Venkat Garimella | Director Marketing - Power Solutions Business, Schneider Electric.
What factors are boosting demand for capacitors?
The trend and how the future technology is changing, but capacitors are not going to disappear overnight. And while there is a bit of growth, there is no big boost, as of now. Mainly, the regulatory issues have still not been changed, which would help the industry.
Bigger companies like Schneider are working towards the next generation trends. So, any company which is in the business of making capacitors, have to think twice, as they may not have a long life, due to issues of volume, profitability, price cut etc., but only capacitors is not a longevity industry.
Have manufacturers implemented advanced technology in capacitors?
Some very smart Indian companies and start-ups are getting on board the power quality management business and so there are small Indian companies that are getting there. This industry is well developed globally, so if the local companies don´t keep their eyes on the innovation, focus on trends and changing customer expectation etc., they may become irrelevant. I´m not saying that they are not doing that, but those how have accessed global technology and components are few. This is an emerging trend and there is a lot of gap in understanding this scenario. The whole space is small and the economics of scale, volume etc. still don´t exist. So, it is early to say whether Indian manufacturers will be successful tomorrow or not. But they are beginning.
What are the challenges pertaining to this sector?
There is a huge capacity in the whole industry, but the demand isn´t as much. Secondly, most capacitor manufacturers import a major amount of raw materials and do not have very high quality gear manufactured in India.
In import, there are duties and the global prices also keep changing, so there is a huge profitability issue. There is a price cut due to the demand-supply gap, the cost is moving because of the fluctuation and there is an impact on the profitability and stretch on margins.
Local companies have to be more technically complaint with the latest international standards and have to be prepared, otherwise they may become irrelevant.
Do you see maximum opportunities for this particular segment in India that should be grabbed by domestic players?
If you see globally, 75 per cent (and increasing) share of the electricity load is on account of non-linear loads (servers, computers, copier machines).
Non-linear loads are very typical in their behaviour and the usual capacitors cannot really work in the increasingly non-linear load conditions, and will instead further add to the instability and poor quality of power. They will thus loose their relevance. Thus, the emerging trend will be for IGBT semi-conductor based power factor and harmonics mitigations solutions, which is what should be picked up by players. At Schneider, we have a very holistic view of power management, and look at the overall comprehensive view of power quality, while approaching this industry.
It was expected that this sector would capture major market share by 2014-19, so how well is this industry doing?
As per my own personal estimates, if we divide the power capacitors industry into two--low voltage (LV) and medium voltage (MV), I think that it is not showing such an encouraging growth. Maybe there has been some growth in LV, but definitely MV is not very strong in the capacitor industry.
Look at the bigger picture of the power sector. First, there is first a power deficit, and secondly--which is very unique to this country--is the very high amount of T&D losses, which as per various reports, is as high as 30 per cent.
The rough estimate is that we need to commission 4,000 MW of power plants, every month, for the next 30 months (2.5 years) to meet our power requirements. Thus, containing this 30 per cent T&D losses and optimising it is what is needed, for which we need a lot of regulatory initiatives from the Government of India.
Frankly, that hasn´t come as yet, but believe me that when these things come up you will see LV and MV capacitors really start to grow.
What should Indian manufacturers and the government do to provide maximum growth opportunities for the sector?
The state distribution companies are not making profits and hence have no money to modernise for tomorrow´s requirements. We need to switch to the kVh billing model from the present kWh one. The latter gives players incentives for having power factor above the prescribed threshold, while penalising those who fall below.
We want kVh billing to happen in more and more states, because it is just started and only 3-4 states currently do this, as it will give a big boost to the capacitors business, especially LV capacitors. In the present regime, only those companies who want energy incentives and have the wherewithal to get what is needed participate, and others just maintain the threshold--opting for no incentive and no penalisation. But, kVh billing, does away with power factor incentive, only keeping the penalties, thus getting each and every consumer interested in improving their power factor. Studies have also proven benefits of kVh billing model for state discoms, but this doesn´t get implemented.
Few of them have already started doing that, and this is the first step. The second step is that it is now time for India to look at power quality. So we are waiting for some regulatory initiatives from GoI to improve the same. Recently, Tamil Nadu became the first state to introduce power quality improvement norms and so others have to also look into this, learn from it, understand and start implementing it.
Please share your views on reactive power management.
Capacitors pump in reactive power. But as I said, going forward, this reactive power generated by capacitors will not hold good technically, when you have more and more non-linear load connections. This then gets taken over by the semi-conductor based IGBT devices. So, the reactive power generation space is going to change in the coming years and while capacitors today are everywhere and IGBT is a little thing, this will change.
IGBT semi-conductors were very expensive, are now expensive and maybe going forward they will become extremely cheap. So, this technology is also undergoing a lot of change, thus consumers, load conditions, IGBT cost, drawbacks of the classical capacitors, etc., will all make IGBT based reactive power management the next big thing.