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Future of wind power?
India
FUTURE OF WIND POWER? What lessons does the wind power market in India hold for the global market? India represents huge opportunities for windpower and other renewables, but not the same opportunities as found in the West. Respect it as a parallel market, argues Laura Dietz of EcoSpace. Our ideas about micro and local generation are based on the assumption of a robust national grid: reliable, maintained, and designed for minimum transmission loss. But what if you don’t assume? What’s left is a fundamentally different landscape for renewable energy development. India’s booming wind power development has the industry’s attention, but not just for megawatt capacity. The exciting part is local and microgeneration. The vast majority of Indian wind generated electricity is sold and used locally, with only 20% sold back to the
national grid. With Europe looking towards local and microgeneration as the future of renewable energy, reducing transmission waste and reintegrating communities with the sources of the electricity they use, India appears to be showing the way. But once you clear away assumptions, what lessons remain? Governments tend to focus on the similarities. The new EU – India Wind Energy Network (EIWEN) is co-funded by the EU with the goal of “ensuring sustainable and economically competitive development of the wind energy sector in India and the world”. Through networking
According to Lynne McGregor, of the Carbon Trust Incubator, “with little or no existing infrastructure, customers can choose their technology, including the option to leapfrog transitional steps and go straight to the most recent applications. This represents quite an opportunity for companies developing technologies that can be used in decentralised power generation.” But companies can’t sell to two such distinct groups [on grid/off grid] in exactly the same way.
38 reFOCUS
May/June 2007
and company-level cooperation, it says, each region can benefit from hard-won experience in the other. “We are looking for horizontal cooperation with Europe to continue growing”, V. Subramanian, secretary of the Indian Ministry of new and renewable energy, said at EIWEN’s January discussions in Brussels and Amsterdam. “Most of the large European wind energy companies, both manufacturers and developers have a strong interest in the Indian market,” added Bruce Douglas, the European Wind Energy Association (EWEA)’s chief operating officer. The view is that growth encourages growth. Where turbines are installed, and energy generation moves towards wind, there is in theory benefit to all countries and opportunity for all companies. But what does “horizontal cooperation” mean? The project’s “knowledge transfer” mission assumes that experiences in one region are not just interesting, but applicable to the other. There’s no arguing with the scale of wind energy growth in India. In 2005 installed capacity increased by 48%, overtaking Denmark and becoming the fourth largest capacity in the world. The pace hasn’t slackened. While European suppliers look to shift the production mix towards renewables, Indian suppliers are adding supply in every category. Capacity is projected to increase from approximately 140,000 MW today to 400,000 MW in 2030, with heavy investment in hydro, nuclear, and natural gas, as well as the coal that presently supplies more than half of all Indian electricity generation.
1471 0846/07 © 2007 Elsevier Ltd. All rights reserved.
India
Nor is it a simple matter of buying up Western-made goods. Indian windpower companies are climbing the ladder for supply not only domestically, but internationally: Suzlon, the market leader, wasn’t in the global top ten in 2002. It now has the fifth largest installed capacity of any manufacturer and 6% of global market share. If it succeeds in acquiring REpower Systems it will be manufacturing in Europe as well as China and the US. India’s national target is for at least 10% of all new energy installation to be from renewable sources by 2012. Even the fraction of that devoted to windpower represents a huge market opportunity. But does the Indian experience represent a new and durable model for renewables? Wind power is growing rapidly in India and Europe, but not for the same reasons. To oversimplify it would be to say that Europe is buying renewable energy, and India is buying energy. Windpower in Europe is about reducing carbon emissions and protecting security of supply. No one expects it to remain permanently uneconomic – technology advances and costs change, for fossil fuels and for carbon credits – but no one could argue that current growth is based solely on the expectation of short-term profits. Investors are counting on a steady and irreversible shift away from fossil fuels. Legislative and ethical drivers are just as important as financial ones. Local and microgeneration in particular justify themselves as reducing waste, not cost. And none of these plans suggest abandonment of electricity grids. Whether from offshore wind farms or domestic mini-turbines, we still expect to buy from and sell to the grid as it suits us. The only question is in how and where the input power will be generated. It’s a sound bet that the European market for renewable energy, including wind, will grow faster than the energy market as a whole. The same assumption cannot be made in India. India relies on local and microgeneration because it has to, and some of the best sources happen to be renewable. Commitment is shallow. Customers can and will shift to fossil, nuclear or whatever else is on offer when they have alternatives – and increasing numbers will. Supply is increasing but not as quickly as demand. The brake to date has not been in fuel, but in plants and cabling. India has the fourth largest coal reserves in the world – predominantly low-quality, high-ash – and burns it as quickly as the power stations can be built. With the new central government line welcoming
