Best Prospects & Opportunities For U.S. Companies

The opportunities for U.S. firms in the Indian RE/Clean tech market are encouraging. Good prospects
exist in the areas of R&D and demonstration; technical collaborations; product and equipment sales;
project design, development, and promotion; power generation and production; operational and
maintenance (O&M); project monitoring; carbon finance/trading; and consulting services. U.S. firms
should find ample opportunity to enhance their competitive position with specific opportunities currently
present in the following categories.

RE Technology Type RE Technology Gaps/Opportunities

Solar PV - Thin film-processing technologies as, low-cost substrates, large size cells/modules, and
pilot demo plants
- Improvements in conversion efficiencies
- Grid interactive projects
- JVs with global PV manufacturers
- Energy storage
- Improvements in module technology, including high density & lightweight modules

Concentrating Solar Power - Increased R&D

(Utility Scale Solar)
- Hybrid power systems
- Non-grid solar thermal applications
- Solar building technology applications
- Solar cooling & solar steam generation are emerging opportunities
- High temperature solar thermal applications

Wind - Importing latest technologies with higher capacities (over 1-2 MW systems)
- Wind machines for low wind regimes
- Better design rotor blades, gear boxes and control systems
- Small wind machines for decentralized power generation, wind PV hybrid systems and
wind mills for water pumping applications are also largely untapped markets

Micro-hydro - Low head power generation systems

- High efficiency systems
- Portable mico-hydro systems

Waste to Energy (Municipal - High rate biomethanization systems

Solid Waste MSW) - Incineration and sanitary landfills
- Financing build, own, transfer, as well as, build own, operate systems
Geothermal - Resource mapping
- Feasibility studies
- Consulting firms active in market development of geothermal resources
Tidal - Resource mapping
- Feasibility studies
- Consulting firms active in market development of ocean and tidal resources
Source: Clean Tech AustralAsia APP report “Pursing Clean Energy Business in India”.

Immediate Opportunities for U.S. CSP and CSPV Solar Companies

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Concentrating Solar Power (CSP) and Concentrating Solar Photovoltaic (CSPV) utility scale solar has
good potential for immediate wide-scale development in India. The Indian State of Rajasthan holds the
highest levels of solar radiation in the country, a claim that has recently been confirmed by the completion
of U.S. National Renewable Energy Lab’s (NREL) solar resource mapping of India.

Mr. Rajeeva Swarup, Chairman & Managing Director of the Rajasthan Renewable Energy Development
Agency (RREDA), reports that the region possesses over 100,000 MW of CSP & CSPV potential with an
estimated project value of approximately $4 million USD per mega watt. With an abundance of solar
resources, coupled with available land, Rajasthan is well positioned to become the global hub for
concentrating solar power projects over the next 3-5 years.

Market Conclusion

Clean energy technologies have moved to the forefront of India’s energy infrastructure and investments
opportunities. This is driven by the need to enhance energy security and fuel diversity, meet increasing
energy needs in an environmentally sustainable manner, and advance economic and social development,
all while reducing poverty and sustaining economic growth. Though barriers exist from technology, policy,
and investment perspectives, India promises to be one of the largest markets for clean energy, and U.S.
companies have a significant role to play in both trade and investment. The advantages of the Indian
clean technology market include a strong industrial base and fast-growing economy; availability of skilled,
relatively cheap labor; one of the world’s largest renewable energy programs; the world’s only dedicated
federal ministry to support renewable energy (MNRE) and the only government financial institution
exclusively supporting renewable energy and energy efficiency (Indian Renewable Energy Development
Agency—IREDA).

Recent RE Reports
In recent months the Government of India, the Australian private sector, U.S. academia, and the U.S.
Department of Commerce have generated a number of in-country market assessment reports. To view a
copy of the complete reports referenced in this document please refer to the following websites.

U.S. Department of Commerce “Clean Energy: An Exporter’s Guide to India”

http://www.buyusa.gov/india/en/400.pdf

Asia Pacific Partnership on Clean Development & Climate’s “Pursing Clean Energy Business in India”
http://www.cleantechforum.com/pdf/Asia%20Pacific%20Partnership%20report%20Cleantech%20Austral
Asia.pdf

National Action Plan on Climate Change

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Most recently the June 30 , 2008 launch of the Prime Minister’s National Action Plan on Climate Change outlines
eight key missions to India’s future climate road map as follows:
1) Solar energy boost- 1000 MW solar power by 2012
2) Savings of 10,000 MW by 2012 through energy efficiency measures
3) Industries like steel, power and textiles to trade in energy efficient targets
4) Minimum target of 5% renewable energy for power grids to procure on competitive basis
5) Nuclear power to be part of climate mitigation package
6) Critical data to be digitized with the sharing and accessing of information made easier
7) Recycling from automobiles at the end of their lifecycle
8) 5000 MW of coal thermal power plants to be closed by 2012. Additional 10,000 MW to be shut or
overhauled beginning in 2013-2018

India’s National Acton Plan on Climate Change http://pmindia.nic.in/Pg01-52.pdf

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Rebuttal to the NAPCC http://www.csmworld.org/public/pdf/CCI-NAPCC_statement_final.pdf

For More Information

If you have questions regarding this report please contact the following individuals.

The U.S. Commercial Service in India, California can be contacted via email at:
Cynthia.torres@mail.doc.gov; Phone: (760) 342-1310, Fax: (760) 342-1565.

The U.S. Commercial Service in New Delhi, India can be contacted via email at:
preetha.nair@mail.doc.gov; Phone; 91-11-2316841; Fax 91-11-23315172 or through its website at
www.buyusa.gov/india.

The U.S. Commercial Service — Your Global Business Partner

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the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S.
companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the
U.S. nearest you by visiting http://www.export.gov/.

Disclaimer: The information provided in this report is intended to be of assistance to U.S. exporters. While we make every
effort to ensure its accuracy, neither the United States government nor any of its employees make any representation as to the
accuracy or completeness of information in this or any other United States government document. Readers are advised to
independently verify any information prior to reliance thereon. The information provided in this report does not constitute legal
advice.

International copyright, U.S. Department of Commerce, 2007. All rights reserved outside of the United States.

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