Diesel genset market is expected to move up from the current sluggishness only when the Indian industrial/ manufacturing sector shores up.
Slow, to negative and now, to flat growth, diesel genes market has witnessed a roller coaster ride in the past five years. A couple of years back, the projections were that the DG sets market will surpass the $ 3.3 billion mark by 2018. Now, given the sustained sluggish scenario the projections are tempered. According to 6Wresearch, India diesel genset market is projected to reach $2.52 billion by 2022. In the current market scenario, this seems to be a feasible proposition.
In a country with 1.2 billion population, the demand for energy is ever increasing. This year, the dip in manufacturing and industrial growth has helped to manage the demand-supply gap. It is anticipated that once the economy starts picking up, the demand-supply gap will also widen.
A few years back gensets were part of establishments that required 24-hour power supply as load-shedding had been a common phenomenon. Thanks to the improved power generation and power management systems, India this year did not face much of power-cuts. It is interesting to note that in the past two years gensets has moved from a primary source of energy to a back-up power level (accounting for 80% market). A few more villages in India are yet to get power supply and 24/7 supply continues to be a distant dream for many of the villages. States such as Uttar Pradesh, Bihar, Telangana and Karnataka are still reeling under power cuts.
In an interaction with Power Today, Ravi Bhandari, Research Analyst with the research and consulting firm, 6Wresearch, said, ´The market for diesel genset declined over the last couple of years due to improved power demand-supply situation, particularly in southern India, which is the largest genset market and slowdown in industrial and construction activity. Though, FY13 (2012-13) witnessed sharp rise in genset sales, primarily driven by high power deficit in several parts of south India. Peak power deficit has reduced significantly, especially in the southern states from 18.5% in FY13 to 1.6% in FY16. Power cuts have also come down to 4-5 hours. All these factor are affecting the sales of diesel gensets in the country.´
However, the consulting firm was optimistic in its outlook. The India diesel genset market is projected to reach $2.52 billion by 2022,´ Bhandari added. This growth will be possible when the industrial demand goes up in India. The factors that can enhance DG set growth in India in short term would be, the changing government policy and economic development in the country which will require continuous power supply. The demand from commercial and industrial sectors is expected to boost the diesel genset sales. Also rise in industrial, public infrastructure and real estate spending would result in increase in demand for power.
Extensive load-shedding is part of the daily routine in india for years now. India in the past was reeling under severe power crisis. It was only three years´ back the country witnessed a massive blackout in the northern region, including the capital city.
Generation capacity addition plans were in place well in advance, however the country had to scale down its capacity addition targets many times, for various reasons including the inability of indebted power disctribution companies´ (discoms) to buy more power. The demand decline clubbed with the spillover from the last capacity addition plans has saved India from a severe power shortage situation. Hydro-electric power is a major contributor to the energy basket, though drought in major states didn´t affect the power situation in the country.
But states such as Telangana are facing severe drought conditions, resulting in power shortages with depletion in water level in dams. This has left industrial units with no other choice but to opt for diesel gensets to ensure uninterrupted power supply despite high power generation cost per unit. Further, any increase in power outages would boost diesel genset sales in the country.
While we expect a positive change for the genset market, technological improvement will be the other factor that will drive the market. ´ There is no need for the manufactures to make long life DG sets as the hours usage of gensets have reduced drastically,´ pointed Ramesh Pasarija, Chairman, Technical Committee, Indian Diesel Engine Manufacturers Association (IDEMA).
6Wresearch had said that, ´In future, diesel genset would register high demand from commercial sector. Growing residential societies, rural banking, construction of public infrastructure and real estate projects would drive the diesel genset market. Also, with the takeoff of 4G service in India, installation of additional towers is expected in 2016 as a result of increasing competition among telecom service providers and increasing pressure from Telecom Regulatory Authority of India (TRAI) to revamp their infrastructure in order to provide better service, are expected to drive the demand for 10 KVA -15 KVA gensets in the country.´
Renewable energy sources like solar and wind have replaced usage of diesel genesis in telecom towers. According to the Central Electricity Authority of India, renewable power installed capacity stood at 38.8 GW as on December 31, 2015, which accounts for about 13 per cent of the overall installed capacity. Wind energy accounts for 65 per cent of total installed renewable power and solar accounts for 12 per cent. The government has set an ambitious target of setting up adding 100 GW of solar energy and 60 GW of wind by 2022taking the total renewable capacity to 175 GW. In 2016, solar power generation cost per unit has recorded the lowest levels at `4.34 per unit in comparison to `15-20 per unit for diesel genset. With the newer technologies, the cost of solar components (panels, batteries) would come down. These factors are also affecting the growth of gensets in the country.
Distributed power generation can offer reliable solution for multiple issues faced by the Indian power sector. It can play an important role in providing electricity in remote locations where grid network is absent. Recently, in 2015, Cochin airport has become fully solar operated. Use of renewable power for distributed power generation would reduce dependency on diesel gensets, restricting the growth of genset sales.
Pointed out Bhandari, ´However, considering the current penetration of renewables in total installed power generation capacity and ever rising demand for power, we believe that renewable energy alone would not be able to bridge the gap between power demand and supply, which left huge potential for genset manufacturers. Though, the market will report single digit growth by 2022.´
In simple words, the inconsistency in power output from renewable sources has made the operators depend on DG sets to ensure continuous supply.
Currently, the market is dominated by demand from urban and semi-urban areas. It is believed, the market will continue to be driven by urban and semi-urban regions as the companies´ focus on rural areas is only towards lower KVA segment.
Unlike in the past, where the demand was driven by power supply gap, in the coming years, it is expected that the market share of standby diesel genset application to gain more pie owing to the reduction of prime application.
The small range DG sets will continue to attract demand in the coming years, given the variety of industries requiring such gensets.
- Renjini Liza Varghese
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