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STRATEGIC MANAGEMENT-I
IMT Ghaziabad
August, 2011
By Group 3 (Section-D):
Mukul Garg (10DM-089)
Navin Singh (10DM-090)
Nikhil G Pai (10DM-094)
Nilesh Surana (10DM-095)
Niraj Mishra (10DM-096)
Surabhi Agarwal (10FN-112)
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Acknowledgement
We are extremely grateful to our professor, Rear Admiral Dr. Rakesh Chopra, for his
valuable inputs and guidance throughout the making of this project, without which this
project would not have been possible.
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Table of Contents
History & Evolution ................................................................................................................................. 6
Wind Power in the World ....................................................................................................................... 7
Growth Trends ........................................................................................................................................ 8
Wind Power in India ............................................................................................................................ 8
Study of business models of players in wind energy sector. ................................................................ 10
Investment ........................................................................................................................................ 11
Generation Costs............................................................................................................................... 11
Drivers across the sector ....................................................................................................................... 12
Security of supply .............................................................................................................................. 12
Economic considerations .................................................................................................................. 12
Environmental concerns ................................................................................................................... 13
Barriers for the sector ........................................................................................................................... 14
Institutional Barriers ......................................................................................................................... 14
Unfair competition: ....................................................................................................................... 14
Internalization of generating costs: .............................................................................................. 14
Lack of knowledge:........................................................................................................................ 14
Regulatory Barriers ........................................................................................................................... 14
Interconnection Standards: .......................................................................................................... 14
Licensing requirements: ................................................................................................................ 14
Unfair competitive disadvantage: ................................................................................................. 14
Investment Barriers .......................................................................................................................... 15
Lack of a model. ............................................................................................................................ 15
Difficulty raising local equity. ........................................................................................................ 15
Obtaining capital resources. ......................................................................................................... 15
Technical Barriers .............................................................................................................................. 15Wind resource assessment. .......................................................................................................... 15
Intermittency ................................................................................................................................ 15
Wind in rural areas ........................................................................................................................ 15
Commercialization Barriers ............................................................................................................... 15
Infrastructure: ............................................................................................................................... 16
Prospecting: .................................................................................................................................. 16
Permitting: .................................................................................................................................... 16
Marketing: ..................................................................................................................................... 16
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Environmental Analysis ......................................................................................................................... 17
Political Factors ................................................................................................................................. 17
Economic Factors .............................................................................................................................. 18
Environmental Factors ...................................................................................................................... 19
SWOT Analysis....................................................................................................................................... 20
Strengths ........................................................................................................................................... 20
Weaknesses ...................................................................................................................................... 20
Opportunities .................................................................................................................................... 20
Threats .............................................................................................................................................. 21
Corporate Analysis: Suzlon Energy ....................................................................................................... 22
History & Past Strategies .................................................................................................................. 22
Financial performance ...................................................................................................................... 25
In the year 2004 ............................................................................................................................ 25
In the year 2005 ............................................................................................................................ 25
In the year 2006 ............................................................................................................................ 26
In the year 2007 ............................................................................................................................ 26
In the year 2008 ............................................................................................................................ 26
In the year 2009 ............................................................................................................................ 26
In the year 2010 ............................................................................................................................ 26
Business level strategy ...................................................................................................................... 29
Global strategy .................................................................................................................................. 30
Expanding Global Presence ........................................................................................................... 30
Global Manufacturing Capacity .................................................................................................... 30
Global Acquisitions ........................................................................................................................ 30
Recommendations ................................................................................................................................ 31
Prospective growth Driver ................................................................................................................ 31Investment Outlay ............................................................................................................................ 31
Risk Assessment and Contingency plans. ......................................................................................... 32
R&D opportunities. ........................................................................................................................... 32
Tie Ups, JVs and Patent Licensing opportunities. ............................................................................ 32
References ............................................................................................................................................ 34
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History & Evolution
In July 1887, a Scottish academic, Professor James Blyth, undertook wind power
experiments that culminated in a UK patent in 1891. In the US, Charles F. Brush produced
electricity using a wind powered machine, starting in the winter of 1887-1888, whichpowered his home and laboratory until about 1900. In the 1890s, the Danish scientist and
inventor Poul la Cour constructed wind turbines to generate electricity, which was then
used to produce hydrogen. These were the first of what was to become the modern form of
wind turbine.
Small wind turbines for lighting of isolated rural buildings were widespread in the first part
of the 20th century. Larger units intended for connection to a distribution network were
tried at several locations including Balaklava USSR in 1931 and in a 1.25 megawatt (MW)
experimental unit in Vermont in 1941.
The modern wind power industry began in 1979 with the serial production of wind turbines
by Danish manufacturers Kuriant, Vestas, Nordtank, and Bonus. These early turbines were
small by today's standards, with capacities of 2030 kW each. Since then, they have
increased greatly in size, with the Enercon E-126 capable of delivering up to 7 MW, while
wind turbine production has expanded to many countries.
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Wind Power in the World
Wind power, as an alternative to fossil fuels, is plentiful, renewable, widely distributed,
clean, and produces no greenhouse gas emissions during operation. A large wind farm may
consist of several hundred individual wind turbines which are connected to the electricpower transmission network. At the end of 2010, worldwide capacity of wind-powered
generators was 197 gigawatts (GW). Europe accounted for 48% of the total in 2009. World
wind generation capacity more than quadrupled between 2000 and 2006, doubling about
every three years.
Global Wind Power Cumulative Installed Capacity
(Data source: GWEC, Global Wind Report Annual Market Update 2010)
In 2010, Spain became Europe's leading producer of wind energy, achieving 42,976 GWh.
