Building a Sunshine Nation

India has one of the highest Solar potential in the World. Can it tap into it build a sustainable economy?

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Source: The Hindu

India generated 68% of its electricity from coal in the fiscal 2013-14. The inability of Coal India Ltd (the state-owned monopoly) to ramp up coal production resulted in 65,000 MW of installed capacity being stranded, causing a power deficit of 5.4% in the fiscal 2013-14. To plug the gap, imports rose to 152 million tonnes in 2013-14 (20% of total coal requirement) resulting in higher power prices. This situation, together with climate change imperative impels a rapid movement towards greener and cheaper sources of power, primarily solar energy.

Rising dreams and falling prices

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Source: Financial Express

 

The movement is already under way as a result of Government’s ambitious ‘National Solar Mission’ announced in 2009 which envisages 20,000 MW solar capacity installed in the country by the year 2022. The Narendra Modi-led Government raised that target last month to 1,00,000 MW of installed solar capacity, inviting domestic and foreign companies to invest about $ 100 billion in the country’s Solar power sector. The buoyant mood behind this ambitious target is supported by 4 key factors. First is the abundant solar resource availability. India receives about 4.5-7 kWh/m^2 of solar energy on average with 1500-2000 hours of sunshine per year (depending on the location). This is enough to generate power more than 1000 times the current demand. A second factor is the falling prices of Solar Photovoltaic modules. Large-scale production, especially in China, has caused the module prices to drop by 80% between 2008 and 2014, dropping by 12% last year alone. As a result the tariffs for grid-interactive solar power have fallen from Rs.17.91/ kWh in the year 2011 to Rs. 5.73 /kWh in the latest round of auctions held by the Andhra Pradesh state government.

Nearing Grid-Parity

The third factor has been the tremendous rise in efficiencies of solar PV-modules. Over the last 8 years, research and mass-scale production have resulted in rise of conversion-efficiency for crystalline silicon modules from 12% to about 19% and that for thin-film (Cd-Te) modules from 8% to 13%. Companies like SunPower (in USA) are already manufacturing silicon modules with 25% efficiency commercially. Scientists at Fraunhofer Institute in Germany recently developed solar cells modules with 44.7% efficiency. This combination of falling costs and rising efficiencies has resulted in solar power approaching grid-parity. KPMG, a consulting firm, predicts solar tariffs to achieve grid-parity by the year 2018-19. Solar power is already more economical than diesel power with an average tariff of Rs. 7/kWh against Rs. 15/kWh for the latter.

The fourth significant factor has been the Government support to build the solar power sector. The ambitious ‘National Solar Mission’ provided various fiscal incentives like preferential feed-in tariff, excise duty concessions, wheeling-charge concessions, income-tax holiday, an 80% accelerated depreciation on solar-equipment, etc. Besides, off-grid solar plants receive a capital subsidy of 30% of the entire-project cost (and of 70% in North-eastern states and J&K). These factors along with falling prices have resulted in rise in installed capacity from 161 MW in 2010-11 to 2,319 MW in 2013-14.

Sunshine on the horizon

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Source: Aditya Greens

This is however only a small amount of the total potential, which is estimated to be in the range of 7,00,000 to 11,00,000 MW. For the non-grid applications, Rooftop solar represents the most lucrative opportunity. It can fulfil 30% of the entire demand generated during the sunshine hours. The example of Germany shows that with robust and attractive policy, Rooftop solar can be effectively leveraged upon. Out of the total Solar capacity in Germany, 80% is via Rooftop solar modules which can meet about 10% of total demand on a typical summer day.

Apart from using Photovoltaic modules, Solar energy can be harnessed through thermal systems as well. In this domain, Solar cooking and Process-heating are the major segments. Of these, Solar cooking is the most mature category with an estimated potential of 2.6 lakh m^2 collector area and target installation sites like temples, hostels, canteens and prisons. Already, successful examples of mass-solar cooking like Shirdi temple and IIT-Roorkee’s student messes exist. But the most lucrative opportunity (of about 46 lakh sq. Metres of collector area) lies in the industrial heating segment. Indian industry accounts for 40% of the total primary energy consumption of which thermal-form accounts for a massive 70%. Solar process heating can easily replace Diesel, LDO or FO-fired boilers in industries like Textiles, Dairy, Pulp & paper and Food processing.