www.re-focus.net
private sector investment in power generation, traditional coal-fired stations are flying up as quickly as wind farms. Some supply remote areas with electricity for the first time. Others offer already-connected customers with a choice of suppliers. If the long-mooted South Asian supergrid becomes a reality, electricity buyers in Chennai will be able to choose not only between a wind farm and a coal fired power station in India, but between alternatives in Sri Lanka and Nepal. Grid-connected Europeans take for granted that one supplier, or one technology, can be replaced by another. As government investment increases cable capacity between states and regions, it will be possible to swap Indian sources in the same way. Grid connection doesn’t doom wind. For now, national and international subsidies, grants and financing schemes reduce the capital cost of setting up a new wind farm. Any renewable project in India has potential carbon trading value – as a non-Annex 1 country, India can sell credits to other Kyoto signatories without any formal reduction obligations itself. The option of selling energy back to a larger grid will represent a new revenue stream for previously isolated wind farms. But all of these are economic incentives, which give way as soon as other incentives offer better numbers. The ethical argument is just as powerful for India, but more complex. It’s insulting to imagine that developing nations care less about climate change. The pragmatic reasons are if anything more compelling, as UN studies project that the populations and economies of developing nations are on the whole more vulnerable to rising sea levels, storms, and trade disruption. But climate change is not the only threat to well being. In the brutal accounting of climate change, an individual living in poverty is less costly than an individual enjoying a less deprived, more carbon-intensive lifestyle. Europe has options to reduce energy usage without increasing real hardship. When Indian rural electrification can aid some of the quarter billion people living below the poverty line, taking on more expensive power even for good reasons is not an easy choice to make. By creating the Annex 1 and non-Annex 1 groups, Kyoto made clear that developed nations, responsible for the bulk of emissions to date, are in a separate category. Industry forgets that distinction at its peril. It’s a sound bet that the energy market in India will continue to grow, and even that
wind and renewables will grow as well. But the trend is away from local and microgeneration, not towards it. Nor is it certain that renewables in any form will remain as large a part of the Indian energy mix. 10% is a worthy target, but Europe has demonstrated that targets are just that. Oversimplifying a complex market presents a huge risk to companies. Lynne McGregor, of the Carbon Trust Incubator at Imperial Innovations, Imperial College’s technology commercialisation and investment company, compares the potential for take up of wind and solar power generation with the phenomenal growth of mobile communications in developing countries. Just as the first question for a wireless network is whether it competes with a traditional network, the first question for renewables is “on grid or off grid:” “With little or no existing infrastructure, customers can choose their technology, including the option to leapfrog transitional steps and go straight to the most recent applications. This represents quite an opportunity for companies developing technologies that can be used in decentralised power generation.” But companies can’t sell to two such distinct groups in exactly the same way. Shrewd companies will, of course refine their offerings for both markets. Renewable energy development in India, including local and microgeneration, will benefit the industry enormously. New customers mean increased production, economies of scale, further investment in R&D, and an inevitable spur towards the economic viability that the industry needs to become self-supporting. But India is a partner, not a focus group. The real lessons are in how different two customers’ motives can be – and in how quickly those motives can change. Companies and governments will use those insights to produce nuanced strategies. Cooperation is excellent; papering over differences keeps the knowledge out of the transfer. About the Author: Laura Dietz is the strategy director of EcoSpace (Europe) Ltd, a community for the environmental industry in the East of England. Its events, public funded programmes, and Ecodirectory link solutions providers with customers and with public sector support. Web: www.ecodirectory.org
