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Case Study

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An Indian Engineering major with global footprint wanted to explore opportunities in the renewable energy space
Situation Approach Solution

Client

An Indian Engineering major with global footprint

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

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Identifying opportunities in renewables
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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

Solar cells convert light energy into electricity through photovoltaics

Tidal or wave movements are used to power traditional hydropower mechanisms

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

Well penetrated Less penetrated New

Wind
Ambient wind rotates large rotors which are connected to generators

AVALON
Consulting

Identifying opportunities in renewables

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

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Identifying opportunities in renewables
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Consulting

Based on technological maturity and growth potential, wind and solar energy was chosen for a deeper evaluation
Situation Approach Solution Example

Growth in Global RE Power Generation by Sources, TWh/a 4505 Others PV

21% In India also RE power is expected to grow driven mainly by wind power

Geothermal Biomass

Wind 693 127 1990 241

2000

2010

2020

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Identifying opportunities in renewables
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Consulting

The growth potential and growth drivers were mapped

Situation Approach Solution Example

Global Annual Capacity Addition Growth, MW

Wind Power Installed Capacity Growth in India, MW

Off-Shore

On-Shore

2008

2009
On-Shore

2010

2011

2012
Off-Shore

2000 2001 2002 2003 2004 2005 2006 2007 2008

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

Identifying opportunities in renewables

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

Tier 1 & 2 Suppliers

OEMs

EPC Companies

Power Utilities

Customers

Global Market Shares of Key Equipment Suppliers of Wind Power, 2007 Others Siemens Vestas

Indian Market Shares of Key Equipment Suppliers of Wind Power, 2007

RRB
Suzlon Vestas Gamesa

Suzlon GE Wind

Enercon
Gamesa

Enercon

AVALON
Identifying opportunities in renewables
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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 Power Technologies

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

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Identifying opportunities in renewables
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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

Could either be standalone systems or grid evacuation of power

Silicon Wafer Maker

Solar Cell Maker

Solar Panel Maker

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

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Identifying opportunities in renewables
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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
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Consulting