Clouds spoil the mood

Despite massive potential and Government’s good intentions, severe challenges face the nascent Solar power sector in India. The utility-scale projects through PPA-mode (Power Purchase Agreement) have persistently been under the shadow of poor financial condition of the state-owned distribution companies. The retrospective tariff reduction by Gujarat’s power utility and non-honouring of PPA agreement by Tamil Nadu’s power utility has made the investors apprehensive, lately. The health of the utility-scale projects via REC-mode (Renewable Energy Certificate) is even more precarious. Non-enforcement of RPOs (Renewable Purchase Obligations) by the state-governments has forced the REC prices to tumble by 70% from Rs. 9.5/kWh to Rs. 2.85/kWh. Only 2% of total solar RECs were traded in October 2014 as compared to 18% in April 2012. This has put projects of 500 MW capacity (1/6th of India’s current solar capacity) in a cash-crunch.

For the Rooftop solar industry, the main hurdle has been the indecisiveness in coming up with an effective policy for residential rooftops. In August 2014, a 30% capital subsidy was announced for Rooftop installations but this was applicable to only Government buildings. Moreover, there have severe delays for the last 8-10 months in subsidy payments as the MNRE budget was reduced from US $246 million in 2013-14 to US $72 million in 2014-15. A local rooftop installer, Zolt Energy’s Pradeep Palleli, said “Announcing subsidies and not releasing it in time is really a major hurdle hindering the growth of the rooftop solar industry.” Even the Solar thermal industry has hit a road-block after the Government withdrew the 30% capital subsidy on solar water heaters on October 1, 2014.

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Who will make them?

The weakest pillar in India’s solar industry however is the crippled manufacturing-base. Global over-supply of cheap modules from manufacturers in China and USA has put many domestic-manufacturers out of business. For those who are left, capacity-utilization of factories remains below 30%, putting them on verge of bankruptcy. The high cost of domestic finance has been another major disadvantage. Solar-developers are getting access to loans at 3-4% from US Export-Import Bank (Ex-Im) while domestic interest-rates remain above 13-14%. Solar-developers have taken loans in excess of US $1 billion from the US Ex-Im Bank. But these come with riders to procure modules from US-based manufacturers, thus putting Indian module-manufacturers out of business.

Government to the rescue

To eliminate the barriers and shortfalls in the sector, the Government has to take proactive steps. Foremost among them should be creating an environment of certainty and stability, where in, programs are sustained and incentive-payments never delayed. To reduce the debt costs for developers, funding avenues like long-tenure, tax-free solar bonds. Lastly, the government can also leverage the ‘Make in India’ campaign to create a robust and sustainable solar-manufacturing industry in the country. Solar-sector focused Manufacturing and Investment zones should be set up to provide business friendly ecosystem along with superior physical infrastructure.

Work has already begun on many investment-encouraging initiatives. As a result, India is building the world’s largest solar-power plant in Rajasthan with a capacity of 4,000 MW, which is expected to bring the cost of solar down to retail tariffs (and even lower in some locations). Big business-houses like Tata-group, Mahindra Group, Reliance, NTPC, Aditya Birla Group and others have already planned investments worth thousands of crores to make the best of the solar-opportunity. The US $ 100 billion solar-investment plan by the Modi Government takes India’s commitment to solar technology to an unprecedented level. The sun has begun dawning on India. Combined effort by Government and Businesses can take it up the horizon and shine upon India’s future.

 

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Harsh Jain is a second year student at IIM-Ahmedabad. He completed his graduation in mechanical engineering from IIT-Roorkee. With extensive research exposure in the form of market research projects and industry review reports in the energy sector, Harsh is an environment enthusiast and actively follows the latest trends in the power and automobile industries.

 

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GE’s Alstom Acquisition: How Smart is the Move ?

On June 22nd 2014, one of Europe’s fiercest acquisition battles ended. French Government officially supported Alstom’s purchase from General Electric. During the previous two months, Siemens and Mitsubishi also played important roles in the bid. Both strategic and political reasons lie behind the structure of the deal.