However, Germany holds the first place in Europe in terms of installed capacity, with a total
of 27,215 MW at December 31, 2010. Wind power accounts for approximately 21% of
electricity use in Denmark, 18% in Portugal, 16% in Spain, 14% in the Republic of Ireland,
and 9% in Germany. Energy production was 430 TWh, which is about 2.5% of worldwide
electricity usage. Several countries have achieved relatively high levels of wind power
penetration, such as 21% of stationary electricity production in Denmark, 18% in Portugal,
16% in Spain, 14% in Ireland and 9% in Germany in 2010. As of 2011, 83 countries around
the world are using wind power on a commercial basis.
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Top 10 countries by wind power capacity (2010)
Country Windpower capacity (MW)
China 44,733
United States 40,180
Germany 27,215
Spain 20,676
India 13,066
Italy 5,797
France 5,660
United Kingdom 5,204
Canada 4,008
Denmark 3,734
(Data source: World Wind Energy Report 2010)
Growth Trends
In 2010, more than half of all new wind power was added outside of the traditional markets
in Europe and North America. This was largely from new construction in China, which
accounted for nearly half the new wind installations (16.5 GW).
Global Wind Energy Council (GWEC) figures show that 2007 recorded an increase of
installed capacity of 20 GW, taking the total installed wind energy capacity to 94 GW, upfrom 74 GW in 2006. Despite constraints facing supply chains for wind turbines, the annual
market for wind continued to increase at an estimated rate of 37%, following 32% growth in
2006. In terms of economic value, the wind energy sector has become one of the important
players in the energy markets, with the total value of new generating equipment installed in
2007 reaching 25 billion, or US$36 billion.
Although the wind power industry was impacted by the global financial crisis in 2009 and
2010, a BTM Consult five year forecast up to 2013 projects substantial growth. Over the past
five years the average growth in new installations has been 27.6 percent each year. In the
forecast to 2013 the expected average annual growth rate is 15.7 percent. More than 200
GW of new wind power capacity could come on line before the end of 2013. Wind powermarket penetration is expected to reach 3.35 percent by 2013 and 8 percent by 2018.
Wind Power in India
The development of wind power in India began in the 1990s, and has significantly increased
in the last few years. Although a relative newcomer to the wind industry compared with
Denmark or the US, India has the fifth largest installed wind power capacity in the world. In
2009-10 India's growth rate was highest among the other top four countries.
As of 31 March 2011 the installed capacity of wind power in India was 14550 MW. It is
mainly spread across:
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Tamil Nadu 6007 MW
Maharashtra 2310.70 MW
Gujarat 2175.60 MW
Karnataka 1730.10 MWRajasthan 1524.70 MW
Madhya Pradesh 275.50 MW
Andhra Pradesh 200.20 MW
Kerala 32.8 MW
Orissa 2MW
West Bengal 1.1 MW
Other states 3.20 MW
It is estimated that 6,000 MW of additional wind power capacity will be installed in India by
2012. Wind power accounts for 6% of India's total installed power capacity, and it generates
1.6% of the country's power.
Future
Indian Wind Energy Association has estimated that with the current level of technology, the
on-shore potential for utilization of wind energy for electricity generation is of the order of
65,000 MW. The unexploited resource availability has the potential to sustain the growth of
wind energy sector in India in the years to come.
The Ministry of New and Renewable Energy (MNRE) has fixed a target of 10,500 MW
between 2007 & 2012, but an additional generation capacity of only about 6,000 MW might
be available for commercial use by 2012.
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Study of business models of players in wind energy sector.
Wind energy is the cheapest form of new electricity generation available today. Wind power
is more expensive than power from old, established power plants, but is cost competitive
with any new power plant.
Technology innovations and market building incentives have helped to dramatically lower
costs over the last 20 years. When the first commercial-scale wind turbines were installed in
the 1980s, wind generated electricity cost up to 30 cents per kilowatt-hour. Today, wind
power plants can generate electricity for less than 5 cents per kilowatt-hour, a price that is
competitive with new coal- or gas-fired power plants.
The successful business models in this sector focuses on providing cost efficient and hassle
free solutions to its prime customers. Their customers in India include small, medium, large
scale businesses, private and public sector companies, power utilities, independent power
producers (IPPs) and even high net worth individuals (HNI). Many of these customers do not
have prior exposure or expertise of the power sector. But they clearly saw a big opportunity
in the power generation business in a fast-growing, energy-starved market like India The
companies supported them with their proven technology, expertise and the comfort of end-
to-end solutions to help them harness this opportunity.
End ToEnd
Solutions
WindResourceMapping
Installing andComissioning
Supply ofWTG and
Accessories
PowerEvacuation
Life cycleoperations
andMaintenance
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Comprehensive Operations and Maintenance is the truly all-inclusive solution. Each turbine
is monitored 24 X 7 by trained engineers at all wind farms. The contract covers spares,
consumables, and major components without any hidden costs and also guarantees 95%
machine availability. Daily generation reports on all turbines are sent to the customer every
day via e-mail. Thus, customers need not engage their manpower or spend time to look
after their wind energy projects.
The product line is a clear reflection of the strategy to develop products customised to the
local geography and wind regimes. The current product range includes from 600kW to
2.1MW. The technology incorporates Hydrodynamic Fluid Coupling, Precise Micro-Pitching
and the flexi-slip Mechanism for maximizing performance. With a proven and reliable of
technology, they assure 95% uptime on its wind turbine generators. Wind turbine
generators in capacities advance features such as Unique backing machine.
Investment
The relative attraction to investors of the wind energy market is dependent on a number of
factors. These include the capital cost of installation, the availability of finance, the pricing
regime for the power output generated and the expected rate of return.
The investment value of the generation equipment in the future wind energy market
envisaged in this scenario has been assessed on an annual basis. This is based on the
assumption of a gradually decreasing capital cost per kilowatt of installed capacity.
Generation Costs
Various parameters need to be taken into account when calculating the generation costs ofwind power. The most important of these are the capital cost of wind turbines, the cost of
capital the wind conditions at the site, and the price received for the electricity generated.
Other important factors include operation and maintenance (O&M) costs and the lifetime of
the turbine.
