Due to the economic slowdown, coupled with the impact of COVID-19 in Q4 FY 20, India’s GDP grew by 4.2% in FY 20, compared to 6.1% in FY 19.
The global economic growth slipped to 2.3% in 2019 after touching 3.1% in 2018, amid prolonged trade disputes, risks of financial stress, and volatility, according to the World Economic Situation and Prospects (WESP) report.
The slowdown in growth is taking place across key advanced economies, and some major emerging economies as well. Among the emerging economies, the East Asia and South Asia regions remain on a relatively strong growth trajectory, owing to robust domestic demand conditions.
Due to the economic slowdown, coupled with the impact of COVID-19 in Q4 FY 20, India’s GDP grew by 4.2% in FY 20, compared to 6.1% in FY 19.
The Power Industry has been undergoing transformation in recent years. Going forward, too, the changing energy generation mix and shift from conventional sources to renewable sources will continue. Sustainable power development, and focus on addressing concerns related to climate change through eco-friendly policies etc., are seen as key trends in the industry. The future scenario will see greater acceleration towards eco-friendly “Green Power” solutions.
The country’s need for energy is increasing rapidly, owing to economic growth and modernisation over the past few years, taking the gross electricity consumption from 1,149 kWh per capita in FY 18 to 1,181 kWh per capita in FY 19, according to the Central Electricity Authority (CEA).
India’s total installed power generation capacity is 370 GW, as of March 2020, compared to 356 GW in March 2019. This includes 87 GW of capacity from Renewable Energy Sources, as on March 2020. Of this, 9.8 GW capacity is from Biomass power (Bagasse and Non-Bagasse), as against 8.7 GW as of March 2019, followed by 147.6 MW from Waste to Energy, compared to 138 MW in the previous fiscal, according to Ministry of New and Renewable Energy (MNRE).
According to the 19th Electric Power Survey conducted by Central Electricity Authority (CEA), the all-India installed power generation capacity is projected to grow to 619 GW by the end of FY 27.
Independent Power Producers (IPPs) play a major role in generating power for sale to the grid or to specific customers. In the Renewable Energy industry, a Feed-in Tariff (FiT) or Power Purchase Agreement (PPA) provides long-term price guarantee for majority of the IPPs. Increasing focus on replacement of existing coal-fired power plants with clean fuel generation, in order to reduce carbon footprint, will further augment the renewable power generation business in the future.
The global renewable power capacity (excluding hydro) increased by 8% in 2019 to 1,347 GW, compared to 1,246 GW in 2018, according to the Renewables 2020 Global Status Report. In India, the Ministry of New and Renewable Energy (MNRE) has set a target of 175 GW of renewable power capacity by FY 22 (including 10 GW target from biomass power). As per the Central Electricity Authority’s strategy blueprint, the country is aiming for an even more ambitious target of 57% of the total electricity capacity from renewable sources by 2027. According to the 2027 blueprint, India aims to have 275 GW from renewable energy. This will increase the demand for thermal renewable energy (Biomass) based power plants in the country, and concurrently trigger greater opportunity for the installation of steam turbines in the future.
Globally, the captive power generation for industry is expected to remain strong, owing to the increasing demand for power from emerging industrialised economies such as China, India, Africa and Middle East, which offer subsidised rate per unit cost of power generation.
In India, the widening power supply-demand, the increasing investments in the industrial sector driven by the ‘Make in India’ initiatives, the rising input costs (energy) and electricity prices, coupled with stringent Government regulations, are expected to drive investment in the establishment of captive power plants.
The need for continuous uninterrupted quality power supply for sustainable industrial operations, backed by improvement in coal supply, will enhance captive power additions in the country. Thus, the installed captive power generation capacity in India is expected to witness around 3% growth over the next 4 years, to touch 65 GW by March 2023.
The largest market for captive power generation in the country is the Industrial sector, mainly on account of the increasing demand for electricity from energy-intensive industries (Cement, Petroleum Refining, Chemicals, Iron and Steel etc.), which, in turn, is expected to drive the demand for steam turbines.
The Combined Heat and Power (CHP)/Co-generation system generates electricity or mechanical power with lower emissions compared to conventional power generation systems. CHP systems/technologies are thus widely preferred for captive power generation for industrial applications, such as Biomass, District Heating, and in Data Centres etc., driving the demand for steam turbines across the globe.
The bulk of the demand for CHP is expected to come from markets like Asia-Pacific, South and Central America, Middle East and Africa. As per industry estimates, the global CHP market is projected to increase its installed capacity from 864 GW in 2018 to 972 GW by 2025.
Bioenergy will remain the predominant source of thermal renewable energy till around 2023, though its total share is estimated to decline from 50% in 2017 to 46% in 2023, due to expansion of alternate renewable power generation technologies (such as Solar Photovoltaic and Wind). Higher acceptance of Bioenergy will increase investment for biomass power plants globally, thereby boosting the demand for steam turbines. According to an international report, in early 2019, there were nearly 4,000 active biomass power plants worldwide, with an installed electrical capacity of around 67.7 GW. This is expected to increase by 1,550 plants, to reach about 5,550 biomass power plants with a capacity of around 89.4 GW by the end of 2028.
Biomass (bagasse and non-bagasse) as fuel helps the CHP system generate power that is sustainable. Industrial use of Bioenergy, particularly from sugar and palm oil mills, is conducive to the production of power from biomass. South East Asia’s biomass generation capacity is expected to increase to almost 19 GW by 2040.