On April 30th, Alstom (€21 billion revenues) presented the details of the proposed acquisition from GE (€120 billion revenues): all assets and liabilities related to the Energy activities transferred to GE for an Enterprise Value of 11.4 billion Euros to be paid in cash.

Figure 1

Source: GE Website

Is the deal value fair ? 

By using the comparable method, it emerges that GE has undervalued Alstom. Indeed, GE’s offer implied a EV/EBITDA multiple equal to 7,87, while Damodaran suggesting that a fair multiple for the sector should be equal to 9,78 and Valuemetrics to 10,44.  The main reasons of this undervaluation may be the industry trend and Alstom’s recent performance.  According to an Ernst & Young research of 2012, the M&A trend in the power and utilities industry has been decreasing in terms of value and number of deals. Considering similar transaction multiples of the recent past in the European market, they confirm the trend and are similar to the ones of Alstom’s acquisition. For example, in 2012 Electricite de France acquired Edison International with a EV/EBITDA multiple of 9.7 and Snam was acquired by Cassa Depositi e Prestiti with a multiple equal to 8.7. Moreover, the whole European energy sector has been facing threats due to the raise of energy resource prices.  Alstom has also negatively performed in the last years. In 2013, Net Income fell 28% to €556 million due to higher restructuring costs. Operating Profit fell 3% to €1.4 billion, with Operating Margin dropping from 7.2% to 7% and orders to 10% (€21.5 billion) because of a weak performance in the thermal power division.

The underlying strategy

The strategic rationale behind the deal is to integrate the Alstom energy activities (€14.8 billion revenues and 65.000 employees) within GE to strengthen its development’s prospects. The main sources of synergies are the complementary capabilities among the two firms: GE’s excellence in Gas Turbines and Wind Onshore and Alstom’s superiority in Hydro, Grid, and Steam turbines. Moreover, Alstom could use the cash received to refocus on the transportation sector.

The deal is likely to be very successful due to various elements. It strengthens GE’s position as the most competitive infrastructure Company in the world. Moreover, the type of technology that is going to be acquired is complementary to the existing capabilities of the company, thus increasing the likelihood of benefiting from the potential synergies in the short-term. Indeed, the synergies that GE is going to leverage are concrete and clear because Alstom mostly conducts business in areas where GE is already present, so the learning curve necessary to generate value is not very difficult to be achieved.

The benefits that GE is more likely to achieve are in the power business, especially regarding the production of clean energy. Indeed, the demand of pollution-free energy is likely to increase in the near future, especially from Asian countries like China or India. Thus the acquisition has taken place in an opportune moment in terms of industry cycle and given the huge scale that the company is going to put in place, it will be able to largely satisfy the future demand.

According to estimates provided by GE, the cost synergies opportunities that the company is expected to generate is about $1.2 billion within 2020 (see graph below for a more articulated analysis), a $4 billion increase in operating profits by 2018 and an EPS increase of $.04-.06 within 1 year.

 Another relevant factor is the past success in dealing with acquisitions of France and European companies. Among them we remember Jenbacher, an Austrian company that has been the cornerstone of GE’ global distributed power business and that under GE’s control has increased revenues 3x times. This success ranges also from various industries, not only in the power sector, ensuring that the post-merger integration phase will be conducted appropriately by GE given the previously developed skills.

 What are the Challenges ?

 Although the deal has a huge potential to be very successful, it is not immune to risk. The first important point that GE should be aware of is the strength of the France unions in the context of the France labor market. Any time it will take decisions regarding the firing or the reconversion of the France labor force may be very difficult to be implemented (or may be implemented at higher costs than in other countries of the world).

Another risk factor is the large amount of transactions costs that will be present as soon as the deal will be completed. They mainly derive from the terms of the deal, which require the constitution of three Joint Ventures that were not present in the first bid by GE. Thus, GE will face much more pressure in generating profits given the larger cost structure.

 Figure 2Source: Author’s elaboration on company’s data

Conclusion

 The deal has high chances to turn to be very successful and may be considered as a game changer in the industry. Although the initial terms had to be modified by GE due to the competition that arose from Siemens-Mitsubishi, the benefits are both large and concrete, and very likely to be monetized in the short-term. This is also related to the nature of the estimated synergies. Indeed, they are of the cost-saving type, which have a higher probability to be achieved compared to the growth ones. However, challenges arise from the institutional environment that surrounds GE’s activities in France, where the power of unions is very high as well as the high amount of transactions costs that arose in order to positively conclude the deal.

