This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 8/5/2019

Overview
India continues to display a steady growth in the demand for electricity.  According to the International Energy Agency, India’s energy demand grew by 4 percent in 2018, outpacing the global demand of 2.3 percent, and is expected to surpass China as the world's largest energy growth market by 2020.  In anticipation of rising demand, the Government of India announced several energy initiatives aimed at building power generation capacity, promoting energy efficiency, and increasing clean energy sources in the overall power mix.  Currently, India has an installed power generation capacity of 356 gigawatts (GW), making it the fifth largest producer in the world.  Coal continues to dominate the energy mix, but its share is declining as renewable energy sources increase their percentage share.  Once a government-led sector, India’s power generation is seeing increased participation from the private sector which made a 45 percent contribution in 2018.

India's Total Installed Capacity by Power Source (GW)

Source

As of March 2017

As of March 2018

As of March 2019

Percentage of Energy Mix

Coal

192.16

196.95

200.70

56%

Gas

25.33

24.89

24.93

7%

Diesel

0.84

0.83

0.63

<1%

Hydro

44.48

45.4

45.39

13%

Nuclear

6.78

6.78

6.78

2%

Renewables

57.24

69.02

77.64

21%

Total

326.83

343.85

356.07

100%

Source: Ministry of Power

Renewable Energy
India continues to progress impressively towards achieving its target of adding 175 GW of renewable energy capacity by 2022, to include 100 GW of solar power, 60 GW of wind power, 10 GW of biomass, and 5 GW of small hydropower.   Additionally, India’s Railway Ministry has also decided to electrify its entire broad-gauge network.  And hence India recently made a 2027 forecast, which aims to have a renewable energy installed capacity of 275 GW, in addition to 72 GW of hydro-energy, 15 GW of nuclear energy and nearly 100 GW from “other zero emission” sources.  This will require $50 billion more in investments.  

Renewable Energy Mix (by Source)

As of March, 2017

As of March, 2018

As of March, 2019

Target for 2022

Wind Power

32,280 MW

34,046 MW

35,625 MW

60 GW

Solar Power

12,289 MW

21,651 MW

28,180 MW

100 GW

Biomass Power

8,182 MW

8,700 MW

9,104 MW

10 GW

Small Hydro

4,334 MW

4,485 MW

4,593 MW

5 GW

Waste-to-Energy

114 MW

138 MW

138 MW

None

Total

57,244 MW

69,022 MW

77,640 MW

 

Source:   Central Electricity Authority 

Overall, the U.S. market share of India’s energy-related equipment and commodities is rather low.  While China continues to lead as the top foreign competitor for low-cost equipment, India imports more equipment from Europe and Japan than the United States, which suggests that there is room to grow U.S. market share in higher value manufactured goods.  Coal commodities are primarily sourced from Australia, Indonesia, and South Africa, but U.S. exports to India doubled from 2017-2018 consecutively for the second year.  Oil and gas commodities exports from U.S. also saw a huge increase, growing by five times from 2017-2018.

Units: $ millions

Indian Import Data by Subsector, 2018

Total Imports

Imports from the United States

U.S. Market Share of Indian Imports

Renewable Energy Equipment-Fuels

$3,160

$255

8%

Transmission and Distribution Equipment

$258

$10

4%

Oil and Gas Equipment

$7,244

$348

5%

Oil and Gas Commodities

$135,885

$3,922

3%

Coal Commodities

$26,411

$2,064

8%

Source: Global Trade Atlas

Units: $ millions

Transmission and Distribution Equipment

2016

2017

2018

2019 (Est.)

Total Local Production

$23,700

$26,900

$27,300

$27,000

Total Exports

$6,000

$6,500

$6,500

$7,300

Total Imports

$418

$436

$258

$284

Imports from the United States

$14

$18

$10

$11

Total Market Size

$18,118

$20,836

$21,058

$19,984

Sources:  Global Trade Atlas, Indian Electrical and Electronics Manufacturers Association, Directorate General of Foreign Trade

Challenges and Barriers to Renewable Energy Exports
While many positive developments suggest growing U.S. export competitiveness in India, exporters continue to face bureaucratic and structural challenges, which show project development.  The sector is generally considered to be highly regulated, with subsidized electricity prices and inefficient state-owned distribution companies.  Developers of all power generation technologies face the same hurdles, which can slow development and make investment decisions less attractive.  Additionally, the broader regulatory environment and infrastructure for renewable energy is problematic.  India’s underdeveloped transmission and distribution (T&D) system remains an impediment to projects.  Losses stemming from the inefficiency of T&D are estimated at nearly 22 percent of total electrical output.  Another barrier towards the Indian government’s renewable energy strategy is the availability of land, a problem epitomized by the struggle to get the parliament to sign off on the Land Acquisition Bill.