The total cost per generated kWh of electricity is traditionally calculated by discounting and
levelising investment and O&M costs over the lifetime of a wind turbine, then dividing this
by the annual electricity production. The unit cost of generation is thus calculated as an
average cost over the lifetime of a turbine, which is normally estimated at 20 years. In
reality capital costs will be higher in the early years of a turbines operations while the loan
is being paid off, where as O&M costs will probably be lower at the beginning of a turbines
operation and increase over the lifespan of the machine.
Taking all these factors into account, the cost of generating electricity from wind energy
currently ranges from approximately 4-6 cents/kWh at high wind speed sites up to
approximately 6-9 cents/kWh at low wind speeds.
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Drivers across the sector
The growth of the market for wind energy is being driven by a number of factors, including
the wider context of energy supply and demand, the rising profile of environmental issues,
especially climate change, and the impressive improvements in the technology itself. These
factors have combined in many regions of the world to encourage political support for theindustrys development.
Security of supply
Global demand for energy is increasing at a breathtaking pace, and this is particularly true in
China, India and other rapidly developing economies. This sharp increase in world energy
demand will require significant investment in new power generating capacity and grid
infrastructure, especially in the developing world.
Industrialised countries face a different but parallel situation. While demand is increasing,the days of overcapacity in electricity production are coming to an end. Many older power
plants will soon reach the end of their working lives. The IEA predicts that by 2030, over
2,000 GW of power generation capacity will need to be built in the OECD countries,
including the replacement of retiring plants.
Just as energy demand continues to increase, supplies of the main fossil fuels used in power
generation, are becoming more expensive and more difficult to extract. One result is that
some of the major economies of the world are increasingly relying on imported fuel at
unpredictable cost, sometimes from regions of the world where conflict and political
instability threaten the security of that supply.
In contrast to the uncertainties surrounding supplies of conventional fuels, and volatile
prices, wind energy is a massive indigenous power source which is permanently available in
virtually every country in the world. There are no fuel costs, no geo-political risk and no
supply dependence on imported fuels from politically unstable regions.
Every kilowatt/hour generated by wind power has the potential to displace fossil fuel
imports, improving both security of supply and the national balance of payments, which is
not only an issue for the United States which sends more than half a trillion dollars a year
out of the country to pay its oil bill. This is an even larger issue for poor countries in Africa,Asia and South America whose economies have been devastated by recent oil price hikes.
Economic considerations
Wind energy makes sound economic sense. In contrast to new gas, coal or even a nuclear
power plants, the price for fuel over the total lifetime of a wind turbine is well known: it is
zero. For conventional generation technologies, future price developments are a significant
risk factor, and if current trends are any indication, they are likely to continue rising into the
unforeseeable future.
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Wind farm owners, however, know how much the electricity they generate is going to cost.
No conventional technology (except hydro the established renewable power generating
technology) can make that claim. This is of fundamental concern not only to individual
utilities and power plant operators, but also to government planners seeking to mitigate
their vulnerability to macroeconomic shocks associated with the vagaries of international
commodity markets.
In addition, at many sites, wind power is already competitive with new-built conventional
technologies and in some cases much cheaper. Although nothing can compete with existing,
embedded conventional generation plant that has already been paid off (and was mostly
constructed with significant state subsidies: governments still subsidize conventional
technologies at the rate of about 250 billion USD/year), wind power is commercially
attractive, especially when taking into account the price of carbon, which is a factor in a
growing number of markets.
Regional economic development is also a key factor in economic considerations surroundingwind energy. From Schleswig-Holstein in northern Germany, to Andaluca in Spain; from the
US Pacific Northwest to west Texas to Pennsylvania; and from Xinjiang and Inner Mongolia
in China to Tamil Nadu and Gujarat in India, the wind power industry is revitalising regional
economies.
Environmental concerns
Climate change is now generally accepted to be the greatest environmental threat facing
the world, and keeping our planets temperature at sustainable levels has become one of
the major concerns of policy makers. The UNs Intergovernmental Panel on Climate Change
projects that average temperatures around the world will increase by up to 5.8Cover thecoming century. This is predicted to result in a wide range of climate shifts, including
melting ice caps, flooding of low-lying land, storms, droughts and violent changes in weather
patterns.
One of the main messages from the Nobel Prize winning IPCCs 4th Assessment Report
released in 2007 was that in order to avoid the worst ravages of climate change, global
greenhouse gas emissions must peak and begin to decline before 2020.
Wind power does not emit any climate change inducing carbon dioxide nor other air
pollutants which are polluting the major cities of the world and costing billions in additional
health costs and infrastructure damage. Within three to six months of operation, a wind
turbine has offset all emissions caused by its construction, to run virtually carbon free for
the remainder of its 20 year life. Further, in an increasingly carbon-constrained world, wind
power is risk-free insurance against the long term downside of carbon intense investments.
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Barriers for the sector
Institutional Barriers
Unfair competition:
Compared with wind energy, nuclear and fossil fuel technologies enjoy a considerable
advantage in government subsidies for research and development.
Internalization of generating costs:
Wind energy will be unable to compete on a level playing field with conventional generation
until new policies are adopted to internalize the public costs of these fossil and nuclear fuel
sources.
Lack of knowledge:
Local electricity companies may be unfamiliar with wind energy. Most utilities have not
studied how renewable resources could fit into their systems. For example, few have
investigated how the output of wind technologies matches their system peak load.
Regulatory Barriers
Interconnection Standards:There is a lack of uniform interconnection standards for wind technologies. The
responsibilities of utilities and generators with respect to interconnection have not been
clearly defined, and as a result, the cost (or even feasibility) of interconnection to the grid
often becomes a significant barrier to smaller projects.
Licensing requirements:
Stringent licensing requirements could also pose a barrier if for example, a small
cooperative selling power only to its members were required to be licensed as an energy
service provider. Similarly, the licensing of generation facilities could be particularly onerousfor small developers.