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Gianmarco Bonaita is a Double Degree student of PGP coming from Bocconi University. He completed his undergraduate degree in Business Administration and Management at Bocconi University. He has been elected city councilman and has worked as a collaborator of journal for 3 months. He has had an internship in an Italian SME. He is passionate about travelling, skiing and photography.

More power for your Electric Car

The Electric Car is hardly a new invention. In fact, they were very popular in the 1920s when Internal Combustion (IC) Engines suffered from drawbacks like excessive noise, vibration and the high cost of fuel. However, they left the limelight after the rise in popularity of IC engines due to the discovery of oil blocks in the USA and improvements in IC engine design.

However, the resurgence in popularity of EVs, fuelled majorly by oil shocks and environmental movements warrants some attention. Even though the Electric Vehicles need a lot of factors working in their favor for them to gain an important position in the automobile market today, we feel there is one aspect which lies at the heart of the issue – the power system.

 The power system – the bottleneck in EV performance:

The performance of batteries and charging infrastructure are responsible for a majority of the bottlenecks facing the rapid acceptance of EVs.

Recharging time: Larger and more powerful electric vehicles require more time to charge – and though the batteries with greater capacities are available, they cost a lot more and take very long to charge.

Battery Lifetime: The cost of batteries increases exponentially with capacity and hence raises the cost of owning an electric vehicle as compared to a fossil-fuel powered vehicle

Range Anxiety: Electric Car owners are plagued with the fear that their battery will run out of power and they will be left stranded. Lack of sufficient charging infrastructure is the core reason for such anxiety

The Battery – A tradeoff between cost and capacity

Batteries are probably the most expensive component of EVs which increase the upfront cost of ownership. Thus, managing battery economics is the first major piece of the puzzle.

Here we will look at a metric called the payback period for the battery since it is the most relevant and commonly used measure of economic competitiveness. The Payback period in our context simply calculates the time taken for an Electric Car’s operating efficiencies to recover the upfront payment for the battery

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This payback period should obviously be less than the normal lifetime of the vehicle for it to make economic sense for the consumer. The figures below do not indicate such a possibility – the current payback period is 12 years, which means we are not there yet; but considering the steady decline in this metric from 35 years in 2007, it is not a distant dream. Moreover, Government subsidies make the deal even sweeter by reducing the upfront cost and hence the payback period.

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Charging Infrastructure – the antidote to Range Anxiety

Another way in which this equation can be improved for the customer, is by reducing the capacity of a battery, while also keeping the ‘Range Anxiety’ at bay – this can only be accomplished by widespread charging infrastructure.

There is a clear tradeoff between the fixed cost of charging equipment and time taken to fully charge a battery; and even with fewer cost constraints, technology to quickly charge the EV has not penetrated the market yet.

Charging Stations Vs. Gas Stations:

There are two major reasons why charging stations are unattractive as compared to gas stations

Firstly, the time taken for charging a battery can be 30 minutes for even the best charging stations. Compare this to the 10 odd minutes taken by even the least efficient gas station and we see we have a problem.

In addition, there is no standardized offering with respect to charging infrastructure – a Tesla station cannot charge a Nissan Leaf EV for example. This lack of standards in the industry is multiplying the cost of charging infrastructure for the society.

Residential Charging:

Regular chargers can take 4-5 hours on an average to charge the EV, which means overnight charging is the best option. Even with such a high duration, the cost of the charging point is as high as USD 3000 which can be prohibitive for certain customers.

Distance between public charge-sites:

Another way to solve the range anxiety problem is to have charging stations at regular intervals, so that I am not far away from a charge-site when the battery is running out of charge.

An easy way to make preliminary calculations is to assume that car should be able to recharge when it exhausts, say, 80% of the charge it gained in 15 minutes of charging (the usual time one would want not mind waiting at a charge station).

Using LA county as a test example, we observe that a charge point is needed every 10 miles. But with only 75 sites as opposed to the requisite 350 odd sites, the current infrastructure is hopelessly inadequate. Without major investments in more powerful chargers or in increasing the frequency of charging infrastructure, the problem of range anxiety is difficult to alleviate.