U.S. exporters, particularly those in the solar sector, continue to face sector-specific issues, including a local content regimes (LCRs) that are the most stringent of any employed globally.  On July 30, 2018, India’s Ministry of Finance announced the imposition of final duties resulting from India’s safeguard investigation on imports of solar cells whether assembled in modules or panels under HS code 85414011.  Because of this announcement, safeguard duties will be imposed in accordance with the following schedule:  25 percent ad valorem (July 30, 2018 – July 29, 2019), 20 percent ad valorem (July 30, 2019 – January 29, 2020), and 15 percent ad valorem (January 30, 2020 – July 29, 2020).  India imported approximately $4.1 billion of solar cells in 2017, of which $3.6 billion was from China, $243 million was from Malaysia, and approximately $2.3 million was from the United States.

In 2019, the Government of India restricted the import of all bio-fuels including ethyl alcohol, bio-diesel, and petroleum oils for all purposes and their import will now require an import license from the Directorate General of Foreign Trade (DGFT).  This will have a major impact on all U.S. ethanol commodity exporters if the situation goes unresolved.  Although the May 2018 biofuels policy upheld the restriction on foreign-produced ethanol importations for fuel blending, it still allowed ethanol importation for industrial use.  Demand for industrial-use ethanol is increasing as supply is increasingly diverted to the fuel industry. However, the challenge would be to supply the ethanol at a landed cost at par with domestic pricing.  In 2018, the total U.S. exports of ethanol to India was valued at $244 million.  The United States remained the largest foreign supplier of ethanol to India, holding over 90 percent market share of imports.

Leading Sub-Sectors
Natural Gas Infrastructure
Traditionally, India’s oil and gas sector has been dominated by public sector undertakings (PSU’s), accounting for 80 percent of domestic oil and gas production and nearly 70 percent of the refining capacity.  In recent years, the GOI has taken steps to deregulate the industry and encourage greater private participation and foreign investment, which is resulting in a slow but steady growth of private sector activity. 

Over the last few years, the Indian Government has played a pivotal role in strengthening this core industrial sector.  The introduction of the New Exploration Licensing Policy (NELP) was aimed at intensifying activities in oil and gas exploration, while the government allowed 100 percent foreign direct investment (FDI) in the sector including natural gas, petroleum products, and refineries, among others.  In addition, the Hydrocarbon Exploration and Licensing Policy (HELP) was launched to address several issues plaguing the oil and gas sector in India, allowing a stipulated revenue sharing model and marketing and pricing freedom for gas discoveries.

The GOI announced plans to raise the share of natural gas in India’s energy mix from 6 percent (2016) to 15 percent by 2022.  Currently, half of India’s supply of natural gas comes from domestic production while the other half comes from imported liquified natural gas (LNG), but industry experts expect rising demand will require a 30 percent domestic, 70 percent imported LNG supplier mix by 2025.  Anticipating future demand, India broadened its international supplier base and negotiated long-term supplier contracts, but now faces the challenge of building up its gas infrastructure to receive LNG shipments, and distribute the gas across a wide geographical area.  Currently, India has four operating LNG terminals located on its western coast, and several more coming on-line.  Over 16,500 km of pipeline are in operation, with an additional 11,900 km under construction.  The existing City Gas Distribution (CGD) network covers 11 percent of the India’s geography, reaching 19 percent of the population.  Upcoming projects intend to expand coverage to 35 percent of India’s geography and 49 percent of India’s population.

