This is a best prospect industry sector for this country. Includes a market overview and trade data.
India is the third largest energy consuming country in the world, and over the past decade it has transformed to a power surplus country (peak demand crossed 200 gigawatts [GW] for the first time in July 2021). India’s installed capacity exceeded 380 GW in 2021, supported by such factors as industrial growth, urbanization, government policies, and favorable geopolitics. The Indian power sector comprises diversified fuel sources. These include conventional sources such as coal, oil, and gas, along with environmentally sustainable sources such as solar, wind, biomass and industrial waste, and small hydro plants.
As of April 30, 2021, India’s installed capacity stood at 383 GW with coal dominating with 55 percent of the mix; however, coal’s share is declining as the supply of renewable energy, in particular solar, increases. Once a government led sector, power generation is realizing increased participation from the private sector, which made a 46.83 percent contribution to India’s installed power generation capacity in 2020.
The global pandemic affected the Indian power sector. Constrained economic activities and unemployment resulted in payment delays from residential, commercial, and industrial consumers. Timelines for capacity additions and developmental plans were delayed across the sector. However, the sector has displayed resilience and is already showing signs of recovery.
Overall, the U.S. market share of India’s energy-related equipment and commodities is low. There is room to grow U.S. market share, especially in higher value manufactured goods with power utilities that have solid balance sheets. Since 2017, with support from both governments, the United States has become a significant source of energy for India. U.S. crude oil exports to India went from zero in 2016 to 93 million barrels in 2019, and U.S. liquified natural gas exports grew more than five-fold from 2016 to 2019.
U.S.-India bilateral energy commodities and equipment trade reached $8.8 billion in 2019, a 325 percent increase over 2016, and accounted for approximately 10 percent of overall bilateral trade. However, 2020 saw a slightly downward trend as total U.S. exports fell to $7 billion. In 2019, India became the largest export destination for U.S. coal, the fourth-largest destination for U.S. crude, and the seventh-largest destination for U.S. liquified natural gas. This helped diversify India’s energy sources with reliable, market-based suppliers.
However, the pandemic led to negative growth for U.S. energy exports to India across all categories. Renewable energy exports declined by 0.3 percent, transmission and equipment exports declined by 27 percent, oil and gas equipment exports declined by 12 percent, oil and gas commodities exports declined by 14 percent, and coal commodities exports declined by 20 percent.
Natural Gas Infrastructure
India plans to increase the share of natural gas in its energy mix to 15 percent by 2030. Currently, approximately half of India’s supply of natural gas comes from domestic production while the other half comes from imported liquefied natural gas (LNG). However, industry experts expect that rising demand will prompt a mix of 30 percent domestic and 70 percent imported LNG by 2025. Anticipating future demand, Indian companies broadened their international supplier base and negotiated long-term contracts. However, longstanding infrastructure challenges at LNG receiving terminals and the lack of gas distribution pipelines create bottlenecks, impacting efficient distribution and importation, and resulting in large quantities of contracted LNG to be sold on the spot market while in transit.
The Indian Gas Exchange (IGX), a new nationwide trading platform, launched in June 2020, established a transparent online marketplace for buyers and sellers to trade natural gas in the spot market. Currently, India has six operating LNG terminals and several more are expected to come online. The government of India is moving toward a “One Nation, One Gas Grid” and is set to expand India’s natural gas grid to 34,500 kilometers by doubling the current gas pipeline infrastructure. City gas distribution projects have been expanded to cover 53 percent of the country’s geography and 70 percent of the population. The government has plans to introduce 1,000 LNG fuel stations, and plans to set up 500 compressed biogas plants by 2024.
The International Trade Administration’s online report Energy Resource Guide – India – Oil & Gas contains additional information about the oil and gas regulatory environment in India, as well as links to tender announcements.
Transmission, Distribution, and Smart Grids
In India, the electric power transmission and distribution (T&D) sector is dominated by public utilities with the overall private sector role limited to one percent in transmission, and five percent in distribution. Some prominent challenges in these sectors are the overall aggregate technical and commercial (AT&C) losses (primarily due to theft or grid inefficiencies) and the growing financial distress of distribution companies (discoms). India’s AT&C losses stand at 20.76 percent as per FY 2020 data, while accumulated losses of the discoms reached $9.5 billion as of May 2021. Although India strives to achieve a reduction in T&D losses to 15 percent under its UDAY program, the world average for T&D loss stood at only eight percent in 2019. This suggests ongoing market opportunities in the sector.
In its latest attempt to address the financial stress of debt laden discoms, the government of India approved a reforms-based and results-linked power distribution sector program with a budget outlay of $41 billion starting April 1, 2021. The program aims to improve the operational efficiencies and financial sustainability of discoms through FY 2024-25. India has put forth plans for privatizing discoms in all eight union territories, and will explore public-private partnerships for power distribution in some states.
India has also begun its ambitious smart meter roll out, which targets the installation of 250 million smart meters by 2024. The initiative is expected to result in reduced power losses, improved revenue collection for local electric utilities and discoms, and will incentivize energy conservation.