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Alternatives to charge stations:

Two interesting charging mechanisms have evolved to counter the conventional charging stations:

Battery Swapping: This revolutionary method simply replaces a discharged battery with a charged one – taking far less time than even a conventional gas station. However, this technology has to deal with obvious issues like lack of standardization, high capital costs, getting small refills and questions of ownership of the batteries. Better Place –  a company which tried to use this as part of their business model files for liquidation recently – clearly indicating that battery swapping still has a way to go before it can become mainstream.

Wireless charging: Using EMF coils set below the road or dividers, EVs can be charged wirelessly, while on-the-go. This solves a lot of issues, including the standardization issue of battery swapping, but high capital costs (estimated at a million dollars for a 5 Km stretch of road) can make this unviable in the short term. In addition, there is no business model to recover the cost from the consumers yet and till such a time, charging stations may be the only way.

 EVs despite their many advantages, thus, will be restricted by battery costs and charging infrastructure, before it can truly compete with existing gas-powered vehicles.

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Sahil Patwa is a PGP 2 student at IIM Ahmedabad and a member of the Consult Club. He spent his summer at the Boston Consulting Group developing a growth strategy for an Industrial Goods major. Before coming to IIM Ahmedabad, he worked as an Associate Consultant at Ernst & Young and did a brief stint at a boutique consulting firm. Sahil holds a B.Tech in Mechanical Engineering from IIT Bombay

Coal, Where Art Thou?

The future of the Indian coal industry appears dark. The demand is going to increase significantly and the government is not ready to address the potential bottlenecks. This article talks about the evolution of Indian Coal Industry, its current challenges and prospective solutions.

Indian Coal Industry is going through a very tough time. The demand of coal is increasing year after year and is expected to grow threefold in next 20 years. But it appears that the domestic coal production will not be able to meet this increase in demand.

Coal has driven the engine of Indian industries for a long time. The Indian coal requirement can be broadly divided into two categories – Thermal Coal, used for power generation and Coking Coal, also known as metallurgical coal, used for steel production. At present, around 70% of coal in India is used for power generation and rest 30% is used by other industries like steel, cement, paper, chemical and pharmaceutics.  The Indian power sector is still dominated by Coal and as per an IEA 2012 report, 68% of Indian electricity is generated by coal. Industry-wise coal usage in India is shown in Exhibit 1.

Coal where art thou

Before proceeding further, let’s have a brief understanding of how the coal industry has evolved in India. The first commercial coal mining was started way back in 1774 by M/s Summer and Heatly, East India Company in Raniganj coal-fields. Since then, the coal industry has moved at a sluggish rate and before independence it just touched 30 million tonnes (MT) mark. After independence, Government of India (GoI) established the National Coal Development Corporation (NCDC) in 1956 to give a push to coal production, with the collieries owned by the railways. During the same time, many private firms also flourished. However, concerned about the low productivity, owing from the use of outdated technology and poor working conditions for labourers, GoI decided to nationalize private coal mines. This was done in two stages – coking coal mines in 1971-72 and non-coking coal mines in 1973. The Coal Mines (Nationalization) Act, 1973, provided the right to GoI to manage all coal mines in India and this act is still a centrepiece of Indian coal policy. Today, there are three state owned firms which control more than 90% of coal production in India – Coal India Limited (with its 8 subsidiaries), Singareni Collieries Company Ltd. and Neyveli Lignite Coal Ltd.

The Coal Mines (Nationalization) Act was amended in 1993 to allow private captive mining by private companies and other public entities for power generation. This amendment led to the allocation of more than 200 blocks by the government to various companies other than CIL, SCCL and NLCL. But, out of these 200 blocks, only 30 have started production till date and the contribution of captive mining was meagre 36 MT in 2010-11 against targeted 104 MT. The reasons for this dismal performance are many – absence of accurate geological statistics; delay in environmental approvals; land acquisition, Rehabilitation & Resettlement issues. This is the first set of issues which limit coal production itself. Logistical concerns like non-availability of enough railway wagons for transportation and lack of road infrastructure from mines to railway sidings is second problem which has affected production capacity. The logistical issues are not limited to rail and road network only. Current coal handling capacity of Indian ports is around 90 MT and this has to be increased by 50 MT in the next 5 years to meet import requirements of 140 MT in 2017.