Transmission, Distribution and Smart Grids
In India, the transmission and distribution of power is dominated by the government with the overall private sector role limited to 1 percent in transmission and 5 percent in distribution (Delhi and Odisha states; city of Mumbai, and parts of Kolkata, Ahmedabad and Surat municipalities have private companies engaged in electricity distribution).  One of the largest challenges that the Indian power sector faces is transmission and distribution (T&D) losses, which are very high – 26.35 percent at distribution level and more than 8 percent at transmission level nationally.  Several large states report more than 40 percent distribution losses.  The Power Grid Corporation of India (PGCIL), which is the owner, operator, and developer of the national interstate power-grid, has proposed an investment outlay of $2.5 billion for implementation of various projects during the current financial year.  Meanwhile, PGCIL has an order book size of $17 billion to be implemented over a period of five to seven years.

One area of potential market opportunities lies in “smart grid” technologies.  India is heavily focused on large scale grid modernization, to increase reliability and reduce black-outs, especially as additional renewable energy resources come online.  Ambitious government policies for energy access and renewable energy deployment send positive signals that the Indian smart grid market presents opportunities for U.S. exporters.  Several U.S. companies are participating in pilot projects, and currently negotiating larger utility-scale projects using technology proven in India.  Nevertheless, the Indian market features notable challenges, including access to financing and policies preferring domestic manufactured goods.  Also, the Indian utilities struggle to gather adequate capital to invest in grid modernization and expansion.

Energy Storage
Despite considerable growth in the power sector, many parts of the country continue to face severe power shortages as consumption increases faster than distribution, leading to shortages and poor quality of power supply.  As a result, most industries maintain diesel-powered generators and households utilize inverters with lead-acid batteries as backup systems to ensure reliability.  India’s T&D entities are piloting energy storage projects at the utility-scale, to help balance and stabilize the grid, especially with the rapid integration of renewable energy sources.

Work has begun on policies and incentives to promote the energy storage sector in India.  For example, the Ministry of New and Renewable Energy (MNRE), through the Jawaharlal Nehru National Solar Mission (JNNSM) offers a higher capital subsidy for photovoltaic systems with energy storage, than those without storage.  India is also working on a fast track program to introduce electric vehicles to tackle its ever-growing pollution issues.   

Opportunities
On the commodity side, excellent opportunities exist to export crude oil, natural gas, and coal to India, which is open to explore new partnerships with U.S. suppliers.  Present restrictions on the imports of ethanol can pose a challenge, but if resolved would pose substantial opportunities for the exporters.

Natural gas infrastructure will be an area of opportunity for 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.  Opportunities also exist for partnerships with the major refineries bringing ethanol production plants online, some of which will be coming out with tenders this year. 

As India moves to modernize the grid system to bring stability and reliability of electrical power, demand is steady for both traditional T&D equipment, as well as “smart grid” innovations.  Equipment might include transformers, fixed capacitors, fuses for electrical apparatus, lightening arrestors voltage limiters, electric conductors, microprocessors, amplifiers, electricity meters, and smart communication technology.

The Indian Energy Storage Alliance predicts that energy storage potential between now and 2025 to be 300GW.  A sizeable portion of the demand is expected from newer applications like wind and solar integration, frequency regulation, peak management, transmission and distribution deferral, diesel usage optimization, and electric vehicles.  Hence there is an added opportunity for advanced storage technologies for the new applications.   Currently, the U.S. energy storage technology enjoys a global competitive advantage, but suppliers will need to enter the market soon to establish strong relationships with business partners in this quickly developing market.

U.S. companies interested in developing new business contacts in India’s rapidly expanding renewable energy sector should contact U.S. Commercial Service Industry Specialist: Renie Subin at Renie.Subin@trade.gov  

Web Resources

Ministry of Power  https://powermin.nic.in   
Ministry of New and Renewable Energy  https://mnre.gov.in/ 
Solar Energy Corporation of India  http://www.seci.co.in/  
Central Electricity Authority  http://www.cea.nic.in/ 
Central Electricity Regulatory Commission  http://cercind.gov.in/
Indian Renewable Energy Development Agency  www.ireda.in/
India Smart Grid Forum  http://www.indiasmartgrid.org/ 
Indian Energy Storage Alliance  http://indiaesa.info/
Confederation of Indian Industry  https://www.cii.in/
Federation of Indian Chambers of Commerce and Industry  http://ficci.in/
Faster Adoption and Manufacturing of Electric Vehicles (FAME)  https://www.fame-india.gov.in
India Brand Equity Foundation  https://www.ibef.org/
National Electric Mobility Mission Plan 2020  https://dhi.nic.in/writereaddata/Content/NEMMP2020.pdf

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.


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