Due to power cuts and supply shortages across the country, the Indian geneset market has been witnessing tremendous growth.
Nowadays, almost each and every organisation needs consistent power supply as data loss can be more expensive than the capital expenditure required for backup power equipment. In 2013, the generator market grew 9.5 per cent compared to the previous year. Further, the Indian diesel generator market (up to 100 kVA) is anticipated to grow at a CAGR of 10.6 per cent in value terms during 2014-2018.
Meanwhile, as the government cracks the whip on DG sets, industry majors are turning towards "green" gensets that guzzle less fuel and pollute less.
The country faces acute power shortage due to the inability of an inefficient and outdated power infrastructure to meet the growing demand from the public as well as the industries. Thus, our country remains energy-starved despite the government implementing various progressive measures to maximise the country's power generation capacity and many players are coming out with cost-effective gensets.
Therefore, in such a scenario, the importance of power backup increases, thereby leading to better prospects for the genset industry in the Indian market. But although the energy deficit is rising, the market is still in its nascent stages and is expected to be stable at least in the next decade with a lot of infrastructure projects coming up.
The genset market will also grow considering the increase in demand for quality power. In the sub 10-kVA range and based on applications, diesel gensets will always take precedence. In the higher power ratings, gensets will keep their own stead. In the case of inverters, one must also appreciate that consumables costs and maintenance costs of batteries, etc., are increasing.
The power backup market in India varies within the three different segments generators, UPS and inverters. Major players like Kirloskar Oil Engines Ltd (KOEL), Mahindra-Powerol, Cummins India, Greaves Cotton, Ashok Leyland, Eicher, Caterpillar, MTU and a few other imported brands are seeing huge market potential to grow in India.
With the rising demand, there have been many changes in technological trends in the field of power over the last 10 years. "We treat this as an opportunity to continually improve on what we already offer," says Pankaj Jha, South Asia Marketing Manager, Perkins Engines Company Ltd.
New CPCB norms
The new Central Pollution Control Board (CPCB) II norms, which were applicable from April 1, 2014, aim at reducing pollution, and cost of medical care, etc. Also, all the manufacturers, importers or assemblers of diesel generator sets in India will comply with the cleaner emission standards, for products up to 800 kW. This was a long overdue notification and was welcomed by the industry.
CPCB-II norms are much more stringent than the EU Stage III A norms for engine generator sets. The CPCB-II norms apply on a larger range of generator sets û up to 1000 kVA, with stricter limits for smoke opacity over the entire span of operation. In comparison, EU stage III A norms did not have any regulation on smoke and were applicable on a smaller range - 35kVA - 625 kVA. EU Stage IIIA is applicable to rental (mobile) generator sets only. Hence, Sachin Kondejkar, Director, Sales and Marketing, Power Generation Business Unit, Cummins India Ltd says, ´The challenge for the Indian generator set industry is much bigger than that in Europe.´
PJM Khan, General Manager, Business Development & Performance Support, Cooper Corporation, says, "Any effort, whether it is small or big from this new norm will help the people, because it is going to contribute to maintain cleaner air and a better environment."
Everything related to the new norms have been considered as a positive step by the manufacturers as it will strengthen the productivity of the product. In fact, India will witness more fuel-efficient generators, which will benefit the end customer. The new range of generators will thus have improved technology as it will rather minimise the pollution and will contribute to mitigating climate change issues. Moreover, since the new set of guidelines will have stringent norms, it is expected that with the improvement in technology, the prices of the power backup material may increase, slightly.
Upgradation, modifications, technology changes are envisaged for a few components or parts of the engines in order to make them CPCB norm compliant. They are EGR, fuel pumps, injection systems and turbo chargers. Even logic control in gensets would have to undergo change. Only acoustics for gensets would not undergo any change. Typically, engines form 50-70 per cent of the genset price depending on whether they are acoustic enclosure gensets (50 per cent) or open gensets (70 per cent).
Impact on competition
Implementations of the new norms may not result in any competitive or technological advantage to an engine manufacturer. This applies to both MNCs operating in India and local players.
Domestic companies are unlikely to be at a disadvantage to their MNC counterparts, consequent to the implementation of the revised norms. A significant advantage for MNC players would be on the availability of technology knowhow from global operations. This is by virtue of high budgets for R&D activities. Other players can always get into technology tie-ups or access knowhow from independent agencies like ARAI and AVL.
Impact on cash flow
Upgrading engines to make them CPCB compliant would entail some capital expenditure for setting up facilities or infrastructure.
Consequent to the implementation of the revised norms, prices of engines would increase by 10-15 per cent. With engines comprising 50-70 per cent of genset value, the prices of gensets would increase by 5-7 per cent. Industry had implemented price hikes in June 2012, but that was because of cost increases. There will be strong probability of another round of price hikes in conjunction to implementation of CPCB norms.
A generator gives economical, uninterrupted, reliable power, wherever and whenever industries have to work without interruption. Due to the high growth of industries and scarcity of electric power, many industries require standby power generation units to work 24x7 without any interruption. So to fulfill this requirement, a generator is the technically perfect solution with best fuel efficiency and emissions.
Technology in the genset industry was virtually stagnant for many years as the emission norms were way behind international standards with no effort being made to align them as has been done in the automobile industry. Thus, technological upgradation in any product will certainly be an added advantage not only for users but also for manufacturers. Our industry has always been blamed for polluting the environment, and now with these rules, the whole scenario is set to change. "Cooper Engines offer up to 30 per cent fuel benefits over competition. Moreover, our engines are designed for compliance with Euro IV emission norms and the gensets are complaint with Indian future norms of CPCB II. We are looking forward to the removal of subsidy, as this will give further impetus to increase Cooper's market share," Khan adds.
Sameer Gupta, MD, Jakson Power Solutions, ´I realised the future belonged to silent gensets and decided to manufacture them.´
Since the export market is huge for this industry, the new norms will be a good opportunity for domestic players to reach the levels of emission norms required in markets like the EU and the US. The latest set of gensets will be powered with new/upgraded technology engines to meet the emission norms. Hence, the gensets also have better electrical technology like controls, etc. That said, there is always scope to further improve the technology and to make the engines more fuel efficient.
India loses Rs 4 lakh crore on account of energy losses According to a report by the Central Electricity Authority (CEA), India loses about Rs 414,800 crore of its gross domestic product (GDP) due to electricity shortage. The northern States of Delhi, Haryana, Uttar Pradesh, Himachal Pradesh and Uttarakhand were the worst affected with a deficit of 7.1 per cent, or 2,912 MW. Even the northeastern region of Assam, Manipur, Meghalaya, Arunachal Pradesh, Tripura, Nagaland and Mizoram recorded a deficit of 5.9 per cent.