May/June 2007
reFOCUS 39
FUTURE OF WIND POWER? What lessons does the wind power market in India hold for the global market? India represents huge opportunities for windpower and other renewables, but not the same opportunities as found in the West. Respect it as a parallel market, argues Laura Dietz of EcoSpace. Our ideas about micro and local generation are based on the assumption of a robust national grid: reliable, maintained, and designed for minimum transmission loss. But what if you don’t assume? What’s left is a fundamentally different landscape for renewable energy development. India’s booming wind power development has the industry’s attention, but not just for megawatt capacity. The exciting part is local and microgeneration. The vast majority of Indian wind generated electricity is sold and used locally, with only 20% sold back to the
national grid. With Europe looking towards local and microgeneration as the future of renewable energy, reducing transmission waste and reintegrating communities with the sources of the electricity they use, India appears to be showing the way. But once you clear away assumptions, what lessons remain? Governments tend to focus on the similarities. The new EU – India Wind Energy Network (EIWEN) is co-funded by the EU with the goal of “ensuring sustainable and economically competitive development of the wind energy sector in India and the world”. Through networking
According to Lynne McGregor, of the Carbon Trust Incubator, “with little or no existing infrastructure, customers can choose their technology, including the option to leapfrog transitional steps and go straight to the most recent applications. This represents quite an opportunity for companies developing technologies that can be used in decentralised power generation.” But companies can’t sell to two such distinct groups [on grid/off grid] in exactly the same way.
38 reFOCUS
May/June 2007
and company-level cooperation, it says, each region can benefit from hard-won experience in the other. “We are looking for horizontal cooperation with Europe to continue growing”, V. Subramanian, secretary of the Indian Ministry of new and renewable energy, said at EIWEN’s January discussions in Brussels and Amsterdam. “Most of the large European wind energy companies, both manufacturers and developers have a strong interest in the Indian market,” added Bruce Douglas, the European Wind Energy Association (EWEA)’s chief operating officer. The view is that growth encourages growth. Where turbines are installed, and energy generation moves towards wind, there is in theory benefit to all countries and opportunity for all companies. But what does “horizontal cooperation” mean? The project’s “knowledge transfer” mission assumes that experiences in one region are not just interesting, but applicable to the other. There’s no arguing with the scale of wind energy growth in India. In 2005 installed capacity increased by 48%, overtaking Denmark and becoming the fourth largest capacity in the world. The pace hasn’t slackened. While European suppliers look to shift the production mix towards renewables, Indian suppliers are adding supply in every category. Capacity is projected to increase from approximately 140,000 MW today to 400,000 MW in 2030, with heavy investment in hydro, nuclear, and natural gas, as well as the coal that presently supplies more than half of all Indian electricity generation.
1471 0846/07 © 2007 Elsevier Ltd. All rights reserved.
India
Nor is it a simple matter of buying up Western-made goods. Indian windpower companies are climbing the ladder for supply not only domestically, but internationally: Suzlon, the market leader, wasn’t in the global top ten in 2002. It now has the fifth largest installed capacity of any manufacturer and 6% of global market share. If it succeeds in acquiring REpower Systems it will be manufacturing in Europe as well as China and the US. India’s national target is for at least 10% of all new energy installation to be from renewable sources by 2012. Even the fraction of that devoted to windpower represents a huge market opportunity. But does the Indian experience represent a new and durable model for renewables? Wind power is growing rapidly in India and Europe, but not for the same reasons. To oversimplify it would be to say that Europe is buying renewable energy, and India is buying energy. Windpower in Europe is about reducing carbon emissions and protecting security of supply. No one expects it to remain permanently uneconomic – technology advances and costs change, for fossil fuels and for carbon credits – but no one could argue that current growth is based solely on the expectation of short-term profits. Investors are counting on a steady and irreversible shift away from fossil fuels. Legislative and ethical drivers are just as important as financial ones. Local and microgeneration in particular justify themselves as reducing waste, not cost. And none of these plans suggest abandonment of electricity grids. Whether from offshore wind farms or domestic mini-turbines, we still expect to buy from and sell to the grid as it suits us. The only question is in how and where the input power will be generated. It’s a sound bet that the European market for renewable energy, including wind, will grow faster than the energy market as a whole. The same assumption cannot be made in India. India relies on local and microgeneration because it has to, and some of the best sources happen to be renewable. Commitment is shallow. Customers can and will shift to fossil, nuclear or whatever else is on offer when they have alternatives – and increasing numbers will. Supply is increasing but not as quickly as demand. The brake to date has not been in fuel, but in plants and cabling. India has the fourth largest coal reserves in the world – predominantly low-quality, high-ash – and burns it as quickly as the power stations can be built. With the new central government line welcoming