Unfair competitive disadvantage:
Wind often faces an unfair competitive disadvantage because public policies do not
generally fully account for the environmental and social costs of conventional electricity
supply technologies.
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Investment Barriers
Lack of a model.
Since there are few wind projects in the region, project developers are understandably
unfamiliar with wind power, and even less comfortable with the risksinvolved.
Difficulty raising local equity.
Local developers have limited investment capacity, and there are many projects competing
for investment capital. As an unfamiliar and potentially risky investment with uncertain
returns, wind power does not immediately emerge as a clear winner.
Obtaining capital resources.
Proper risk allocation and mitigation are fundamental concerns for wind developers seekingto secure project funding. In a typical wind project, there are common barriers to accessing
capital resources, such as the availability of financeable off taker agreements,
construction cost over-runs, long term reliability of turbines, and the risk of wind-bearing
ability.
Technical Barriers
Wind resource assessment.
The wind maps developed by some countries (OLADE/SWERA) are not enough for projectdevelopers. High resolution wind maps are needed.
Intermittency
Because the wind blows intermittently, wind power can only supply a portion of a
consumers, communitys, or regions electricity needs. In grid-connected applications,
owners of wind capacity must negotiate supply contracts that account for winds
intermittent nature.
Wind in rural areas
Rural small grids would require upgrading to three-phase before interconnecting wind
turbines larger than 20-25 kW. Without standard agreements concerning each partys
responsibilities in paying for necessary upgrades, this weakness in the grid is a significant
barrier to wind development in rural areas.
Commercialization Barriers
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Infrastructure:
Developing new wind sites requires large initial investments to build infrastructure. These
investments increase the cost of providing wind electricity, especially during
early years.
Prospecting:
Developers must find publicly acceptable sites with good resources and with access to
transmission lines. Potential wind sites can require several years of monitoring to determine
whether they are suitable.
Permitting:
Planning permission issues for conventional energy technologies are generally well
understood, and the process and standards for review are well defined. In contrast, wind
energy often involves new types of issues.
Marketing:
Individuals have no choices about the sources of their electricity. But electricity deregulation
could open the market so that customers have a variety of choices
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Environmental Analysis
Political Factors
The Indian governments stated target is for renewable energy to contribute 10% of total
power generation capacity and have a 4-5% renewables share in the electricity mix by 2012.
This means that renewable energy would grow at a faster rate than traditional power
generation, accounting for around 20% of the total added capacity planned in the 2008-
2012 timeframe.
Currently, the promotion of renewables only figures in one section of the 2003 Electricity
Act (86(1)e). This act restructured the Indian electricity industry by unbundling the vertically
integrated electricity supply utilities in the Indian states and establishing State Regulatory
Commissions in charge of setting electricity tariffs. The act also opened access to the Indian
transmission system, allowing consumers to purchase their electricity from any producer.
The support for wind power in India includes the following measures:
Fiscal and financial incentives:
Concession on import duty on specified wind turbine parts.
80% accelerated depreciation over one or two years
10 year income tax holiday for wind power generation projects
Excise duty relief on certain components
Some states have also announced special tariffs, ranging from Rs 3-4 per kWh, with a
national average of around Rs 3.50 per kWh
Wheeling, banking and third party sales, buy-back facility by states
Guarantee market through a specified renewable portfolio standard in some states, asdecided by the state electricity regulator by way of power purchase agreements
Reduced wheeling charges as compared to conventional energy
Land policies:
The Ministry of Environment and Forests has issued guidelines for diversion of forest lands
for non-forest purposes, particularly to enable wind generation
Clearance of leasing and forest land for up to a period of 30 years for wind developers
Financial assistance:
Setting up of the Indian Renewable Energy Development Agency (IREDA REDA), thepremier finance agency of the Government of India to provide soft loans for renewable
energy projects, particularly for demonstration and private sector projects
Wind resource assessment:
The government set up the Centre for Wind Energy Technology (C -WET) to map wind
energy potentials
The C-WET has set up more than 1,000 wind monitoring and wind mapping centres across
25 states
Wind mapping at 50 meters (C-WET) and 60-80 meters height (private companies)
State policiesRenewable Portfolio Standards and financial incentives
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In the absence of a national renewable energy policy, ten out of the 29 Indian States have
now implemented quotas for a renewable energy share of up to 10% and have introduced
preferential tariffs for electricity produced from renewable sources. In addition, several
states have implemented fiscal and financial incentives for renewable energy generation,
including; energy buy back (i.e. a guarantee from an electricity company that they will buy
the renewable power produced); preferential grid connection and transportation chargesand electricity tax exemptions.
Economic Factors
Cost Trends
Wind power has negligible fuel costs, but a high capital cost. The estimated average cost per
unit incorporates the cost of construction of the turbine and transmission facilities,
borrowed funds, return to investors (including cost of risk), estimated annual production,
and other components, averaged over the projected useful life of the equipment, whichmay be in excess of twenty years.
The marginal cost of wind energy once a plant is constructed is usually less than 1 cent per
kWh. In 2004, wind energy cost a fifth of what it did in the 1980s, and some expected that
downward trend to continue as larger multi-megawatt turbines were mass-produced.
However, capital costs have increased. Not as many facilities can produce large modern
turbines and their towers and foundations, so constraints develop in the supply of turbines
resulting in higher costs.
Incentives
Wind energy in many jurisdictions receives financial or other support to encourage itsdevelopment. Wind energy benefits from subsidies in many jurisdictions, either to increase
its attractiveness, or to compensate for subsidies received by other forms of production
which have significant negative externalities.
Secondary market forces also provide incentives for businesses to use wind-generated
power, even if there is a premium price for the electricity. For example, socially responsible
manufacturers pay utility companies a premium that goes to subsidize and build new wind
power infrastructure. Companies use wind-generated power, and in return they can claim
that they are undertaking strong "green" efforts.