Renewable Energy and Energy Storage
The solar energy sector remains a sunrise sector in India, and has the potential to meet the nation’s growing energy demand. Recent years have seen huge support from the government to strengthen the renewable energy sector in the country. India has set ambitious renewable energy targets, policies, and programs to support this growth. In 2019, India announced a target of 450GW of solar capacity by 2030, and it is promoting itself as a manufacturing destination for solar photovoltaic (PV) cells. However, it remains to be seen if there will be significant oportunities for U.S. exporters, because of a concerted effort to reduce reliance on imports through Production Linked Incentive (PLI) Schemes.
India is a major hub for wind energy manufacturing, and is one of only five countries that can produce all six major wind turbine components (nacelles, blades, towers, generators, gearboxes, and bearings). Some of the leading wind companies active in India include Vestas India, Suzlon Energy Limited, ReGen Powertech Pvt. Ltd., Wind World India Ltd., Orient Green Power Ltd., Indowind Energy Limited, GE Energy India Limited, Inox Wind, Leitwind Shriram Manufacturing Ltd., RRB Energy.
India’s Department of Heavy Industries (DHI) has also issued a PLI notification for Advanced Chemical Cell (ACC) battery storage. Investments in manufacturing and overall value addition for ACCs are still negligible in India, and its current domestic demand is met entirely through imports. Several major battery-consuming sectors like the consumer electronics, electric vehicles, advanced electricity grids, and solar rooftop are expected to achieve robust growth in the coming years.
Overall, the U.S. market share of India’s energy related equipment and commodities imports is low. China used to be the top foreign competitor for low-cost equipment, however since 2020 India is making conscious and proactive efforts to reduce its supply chain dependence on China which signals increased opportunities for U.S. companies. The PLI scheme for solar and energy storage led several large Indian renewable energy companies and public sector entities to scout for partnerships with foreign technology providers. Increased manufacturing in India will also lead to increased potential U.S. export opportunities for some parts of the solar value chain (e.g., U.S. polysilicon). For example, India’s Reliance Industries, the world’s second largest energy company, has announced plans to invest $10 billion in clean energy between 2021 and 2024, and is considered a potential partner for U.S. firms.
Likewise, other large Indian energy companies like Adani, Renew Power, and Avaada, as well as public sector entities like Coal India Limited and NTPC Limited, have indicated their interest in investing and diversifying into the clean energy space (including solar, energy storage, hydrogen, and smart grid technologies). The PLI scheme has prompted several U.S. solar companies to rethink their India strategy and some of have already established offices in India.
As India continues to modernize its national power grid, demand remains steady for traditional transmission and distribution equipment as well as smart grid innovations that improve reliability and stability. Transformers, fixed capacitors, fuses for electrical apparatus, lightening arrestors, voltage limiters, electric conductors, microprocessors, amplifiers, electricity meters, and smart communication technologies are frequently imported.
India plans to replace all traditional electricity and gas meters with smart meters to increase the operational efficiency and revenue generation capacity of distribution utilities. Energy Efficiency Services Limited (EESL) is the nodal agency for implementing the roll-out of smart meters for electricity, and is the leading smart metering service provider in the country. EESL plans to replace 250 million conventional meters with smart meters over the next three years, and has signed agreements with various state distribution utilities to undertake smart metering projects.
The Indian Energy Storage Alliance (IESA) predicts that grid-connected energy storage demand could reach 65 GW by 2026, to meet demand for renewable energy integration, frequency regulation, peak management transmission and distribution deferral, and electric vehicle charging. Currently U.S. energy storage technology enjoys a global competitive advantage, but suppliers will need to establish strong relationships with local business partners to enter this fast-developing market. India’s regulatory and policy environment for energy storage is also evolving.
U.S. exports of crude oil, natural gas, and coal to India are expanding at a steady rate, with buyers open to exploring new partnerships with U.S. suppliers. India’s imports of U.S. oil and gas commodities grew from $4.1 billion in 2018 to $5.5 billion in 2020. As domestic production of ethanol will not meet mandated goals of 10 percent ethanol fuel blending for vehicles by 2022, India may lift import restrictions for ethanol which would create substantial opportunities for U.S. ethanol exporters.
Several new refinery and petrochemical projects have been planned for the next five years, as well as expansion projects for existing refineries. India plans to double its refining capacity from the current 5 million barrels per day to 10 million barrels per day by 2030.
Natural gas infrastructure will present opportunities over the next several years, particularly as India constructs new LNG terminals, expands pipelines across the nation, and builds out city gas distribution to include piped city gas for buildings and compressed natural gas dispensers for transportation. Liquefied natural gas dispensing units and virtual pipelines in the form of cryogenic containers present additional opportunities for U.S. companies. The requirement for new entrants in the fuel retailing business to invest in new-fuel dispensation will be an opportunity for LNG, Biofuels, and possibly Hydrogen technology.
For more information on tapping India’s energy sector opportunities, contact Ms. Renie Subin.