www.re-focus.net
private sector investment in power generation, traditional coal-fired stations are flying up as quickly as wind farms. Some supply remote areas with electricity for the first time. Others offer already-connected customers with a choice of suppliers. If the long-mooted South Asian supergrid becomes a reality, electricity buyers in Chennai will be able to choose not only between a wind farm and a coal fired power station in India, but between alternatives in Sri Lanka and Nepal. Grid-connected Europeans take for granted that one supplier, or one technology, can be replaced by another. As government investment increases cable capacity between states and regions, it will be possible to swap Indian sources in the same way. Grid connection doesn’t doom wind. For now, national and international subsidies, grants and financing schemes reduce the capital cost of setting up a new wind farm. Any renewable project in India has potential carbon trading value – as a non-Annex 1 country, India can sell credits to other Kyoto signatories without any formal reduction obligations itself. The option of selling energy back to a larger grid will represent a new revenue stream for previously isolated wind farms. But all of these are economic incentives, which give way as soon as other incentives offer better numbers. The ethical argument is just as powerful for India, but more complex. It’s insulting to imagine that developing nations care less about climate change. The pragmatic reasons are if anything more compelling, as UN studies project that the populations and economies of developing nations are on the whole more vulnerable to rising sea levels, storms, and trade disruption. But climate change is not the only threat to well being. In the brutal accounting of climate change, an individual living in poverty is less costly than an individual enjoying a less deprived, more carbon-intensive lifestyle. Europe has options to reduce energy usage without increasing real hardship. When Indian rural electrification can aid some of the quarter billion people living below the poverty line, taking on more expensive power even for good reasons is not an easy choice to make. By creating the Annex 1 and non-Annex 1 groups, Kyoto made clear that developed nations, responsible for the bulk of emissions to date, are in a separate category. Industry forgets that distinction at its peril. It’s a sound bet that the energy market in India will continue to grow, and even that
wind and renewables will grow as well. But the trend is away from local and microgeneration, not towards it. Nor is it certain that renewables in any form will remain as large a part of the Indian energy mix. 10% is a worthy target, but Europe has demonstrated that targets are just that. Oversimplifying a complex market presents a huge risk to companies. Lynne McGregor, of the Carbon Trust Incubator at Imperial Innovations, Imperial College’s technology commercialisation and investment company, compares the potential for take up of wind and solar power generation with the phenomenal growth of mobile communications in developing countries. Just as the first question for a wireless network is whether it competes with a traditional network, the first question for renewables is “on grid or off grid:” “With little or no existing infrastructure, customers can choose their technology, including the option to leapfrog transitional steps and go straight to the most recent applications. This represents quite an opportunity for companies developing technologies that can be used in decentralised power generation.” But companies can’t sell to two such distinct groups in exactly the same way. Shrewd companies will, of course refine their offerings for both markets. Renewable energy development in India, including local and microgeneration, will benefit the industry enormously. New customers mean increased production, economies of scale, further investment in R&D, and an inevitable spur towards the economic viability that the industry needs to become self-supporting. But India is a partner, not a focus group. The real lessons are in how different two customers’ motives can be – and in how quickly those motives can change. Companies and governments will use those insights to produce nuanced strategies. Cooperation is excellent; papering over differences keeps the knowledge out of the transfer. About the Author: Laura Dietz is the strategy director of EcoSpace (Europe) Ltd, a community for the environmental industry in the East of England. Its events, public funded programmes, and Ecodirectory link solutions providers with customers and with public sector support. Web: www.ecodirectory.org
May/June 2007
reFOCUS 39