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Cost Structure of a typical 2 MW wind turbine (2006, in Euros)
Environmental Factors
Compared to the environmental impact of traditional energy sources, the environmental
impact of wind power is relatively minor. Wind power consumes no fuel, and emits no air
pollution, unlike fossil fuel power sources. The energy consumed to manufacture and
transport the materials used to build a wind power plant is equal to the new energy
produced by the plant within a few months. While a wind farm may cover a large area of
land, many land uses such as agriculture are compatible, with only small areas of turbinefoundations and infrastructure made unavailable for use.
There are reports of bird and bat mortality at wind turbines as there are around other
artificial structures. The scale of the ecological impact may or may not be significant,
depending on specific circumstances. Prevention and mitigation of wildlife fatalities, and
protection of peat bogs, affect the operation of wind turbines. There are anecdotal reports
of negative effects from noise on people who live very close to wind turbines.
Social Factors
Creation of local employment opportunities. Improvement in quality of power. Long term energy security. Overall development of the area.
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SWOT Analysis
The wind energy program in India is a positive development. In this context, a SWOT
analysis has been attempted with the viewpoint of enhancing the uptake of this program in
the future years.
Strengths
Continuing demand- supply gap and escalation in the cost of fossil fuel-based powergeneration and electricity tariffs for industry and organized sector.
Encouragement by Central and State Government policies - fiscal incentives such asaccelerated depreciation and reasonable tariffs for industry and organized sector.
Growth in wind manufacturing sector- joint ventures as well as indigenous industrycontributing to adoption of the merging technologies, up-scaling size of machines and cost
cutting initiatives.
Massive nation-wide efforts for wind resource assessment covering 25 states,comprising 900 stations and micro-survey of sites.
Setting up a well managed C-WET, an institution in the public sector with EU supporttesting, R & D and advisory functions.
Tactical project management orientation by wind industry, which involves landprocurement, site selection, installation of the wind generation facilities on a turn key basis
by the project developers/ equipment suppliers.
Weaknesses
Low capacity utilization of the wind generation plants - this is not attributed toavailability of wind but also factors such as
Over- capacity due to biasing of the market mechanism to tax incentives forinstalling of wind farms rather than efficient operation. This led to inadequate resource
assessment in advance of construction and poor engineering.
Forced outages due to technical factors such as weak grid integration, mechanicalproblems, etc.
Dearth of O & M skills and service organizations. Small wind power generation program not successful due to techno- economic
considerations and inadequacy of the demonstrative efforts taken up so far.
Rising land costs and developmental issues.Opportunities
Substantial untapped market- off- shore and on- shore.
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Enhancing productivity of existing installations by re- powering existing ones. CDM credits for clean technologies. Tried and tested technologies for such small applications is under developed due to
mismatch, poor project design, dearth of trouble shooting skills and barriers in commercialoperations. The small wind industry implementation Strategy (SWIIS) project, co-
coordinated by Societe d Etudes Et de Development (SEED) to increase the sectors
impacts through provision of tools such as sectoral market analyses, a catalogue of
manufacturers, comprehensive listing of available
Turbines, their applications and detailed information on hybrid technologies such aswind-diesel and wind-PV. Similar initiatives are needed in the Indian context.
Threats
Technical progress and financial outlays may not keep pace with the prospectivemarkets in the future years.
Wind power subsidies may be rationalized or pegged down discouraging prospectivebuyers.
Cost cutting may not work out favorably- land costs may shoot up & cost-cuttingideas by equipment suppliers may dry up.
Consolidating all the points mentioned above, we can show the framework for SWOT as
Strength
Continuing demand- supply gap
Escalation in the cost of fossil fuel-based powergeneration
Availability of soft loans and government incentives
Project gestation period is significantly
shorter than conventional sources
Weakness
Low capacity utilization of the wind generation plants(PLF :18-23%)
Rising land costs and developmental issues
Forced outages due to technical factors such as weakgrid integration, mechanical problems etc.
Threats
Risk of obsolescence in case of technologicalinnovations in other forms of energy
Wind power subsidies may be rationalized orpegged down
Oppurtunities
Substantial untapped market( current utlization :24%)
CDM credits for clean technologies
Enhancing productivity of existing installations by re-
powering existing ones
Indian Wind
Energy Sector
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Corporate Analysis: Suzlon Energy
History & Past Strategies
Suzlon is a market leader in Renewable Energy Resources segment. It specializes in
providing total solutions in Wind Power Generation with cohesive integration of
consultancy, design, manufacturing, installation, operation and maintenance services.
Currently, Suzlon is ranked as fifth leading wind turbine manufacturer in the world. For its
contribution in the wind energy sector, Suzlon has been awarded by the World Wind Energy
Association.
Suzlon's story began in 1992 when founder Tulsi Tanti was managing a 20-employee textile
company. Due to the local infrastructure's erratic availability of electricity and because of
the rising costs of power, the highest business expenditure after the raw materials was
electricity.
Suzlon was founded by Tulsi Tanti in 1995, when he was working in a family-owned textile
company. In that year, India's shaky power grid and the rising cost of electricity offset any
profits the company would make. After providing electricity for his own company, Tanti
realized that other companies in India could also greatly benefit from being sold wind power
technology and advised on its use. With the help of some of his friends of Rajkot, he moved
into wind energy production as a way to secure the textile company's energy needs, and
founded Suzlon Energy. Suzlon adopted a business model wherein clients would be
responsible for 25% of the up-front capital investment and Suzlon would arrange the
remaining 75% on loan. Initially banks were hesitant to fund loans for this model but by
2008 40-50 Indian banks were financing wind power projects for Suzlon clients.