Third constraint, as mentioned above, is expected increase in coal imports in the future. In 2011-12 India produced slightly more than 550 MT and around 85 MT of coal was imported to meet domestic demand. This gap between demand and supply is expected to increase to 140 MT by 2017 as per estimates by World Energy Council. The expected coal demand in India for the next two decades is shown in Exhibit 2.

Coal where art thou 2

Import of coal brings its own set of problems. India is primarily dependent on South Africa and Indonesia for thermal coal and Australia for coking coal. Australia has shown significant price fluctuations in the past because of the Queensland floods. Further, the changing regulatory and tax scenario in these countries suggests an increase in coal prices in the future. At the same time, other potential geographies like Mozambique and Columbia lack infrastructure facilities to ensure smooth coal transportation.

Fourth issue is coal quality management. Indian coal is low to medium grade with high ash content, low moisture and low sulfur. Indian power plants often complain about high ash content and inconsistency in coal quality. Coal benefaction and washing are potential solutions to this problem and as an initiative CIL has decided to set up 20 coal washeries with aggregate capacity of more than 100 MT/year.

There are a lot of measures that could be taken at various stages of coal value chain to release various bottlenecks mentioned above. At the coal exploration stage government should provide incentives as it does for Oil and Natural Gas exploration under NELP program. At the clearance stage, the government should appoint one single committee with representatives from all the concerned ministries like environment, water, mining, forest etc. This will reduce the clearance time significantly. Adding on, coal recovery from under-ground mines varies from 20% to 70%. To address this issue at mining stage, government should encourage investment in R&D and more efficient technologies to recover more coal. To address logistical issues, the government should adopt PPP model to develop first-mile infrastructure to transfer coal from mines to nearby railway sidings and for development of port capacities for coal handling. Simultaneously, given that imports are expected to augment in future, GoI should use diplomatic approach to make the process of acquisition of coal mines abroad and price mechanisms suitable for Indian industry.

The measures mentioned above are the need of the hour to ensure energy security as well as industrial growth of India. Coal is definitely going to stay as a major force behind Indian development for next few decades and ensuring a timely supply of high-quality coal to power plants and other industries is the key to development.

Mani Mahesh Garg is a PGP2 student at IIM Ahmedabad and a member of the Consult Club. He is a graduate from IIT (BHU), Varanasi with B.Tech in Ceramic Engineering. Prior to joining IIM-A, Mani Mahesh worked at RINL, a public sector steel manufacturer.

Delivering India’s Energy Security

India’s phenomenal growth in last two decades has made it a strong contender in the race of emerging global superpowers. However, if India wants to fuel any hopes to realize its ambitious plans, gaining energy security will be a paramount concern. India’s huge dependence on foreign imports not only puts a great strain on its economic resources, but also makes it vulnerable to the whims of outside world.

India’s energy sector has been majorly crippled by issues pertaining to domestic nature. Due to scarcity of domestic oil and gas reserves, more than three-fourths of India’s oil needs are met by imports. Even the existing reserves are not fully exploited. Excessive bureaucracy and requirement of approval from 7 different ministries has stalled production plans at numerous occasions. Government’s changing stance on tax laws, policy ambiguities and uncertainty on revenue sharing models has resulted in lower enthusiasm among foreign players. Moreover, Government’s regular intervention in fixing oil prices and misalignment with global prices has discouraged private sector to become a partner in finding solutions to India’s myriad energy problems.

In spite of abundant coal reserves, India imports huge quantities of coal owing to the poor domestic quality. While India’s long sunshine period and long coastline present a huge potential of exploiting renewable resources, their doubtful commercialization and huge investments have deterred any big plans. Moreover, the recent nuclear catastrophe in Japan has put looming concerns over the future of nuclear energy. The growing public awareness and stringent environmental regulations have made harnessing of conventional sources of energy even more difficult and costlier. Thus, India’s energy future looks bleak and need some immediate corrections.

