Moving away from the conventional

Moving away from the conventional

Ramesh Kymal, MD of wind turbine manufacturer Gamesa India, says, it’s time Indian policy makers focus on creating a level playing field for renewable energy players in the electricity market and integrate the sector into the long-term energy needs of the country  

MADHUMITA PRABHAKAR

Ramesh Kymal is the managing director of Gamesa Wind Turbine Pvt. Ltd. (Gamesa), the wholly owned subsidiary of Gamesa Corp., the Spain-based wind power equipment maker. In 2010, when growth was slowing down in the parent company’s home market, it decided to expand into 10 other countries including India. Ricardo Chocarro, CEO-Europe and Rest of the World, Gamesa Corp, convinced Kymal to lead the global company in India. Since then, Kymal has played a vital role in steering the company to become one of the leading players in the Indian wind energy sector. He also serves as the chairman of the Renewable Energy Council of CII and aims to make India a global leader in renewable energy, by facilitating the introduction of pro-sustainable state and central level policies and developing innovative financing mechanisms for the sector. In this interview, he discusses the potential the wind energy sector holds in the region, critical success factors for the various verticals at Gamesa and the company’s foray into solar energy, through Gamesa Electric.

Where does Gamesa India fit into India’s wind energy sector? 

Today, India stands at fifth place worldwide with about 7 per cent of the globe’s total installed capacity. It offers excellent growth prospects for the wind power sector due to its huge potential and demand for electricity, especially from the renewable energy sources. It holds a wind potential of above 2,00,000 mega watts (MW), of which, less than 10 per cent has been tapped so far. The major reason for lower installed capacity is the approach adopted by policy makers, in not providing a level playing field between conventional and renewable energy sources. The direct and indirect subsidies that are offered to conventional energy resources at various stages make the competition lopsided in its favour. Moreover, the withdrawal of accelerated depreciation (AD) and generation based incentives (GBI) last year, resulted in plummeting of capacity addition to about 60 per cent compared to the previous year. However, the revival of the GBI in the Union Budget 2013-2014 has helped in regaining investor confidence to a large extent, though the fine print is still awaited.

As for Gamesa, it has established itself well in the Indian market and has experienced exponential growth in the last three years. It has emerged as one of the leading players in the wind energy sector with an installed capacity of 230 MW, of the total installed capacity of 2,350 MW by all manufactures, during this period. Gamesa has also established manufacturing units both for nacelles and blades in strategic locations and also sourced components from other suppliers, to be cost competitive in the market.

Since inception, Gamesa has executed the first re-powering project in India that is, replacing inefficient old turbines with latest technology WTGs, in order to have higher efficiency and generation in the same site. Ministry of New and Renewable Energy (MNRE) estimates suggest that, of the total installed capacity, about 4,000 MW, with a unit size of 500 kW and below, have been installed in high potential sites, which provides tremendous opportunities to re-powering and Gamesa aims to tap this potential as well.

What are the salient differences between the wind energy sectors, globally and in India?

The wind energy sector offers promising opportunities to investors and developers both in India as well as globally, with technologies being common in most of the cases. The major differences lie in mainstreaming wind power into the electricity market and providing a level playing field for both wind and conventional power sources.

The prevailing scenario, today, is that while countries like Germany, U.S. and China are achieving power generation targets in both the short and long-term through appropriate policy framework, India is still focusing more on conventional power generation, which has many bottlenecks in the form of availability, supply and environmental concerns. Thus, there is a need for policy framework to be developed at the centre, to take wind as a major source of power generation and integrate it into long-term planning.

According to you, how do investors perceive this sector?

In my opinion, investors look at the wind energy sector as risky, since the prospects are highly influenced by regulatory and policy changes, as compared to other sectors. However, owing to the huge opportunities and attractive returns that the sector offers, investments from financial institutions, banks and PE funds have been on the rise, except during the global economic crisis. Also, as more IPPs are entering the wind energy market today, investors are offering various innovative financing options. Importantly, a priority sector status will play a vital role in bringing in more and more financial institutions and banks into this sector.

Globally, Gamesa has a VC arm that invests in new technologies in related areas. Any plans of bringing this into India? 

Gamesa Venture Capital, a global fund that, in theory, has no geographical bias, will also consider co-investing with other VCs in cases where a business or project generates great interest from investors. Gamesa has already made investments in U.S.-based off-grid renewable firms involved in solar and water technologies and a Spanish firm, which specialises in intelligent energy management services.  India offers tremendous potential for such sustainable technologies, especially in the sectors of energy and water. Gamesa India has already developed a pilot model of water purification systems (RO) based on solar energy and is now planning to explore the market for the same. At such a juncture, Gamesa’s VC arm could become versatile and also help in bringing technologies that are already secured elsewhere, to India.

Tell us about your foray into the solar EPC and solar inverters business. 

Solar energy offers tremendous potential in India. The company successfully ventured into the solar business last year, by installing two 100 kW off-grid, solar photo voltaic (SPV) projects, to meet the captive power requirement of our industry customers. Moreover, Gamesa Electric has developed two models of solar inverters, 100+ and 500+, which are compatible with grid connected SPV power plants. We have set a target of achieving 2,000 kW of SPV installation in 2013 and would like to expand in the years to come.

What are your investments plans for India in the future? What are your revenue expectations for the three arms of business?

Having invested sufficiently into manufacturing units, our focus will now be on developing wind farms and preparing for the next five years. With a sizable number of turbines that are now operating in India, operations and maintenance (O&M) will also become a major contributor to Gamesa India’s bottom-line. In terms of revenue, sales and wind farm development put together will contribute about 80 per cent to 85 per cent and the rest will be from offering O&M services to our clients and other customers as well.

What are your plans for Gamesa India in the next three years? How does it fit into the global scheme of things? 

Global economic slowdown has had impacts in investments made in the global wind power sector, especially in Europe and the U.S. Though India has not been affected so much, there has been a significant drop in capacity addition last year, not only for Gamesa but also for all manufacturers, mainly due to the policy changes brought in by the government. However, now that GBI has been re-introduced, the market looks positive and I am confident that for the next three years, the growth will continue. In a way, we can say that the sluggish market in Europe has shifted the focus towards developing economies and the investment trend will continue to grow through Independent Power Purchasers (IPPs) raising finance with lower interest rates from European and American financial investors, because of the higher returns achievable in Indian wind energy market.