The Company entered into a technical collaboration agreement in 1995 with a German
company, Sudwind GmbH Windkrafttanlagen to source the latest technology for the
production of WTGs in India. Sudwind GmbH Windkrafttanlagen was subsequently taken
over by Sudwind Energiesysteme GmbH (Sudwind). The parties entered into a fresh
agreement dated September 30, 1996, under which Sudwind proposed to share technicalknowhow relating to 0.27 MW, 0.30 MW, 0.35 MW, 0.60 MW and 0.75 MW WTGs in
consideration for royalty to be paid on the basis of each WTG sold over the course of five
years from the date of this agreement.
Suzlon started its journey with a small project to supply wind turbine generators for a 3.34
MW windfarm project in Gujarat, India. Since then, Suzlon has not looked back and today it
ranks as the world's 5th leading, and India's and Asia's leading manufacturer of wind
turbines, with over 2,000 MW of wind turbine capacity supplied in India and across the
world.
http://en.wikipedia.org/wiki/Tulsi_Tantihttp://en.wikipedia.org/wiki/Tulsi_Tanti -
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Suzlon has developed and implemented several large-scale windfarms throughout India. In
Vankusavade, Maharashtra Suzlon has developed a windfarm that is stretched over 29 km
of rugged mountainous terrain averaging over 1,000 meters above sea level. This windfarm
has 566 WTGs and has an installed capacity of over 205 MW. Vankusavade windfarm
successfully demonstrated the viability of large, utility-scale windfarms in India. InSanganeri, Tamil Nadu, Suzlon is developing a windfarm with a planned capacity of over 500
MW. Similarly, in Dhulia, Maharashtra, Suzlon is developing one of the largest windfarms of
its kind in the world with a planned capacity of over 1,000 MW once complete.
Suzlon has presence in all the major international markets. United States, the largest market
for wind energy worldwide forms Suzlon's largest market outside of India. Suzlon has also
received major orders from Australia, Brazil, China, Italy, Portugal and South Korea. In terms
of global footprint, Suzlon's global team is spread across four continents: Europe, North
America, Asia, and Australia. Suzlon has its international business headquarters in Denmark,Global Management Center in Netherlands, and research and development centres in
Germany, and Belgium. In North America, Suzlon has its US corporate headquarters in
Chicago, Illinois and has offices across the continent to provide marketing, projects and
service support. In Asia, Suzlon has presence in India and China. Suzlon's office in
Melbourne, Australia is responsible for sales, marketing, project implementation and service
support for the emerging Asia Pacific Market.
In 2001, Tanti sold off the textile business, so he could focus on the development of his windenergy business. In 2009, Suzlon is still actively run by Tulsi Tanti, now in the role of
Chairman and Managing Director.
The Company obtained the official non-exclusive, non-transferable license for the
manufacturing, marketing, dealing and servicing of APX-60 type blades from the trustee of
Aerpac B.V upon its liquidation, for consideration of Euro 200,000 vide an agreement that
was entered into between the trustee of Aerpac B.V and the Company dated June 4, 2001.
This license is valid for an indefinite period. The Company entered into an agreement dated
April 10, 2001 with Enron Wind Rotor Production B.V for the acquisition of the moulds and
the production line and technical support and assistance for the production of the rotor
blade type APX 60-P in India for total consideration of Euro 500,000. Enron has granted
these rights for the manufacturing, marketing and dealing with the products for an
indefinite period.
The Company introduced the concept of total solutions wherein, in addition to the supplies
of equipments, the client is offered project execution work comprising land acquisition, site
development, erection and commissioning, foundation and other civil work and O&M
services. These services are offered in conjunction with the Associate Companies.
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SWSL, a subsidiary of the Company, was incorporated in 1998 with the objective of
providing O&M for wind power projects set up by the Company. The Company has also set
up technological development centres in Germany and The Netherlands through wholly
owned subsidiaries. SEG, incorporated in 2001 and earlier known as AX 215
Verwaltungsgesellschaft mbH became a wholly owned subsidiary of the Company in 2002.
AERT, a wholly owned subsidiary of AERH, which in turn is a wholly owned subsidiary of the
Company, was incorporated in 2001 to engage in the development of technology for rotor
blades, a key component of WTGs.
Cannon Ball Wind Energy Park-I, LLC (Cannon Ball) was incorporated as a limited liability
company in July, 2002 for the purpose of setting up a wind power project in North Dakota,
USA. Cannon Ball is a wholly owned subsidiary of SWECO which is a subsidiary of Suzlon
Energy A/S. Further, a representative office of the Company was also set up in China in 2003
to explore the Chinese market.
In 2003, Suzlon got its first sale in USA, with an order from DanMar & Associates to supply
24 turbines in southwestern Minnesota. Also in 2003 Suzlon set up an office in Beijing.
Further, Suzlon Energy A/S, a wholly owned subsidiary of the Company was incorporated in
August, 2004 to supervise the international marketing activities of the Company. It is
proposed that the entire non-India marketing activities of the Company shall be coordinated
through Suzlon Energy A/S. SWECO, now a wholly owned subsidiary of the Suzlon Energy
A/S, was incorporated in 2001 to market, the WTGs manufactured by the Company in U.S.A.
Further, Suzlon Energy A/S has another wholly owned subsidiary, Suzlon Energy Australia
Pty Limited, which was incorporated in 2004 to access the wind energy market in Australia.
Suzlon Energy B.V. earlier known as AE-Rotor B.V., The Netherlands, a wholly owned
subsidiary of AERH, which is a wholly owned subsidiary of the Company, was incorporated in
2001 to market the rotor blades manufactured by the Company.
Suzlon Rotor Corporation in 2006 began producing the blades in Pipestone, Minnesota in
the United States. Among its clients is Wind Capital Group.
In the year 2006, Suzlon reached a definitive agreement for acquisition of Belgium firmHansen Transmissions, specializing in gearboxes for wind turbines, for $565 million. In 2007,
the company purchased a controlling stake in Germany's REpower which valued the firm at
US$ 1.6 billion.