India has to adopt a multi thronged strategy to effectively counter the above challenges. While India’s energy giants like ONGC have taken right steps by acquiring foreign oil and gas assets to overcome the domestic shortages, more such efforts need to be taken. Both private players and national oil firms have to aggressively pursue the path of acquisition of O&G reserves in Latin American, African and other countries. Government has to promote these initiatives by increasing its budget outlay for these acquisitions.

Coal to Gasification (CTG) technology is an answer to India’s poor quality of coal. The success of China in converting poor quality of coal into gas and transporting it form remote places to country’s main centre highlights the efficacy of this new technology in helping India harness its full coal potential.

Fuel subsidies have to be phased out in a systematic manner to cut their inefficient usage. Diversion of these funds towards R&D for better exploration techniques will pay huge dividends in increasing domestic production. India has to increase diplomatic efforts to bring more Clean Development Mechanism (CDM) projects to its shores. Such projects will bring much needed investments and build India’s base of renewable sources. The discovery of unconventional sources of energy like shale gas and coal bed methane reserves has also opened up a new window of opportunity. Schlumberger has already confirmed the availability of shale gas basins in Cambay and Cauveri basin. US’s shale gas success demonstrates that successful shale gas exploitation can go a long way in enhancing country’s gas production.

However, the area that requires major overhaul is India’s poor domestic exploration environment. While the New Exploration Licensing Policy (NELP) has played a role in bringing some private players to the domestic oil and gas exploration market, a lot needs to be done still. India urgently requires the technical expertise (deep sea and ultra deep sea technology) and huge investments from global energy players to increase production and oil and gas recovery. More transparency in product sharing contracts and implementation of open acreage policy will encourage participation of global players. Strong legal system has to be established to resolve the disputes arising out of contracts from allocated blocks. Currently, more than 52 of the allotted 114 blocks under NELP are pending approval from various ministries. The question is why these blocks were allotted before approvals of different ministries. Such cases set a bad precedent to future allocations. Single window clearance mechanism has to be developed to reduce the time and hassles of moving through different ministries. Moreover, Government has to launch aggressive marketing campaigns and make seismic data available for different regions to improve perception about India’s geology. Private players have to be encouraged through tax breaks and risk sharing agreements to make investments in the infrastructure and modern equipments for exploration.

To sum up, more proactive Government approach, higher private sector participation and efficient use of available resources will drive not only India’s energy security but also give more teeth to India’s rising dominance as a global superpower.


Ankur Goyal is a PGP1 student at IIMA, and is member of the Consult Club here. He graduated with a B.Tech in Chemical Engineering from IIT Delhi, and worked for a year in Kellogg Brown and Root Technology group, before joining the post-graduate program at IIMA.

Green consulting: The way to go

We at IIM Ahmedabad’s Consulting Club have started a new initiative on this blog where we will regularly publish articles contributed by corporates working in the area of consulting. We hope that these insights from the professional world will be interesting for our readers and will help contribute towards making this blog an active forum for students and professionals related to the world of consulting.

The first article in this series has been contributed by Gensol Consultants Pvt. Ltd. who have been working in the area of Green Energy Consulting for about three years. 

Talk about green jobs and the image of men operating wind-turbines, solar energy plants or environmental activists lobbying for water or forests conservation conjures up in the mind. Little does one wonder about people advising the corporates to lower their carbon emissions–called carbon footprint–through innovative strategies or helping the government devise policy initiatives aimed at mitigating climate change. But the landscape of green jobs has undergone a rapid transition to include advisory jobs that are aimed at transforming existing work practices with due regard to the mother nature.

The basic premise on which the consulting business operates is the expert advice on a certain subject, whose inherent complexity could impair the ability to achieve the objectives of the business in the absence of an expert guidance. In this vein, a consultancy that advises on the best possible strategies to low carbon emissions would require a deep acumen of the policy inputs specific to climate change and its mitigation. Given the kind of opportunities presented by the climate change mitigation and adaptation measures around the world, the role of a green consultant is a promising field to make a career in.

It is the passion to harness the huge potential of this business that Gensol Consultants Private Limited (GCPL) set itself on a path to become one of the big names in the green advisory business, to a point that when you say ‘green consulting’, Gensol’s name quickly makes waves in your mind. Notably, Gensol had made a humble beginning in the year 2007. And during this short span of three years, Gensol has already etched a strong presence in the global CDM market, by clawing more than 25% share of CDM advisory market in India, with more than 350 clients under its kitty.

