India: Moving Beyond Conventional Energy - An Overview Of The Indian Energy Opportunity
Opinion In the background of a growing economy, India’s energy demands are expected to outpace its supply. Key
drivers for this imbalance include an expanding middle class and limited domestic hydrocarbon resources. So far, the
government has played a key role in managing the country’s energy infrastructure. However, we believe there should be
increased reliance on foreign investors and private domestic players to fill the supply void through infrastructure
expansion and introduction of renewable energy sources. In this regard we believe investors should focus on the following
near term investment themes:
Distributed / Captive Generation India’s erratic power supply is believed to cause an average of 17 major disruptions
on a monthly basis for Indian manufacturers; consequently, an average manufacturing firm in India could be losing 8%
to 10% in sales due to the lack of power. As a result at least a fifth of them resort to captive power generation and we
believe this number should grow.
Rural Electrification & Renewable Energy Approximately 60% of India’s population still lives in villages and receives
less than eight hours of electricity per day. In our opinion there is an opportunity for alternative / renewable energy
technologies to contribute to a localized electricity infrastructure, thus removing the need to rely on centralized power
delivery systems.
Oilseed Production Jatropha oilseed presents a significant opportunity in the context of India’s energy needs.
Jatropha, grows on wasteland with minimal inputs, needs less water and yields 25% to 30% oil from seeds three years
after plantation. The attractiveness of Jatropha as an energy source primarily stems from an opportunity to cultivate oil
seeds without displacing food crops and its high oil content
Monitoring & Preventing Electricity Leakage and Theft India has the unenviable reputation of having the highest
transmission and distribution losses in the world. Our checks show that only 45%-50% of the energy consumed in the
system is being metered. In our opinion, privatization should play an important role in the electricity distribution arena,
creating substantial opportunities for smart metering and monitoring technologies.
Carbon Credits There is an increasing investor interest in clean development projects (CDM) that have the potential to
generate carbon credits. India’s registered CDM projects generated 28 MM CERs (Certified Emission Reductions) in
2007 compared to 12 MM in 2006, indicating the growth potential in this market. Various estimates point towards an
accelerated growth period in CER generation up to 2012, approximately settling at the 100 MM CERs per year level.
India Energy Overview The International Monetary Fund, is projecting India to grow its GDP at a rate of 8% (compared
to the Planning Commission of India’s target of 9%-10%) driven by factors such as high domestic savings rate (25%),
positive investment climate, increased industrial output and high worker productivity. However, we believe, one of the key
risks to India’s continued GDP growth include infrastructure shortcomings. In this context, we believe, energy sufficiency
should be factored into India’s strategic infrastructure development plans. With intense international competition for
traditional energy resources such as oil and coal, we believe, India should be looking at renewable energy sources as an
important component of its energy security.
Role of Renewable Energy We believe, India cannot afford to rely on conventional energy sources for its future energy
security. As India tries to increase its economic output, energy becomes a vital necessity. The urgency to fill the energy
gap has led the government to formulate broad policy objectives over the next 25 years. The government has eased
restrictions on asset acquisitions abroad, helped by currency appreciation and growth in foreign exchange reserves. Last
year, according to the UNEP, India was the largest net buyer of renewable energy companies abroad, mostly in European
markets. We believe this trend is an important indicator of the strategic role alternative energy technologies and
renewable energy solutions will play in India going forward.