In June 2007, Suzlon had signed a contract with Edison Mission Energy (EME) of US for
delivery of 150 wind turbines of 2.1 MW in 2008 and a similar volume to be delivered in
2009. EME had an option not to purchase the 150 turbines due to be delivered in 2009,
which it has chosen to exercise.
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In November 2009, the company decided to sell 35% stake of Hansen for $370 million as
part of its debt restructuring program, through placing new shares. It appointed Bank of
America Merrill Lynch and Morgan Stanley as the managers and book runners for the same.
In January 2011, Suzlon received an order worth $1.28 billion for building 1000MW of wind
energy projects from the Indian branch of the Lord Swaraj Paul-owned Caparo Energy Ltd.
In May 2011, Suzlon announced of returning to profitability after financial crisis of 2009.
Major Achievements of Suzlon:
Fifth leading wind turbine manufacturer in the world with over 6% of market share. Won the Best Manufacturer by the World Institute of Sustainable Energy. Received the 'IPO of the Year' honor from the Euromoney and Ernst & Young-backed
Renewable Energy Finance Forum.
Awarded by the World Wind Energy Association for its contribution in the windenergy sector.
Financial performance
Figure: Market share
Source: BTM Consult ApS World Market Update 2008 March 2009
In the year 2004
Suzlon Energy Ltd signs up MSPL's 3.75 MW Wind Power Project Suzlon Energy Ltd opens Representative Office in Beijing
In the year 2005
Suzlon Energy secures maiden contracts in China & South Korea
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DEG, Germany signs agreement with Suzlon Energy Ltd to finance US $ 10 million Suzlon Energy Ltd takes a major vertical integration step by setting up Suzlon Control
System - MBU operations at Daman, India
In the year 2006
Suzlon Energy Ltd - Signed a turbine supply agreement with Edison Mission Suzlon Energy Ltd - Signed with Edison Mission Group Suzlon gets Rs 620 cr Australian firm project order
In the year 2007
Suzlon Energy Limited has has appointed Mr. Andre Horbach as a global ChiefExecutive Officer of the Suzlon group.
Suzlon Energy has issued zero-coupon foreign currency convertible bonds worthmillions to fund its organic growth initiatives.
Suzlon Energy Ltd signed a major new order with ONGC, India's leading Oil & GasExploration & Production (E&P) Company, for 51 MW of wing turbine capacity.
In the year 2008
The Company has splits its face value from Rs10/- to Rs2/-. Suzlon Energy Ltd enters Kerala with its first Wind Power Project commission of S52-
600 kW turbine at Agali
Suzlon Energy Ltd is first S88-2.1 MW wind turbine is commissioned by Deco LightCeramics Ltd, in Gujarat, India
Suzlon Energy Ltd Signs up with ONGC Limited - for 51 MW wind turbine capacity Suzlon Energy Ltd signs up with Ayen Enerji Co. Inc. - for 31.5 MW of wind turbine
capacity
In the year 2009
Suzlon Energy Ltd has informed BSE that Suzlon Energy Australia Pty Ltd., a step-down wholly owned subsidiary of Suzlon Energy Ltd has entered into an agreement
with AGL Energy Ltd for supply of 54 units of Suzlon's S88-2.1 MW wind turbine
generators translating to 113.4 MW capacity in Australia in 2009. Suzlon Energy Ltd has informed about the signing of an agreement by Suzlon with
Technomash Bulgarian Industrial Group to deliver 12.6 MW of capacity through six
numbers of Suzlon S88-2.1 MW wind turbines.
Suzlon Energy Ltd has signned a repeat order for 57 MW with Ayen Enerji of Turkey.The order will be supplied with 27 units of Suzlon S88-2.1 MW turbine, to be
installed at the Seferihisar and Mordogan projects in east Turkey.
In the year 2010
Suzlon Energy has secured a seventh order from Rajasthan State Mines and Mineralsfor 31.5 MW of capacity.
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Suzlon Energy has signed the repeat orders with ITC Limited, a leading and highlydiversified conglomerate, to set up, operate and maintain two new wind power
projects in the states of Karnataka and Maharashtra.
Suzlon Energy bagged an order from ITC for supplying 27 MW of wind powerturbines to projects in Karnataka and Maharashtra for an undisclosed amount.
Suzlon Energy stated that it has received its first ever order from a subsidiary ofLarsen and Toubro (L&T).
Coimbatore: Suzlon Energy Ltd has received an order from L&T InfrastructureDevelopment Projects Limited to set up, operate and maintain 8.7 MW wind project
in Tamil Nadu.
Suzlon Energy Limited (SEL) has bagged a repeat order from the Malpani Group inorder to set up as well as operate and maintain two new wind power projects
totaling 19.8 MW capacity, in Karnataka and Maharashtra.
Suzlon Energy bagged orders worth Rs 118.8 crore from Malpani Group.This is inorder to setup, operate and maintain 2 new wind power projects in Karnataka and
Maharashtra
Suzlon Energy Ltd stated that it has bagged a 202 MW (megawatt) order worth Rs1,149-crore from Techno Electric Group, a Kolkata-based engineering firm, for
developing 500 MW of new capacity.
Suzlon Energy Ltd has own 74.8 MW order in Germany.
Figure: Confirmed order book
Source: www.suzlon.com
Debt management exercise
Repayment of Acquisition Loans aggregating to USD 780 million, funded through
Hansen stake sale proceeds in addition to a new USD denominated loan of USD 465
million from State Bank of India
Achieved gross debt reduction by approx. 15%; USD 350 million
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Shareholders approval sought for revising conversion price of Foreign Currency
Convertible Bonds (FCCBs)
Maturity in June and October 2012
Total face value of outstanding FCCBs covered under the proposal ~USD 332 mn
Figure: Suzlon Business
Source: www.suzlon.com
In November 2009, the company decided to sell 35% stake of Hansen for $370 million aspart of its debt restructuring program, through placing new shares. It appointed Bank of
America Merrill Lynch and Morgan Stanley as the managers and book runners for the same.