While it is true that CDM advisory was the primary business for GCPL, the heightened sense of responsibility towards preserving environment the world-over has certainly presented opportunities to spread our wings even wider. To put this context, it would be notable that developing nations have fashioned a very mature response to the problem of climate change and they are time after time giving out policy responses to this important issue. For example, with a view to emerge as a low carbon economy, India had released its first National Action Plan on Climate Change (NAPCC), in June 2008, outlining existing and future policies and programs addressing climate mitigation and adaptation. Under this Plan, eight national missions have been the identified, namely the National Solar Mission, the National Mission for Enhanced Energy Efficiency, National Mission for Enhanced Energy Efficiency, National Mission on Sustainable Habitat, National Water Mission, National Mission for Sustaining the Himalayan Ecosystem, National Mission for a Green India, National Mission for Sustainable Agriculture and the National Mission on Strategic Knowledge for Climate Change. Importantly, the solar mission seeks to add 20,000 MW of solar-based generation capacity by 2022, the energy efficiency mission aims to yield savings of 10,000 MW by 2012, the sustainable habitat is intent upon promoting energy efficiency as a core component of urban planning and the water mission has set a goal of a 20% improvement in water use efficiency through pricing and other measures.

Meanwhile, goals under the green India plan include afforestation of 6 million hectares of degraded forest lands and expanding forest cover from 23% to 33% of India’s territory, the sustainable agriculture plan aims to support climate adaptation in agriculture, while the sustainable Himalayan Ecosystem scheme aims to conserve biodiversity, forest cover, and other ecological values in the Himalayan region, and the mission on strategic knowledge for climate change envisages a better understanding of climate science, impacts and its  challenges.

While a lot of green consulting activity has already been done while framing this policy, the path of implementation unveils a much more lofty scale of opportunities for us to grab. Each mission embodies a vast gamut of business potential, in light of the huge scale of activity the country has tounfold in order to achieve its  dual aim of inclusive growth and a better environmental standing. For example, the solar mission is a great platform to improve the business potential since solar power generation is still in a nascent stage and requires a lot of desk as well as field research to find a site that is suitable for the installation of the solar panels. Given the fact that solar power generation is a capital-intensive business, the role of a consultant cannot be left without attention. Then again, the Green India mission is another potential area where Gensol is eyeing a big game, given that forestry carbon projects have always been on the agenda of the international climate change summits. The role of forests as stocks of carbon has been an area of heated discussion in light of the fact that they are non-permanent sinks of carbon and, therefore, require suitable forestry models to maximize revenues–another potential area of green consulting. Similarly, other missions also present a bunch of business opportunities for Gensol as a green consultant.

Besides, there are numerous avenues where the consulting business could be expanded. A stellar example in the Indian context would be the renewable energy certificates (REC) mechanism, which a market-based instrument to promote renewable energy power. Under this scheme, the power generating companies would be required to generate a certain percentage of the total electricity consumption in their area–called renewable purchase obligation (RPO)– from renewable energy sources, like wind, solar, biomass, among others. The existing disparity in the renewable energy sources across the country would allow these companies to purchase these certificates from the energy exchanges in order to meet their RPO targets. It is estimated that the REC market is worth more than Rs. 14,000 crore, which further enhances the scope of our business. A similar budding opportunity is the energy saving certificates (ESC) scheme, under the national energy efficiency plan, under which, the units of energy saved could be tradable in a similar operational framework, whereas Green IT and Green logistics remain robust candidates on our business radar. Not only this, Gensol has carved out its global expansion plans, with its maiden overseas venture being the U.K’s Carbon Reduction Commitment (CRC) program, which is a U.K-specific version of the global carbon trading market. Gensol hopes to grab a fair share of this market, by helping the corporates cut costs, make money and improve their environmental standing.

In this background, it might be apropos to say that Gensol is well on the path of its vision to become a 360o carbon solutions provider, with minute focus on ‘green and the shades of green’.

Credit: Mr. Anmol Singh Jaggi, Director, Gensol Consultants
             Ms. Tisha Dwivedi, Gensol Consultants