In January 2011, Suzlon received an order worth $1.28 billion for building 1000MW of wind
energy projects from the Indian branch of the Lord Swaraj Paul-owned Caparo Energy Ltd.
In May 2011, Suzlon announced of returning to profitability after financial crisis of 2009.
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Wind turbineR&D in
Germany
Rotor bladeR&D in
Netherlands
GearboxR&D in
Belgium
Product &Process
Engg, India
TechnologyCampus
Germany
EngineeringCentre India
InnovationCentreEurope
Business level strategy
Integrated Business Model
Allows customers to benefit from cost efficiencies and economies of scale in wind farm Provides hassle free solutions to customers Provides greater control over execution time line Control of value chain from planning to maintenance Leveraging experience across wind energy value chain
Research and Development Best of all World
Vertical Integration
Improving CostEfficiency
Research and Development Innovation
Growth
Vertical Integration
Focus on HighGrowth Market
Strategic focus on customer needs
End to End solutions
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Presence in high growth markets
Right product for the right market
Global strategy
Expanding Global Presence
Australia - Sustainable and internationally competitive renewable energy industry USA It has outpaced Germany in terms of capacity
China - Favorable policies & targets Foray into new markets Brazil and Sri Lanka India Robust domestic demand
Global Manufacturing Capacity
Manufacturing facilities in India, China, USA, and Germany Suzlon has acquired forging and foundry capacity in India
Global Acquisitions
Hansen Transmission
Plugs critical gap in suzlons supply chain (gearbox - longest lead time) Develops long term growth driver in terms of wind and industrial gearbox business
REpower Systems AG
Entry into large European markets Complimentary product portfolio - offshore technology Improve REpower margins through synergy Capitalize on know-how and brand equity
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Recommendations
Prospective growth Driver
Prospective growth drivers for the wind energy sectors are:-
1. Growing Demand for EnergyWith the growing energy demand all over the world and the supply of energy from Fossil
fuel sources stagnating, the drive for energy from alternate sources has increased manifold
over the last few decades. The new sources of energy are primarily Wind, Solar and Nuclear
energy driven. With the dangers associated with Nuclear energy and Seasonal feasibility of
solar energy sources, it is wind that is getting the major impetus to fulfil the growing
demand thereby increasing the feasibility for investing in wind energy sources all over the
world.
2. Legislative, Regulatory, Incentives, and Subsidies.The legislative environment is boosting the investment in wind energy by offering subsidies
and investment avenues through special purpose vehicles and other sources. Regulations
are also being formulated to favour the generation and increase the acceptance among the
energy producers as alternatives to fossil fuel for generating power.
3. Lower Lifetime Costs than Solar and Hydroelectric4. Less Land Use Impacts than Solar5. Improvements to Existing Technologies
a. Increasing Turbine Capacitiesb. Self-Erecting Towersc. Better Component Reliability
Investment Outlay
Investment outlay for a Typical Wind Energy Project is:
1. Land2. Wind Energy Turbines3. Transformers4. Maintenance equipment5. Labour6. Patents and Licensing
The typical cost of a Wind energy project is at the rate of Rs 1 Cr per Megawatt which is considerably
lower than that of a solar energy which is of the range of Rs 2-3 Cr per megawatt and is subject to
seasonal availability of solar rays and the intensity suitable enough for power generation. In
comparison, wind energy is suitable for power generation for over 300 days per year in suitable
locations which can be tapped into at cheap rates.
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Risk Assessment and Contingency plans.
The risks associated with a Wind Energy project is:
1. Land Acquisition risksThese risks are associated with all power projects. These can be mitigated by following the
central and state objectives in accordance with the environmental regulations of the state.
2. Risk of failureThe risks associated with failure of the projects of this kind are to do with the forecasting
and meteorological data veracity. These can be mitigated by using international standards
team for assessing the same to verify the details available
3. Project financingWith increasing acceptance of the wind energy projects all over the world, the risk of the
project not getting financed is low and can be mitigated by seeking central cooperation insecuring bank guarantees and loans with equitable investment from the centre for the same.
4. Technological riskTechnological risk can be mitigated by tying up with companies and institutions specialising
in wind energy and other renewable energy sources to provide inputs on turbine design and
other technological factors in the wind energy project.
R&D opportunities.
R & D opportunities are huge in this sector as the power that can be generated is only a fraction of
what can be tapped into. This prompts better design of turbines and other technological factors togenerate higher amount of energy from the available sources. R & D opportunities are available in
the following technological areas:
1. Towers2. Nacelles and Interior Components3. Rotors Blades and Hub4. Wind Turbine Raw Materials5. Horizontal Axis Design6. Vertical Axis Design7. Upwind Design8. Downwind design9. Three Blades vs. Two Blades design10.Onshore vs. Offshore power generation and operation11.Direct Drive vs. Traditional Geared Turbine
Tie Ups, JVs and Patent Licensing opportunities.
Tie-ups for providing technical and operational assistance for wind energy projects are common
place and growing at a pace faster than any other avenues in the energy sector. The countries with
higher projected investment in the wind energy sector are:-
1. USA
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2. China3. India4. Northern Europe countries5. Australia6. Latin American countries.
These countries are suitable for executing projects through Joint Ventures as the company can invest
in the equity needed to launch the JV needed to execute projects. The return on these projects are
expected to be in the region of 16-20%.
Patent licensing opportunities are available from the following companies:-
1. Vestas2. Enercon3. Repower4. Siemens5. Goldwind Science and Technology Co.6. Sinovel
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References
www.inwea.org
www.greenworldinvestor.com
www.eai.in/ref/ae/win/win.html
en.wikipedia.org
www.suzlon.com
www.sustainabledevelopment.in
www.wwindea.org
www.mywindpowersystem.com
www.euindiawind.net
www.renewsindia.com