The Bioenergy (bagasse/non-bagasse) potential in India has been estimated at 25 GW in 2022, and the Government of India (GoI) has been consistently promoting the Biomass Power and Bagasse Co-generation programme. India’s current bagassebased co-generation target from Sugar industry in 2022 is 10 GW. However, the overall sugarcane crushing capacity is expected to go up significantly, owing to favourable weather conditions and increased yields of sugarcane, leading to higher utilisation of bagasse-based co-generation target in the future. Co-generation from bagasse is expected to clock 16 GW in 2027 and 30 GW in 2030, thus significantly propelling the demand for steam turbines.
The waste heat recovered from other industrial sources/ processes, and commonly found to generate steam and electricity in Cement processing, Heavy Metal processing, Petroleum Refining Process and Chemical processing, can be further used as fuel in other processes.
Rapidly increasing industrial waste, along with stringent EUwide waste legislations, have been the key drivers for the growth of WtE technology in Europe – one of the largest markets for these technologies. Countries like Switzerland, Germany, Sweden, Austria and Netherlands lead installation capacity within Europe.
The Asia-Pacific market is also, however, expanding rapidly and is estimated to grow at a CAGR of 7.5% due to increasing waste generation, higher investment thrust by Government organisations in China and India, and increased technology penetration in Japan. The Indian Government is providing incentives and subsidies for use of renewable technologies, in order to generate more and more power through waste utilisation. Even though the potential for WtE power generation in the country is huge, production is still in a nascent stage with only around 147.6 MW of power generation capacity created so far.
Residual waste from disposal of Municipal Solid Waste (MSW) is another source of input and is treated with various WtE technologies for electricity generation. However, high initial cost of investment required to build a WtE plant is one of the key factors likely to hamper future growth of this market.
According to industry sources, MSW generation in India is estimated to reach 4.5 lakh tonnes per day in 2030, from around 1.5 lakh tonnes per day in 2019. Of the country’s current MSW generation, only about 25% is processed (i.e. recycled, composted and converted into biogas or electricity). The demand for steam turbines is based on project viability criteria (in turn based on return on investment and calorific value of the waste), feed-in tariff proposed by the government, and assurance of waste collection by the municipalities etc.
The Government of India, under the Swachh Bharat Mission, has set a target of constructing 800 megawatt (MW) of WtE plants - five times the collective capacity of all the existing WtE plants.
It also proposes setting up a Waste-to-Energy Corporation of India, which would construct incineration based WtE plants through the Public Private Partnership (PPP) model. According to industry sources, there are currently 40 WtE plants at various stages of construction.
To conclude, rapid increase in electricity consumption, along with growing focus on electricity generation through thermal renewable energy sources, is expected to unleash huge opportunity for steam turbines in the future.
Manufacturing has emerged as one of the high growth sectors in India. The ‘Make in India’ programme is aimed at placing the country on the world map as a manufacturing hub and bring global recognition to Indian manufacturing. India is expected to become one of the largest manufacturing countries in the world by the end of 2022.
Under the ‘Make in India’ initiative, the Government aims to increase the share of the manufacturing sector in the Gross Domestic Product (GDP) from 17-18% at present to 25% by 2025. Improvements in ease of doing business, coupled with continuing augmentation in infrastructure and skilled workforce, should support the spurt in manufacturing activities in the coming years.
The largest market for captive power generation globally is the Industrial sector. It is estimated that the 3-100 MW steam turbine market will grow by over 8% by 2024, mainly due to increase in investment to promote energy efficiency in process industries, namely Sugar, Distilleries, Pulp and Paper etc. Globally, the demand for steam turbines from Sugar co-generation, including the Distillery segment, has been growing by 6% annually.
The Indian Government’s focus on clean fuel has triggered significant potential for Distilleries requiring captive power generation. With the launch of the National Biofuels Policy, as well as incentives offered by the Government (such as soft loans) for setting up of new distilleries and expansion of old distilleries, huge investments are being made by the sugar companies in Greenfield and Brownfield expansions. Investments are also being made for setting up grain-based distilleries to manufacture ethanol and supply the same to Oil Marketing Companies.
India’s National Biofuels Policy 2018 stipulates an ethanol blending target of 10% by 2022 and 20% by 2030, while biodiesel blending target has been set at 5% by 2030. The Consumer Affairs, Food and Public Distribution Ministry has given in-principle approval to 362 new distilleries in sugar mills for adding capacity of 550 crore litres. This will augur well for the steam turbine industry as the demand for captive power generation will also increase in the sector.
Globally, the demand for steam turbine from the process Co-generation segment has grown primarily due to increasing demand from Pulp and Paper, Cement and Chemicals industries etc.
The Pulp and Paper industry constantly focusses on improving energy efficiency, which is attained through increased use of biomass (wood waste) based power generation, and by efficient usage of steam. CHP/Co-generation in Paper industry offers another area of interest for growth of demand for steam turbines. Despite the widespread use of CHP systems in the Indian Pulp and Paper industry (especially in large and medium plants), the potential for growth in CHP still remains.
India is the 2nd largest Cement and Steel producer in the world. According to industry estimates, the cement production capacity is estimated to touch 550-600 million tonnes by 2025, and the crude steel production is expected to reach 128 metric tonnes (MT) by 2022. In Cement and Steel industry, hot exhaust gas is currently being utilised from production lines in order to reduce the operating cost. The heat from the hot steam is recovered using Heat Recovery Steam Generators (HRSG) for the generation of superheated steam that can be used in the process (co-generation) or to drive a steam turbine (combined cycle).
According to the International Council of Chemical Association (ICCA), the size of the global Chemical industry was estimated at USD 5.7 trillion in 2018-19, and is also driven by demand from its own consumption (Basic, Specialty and Knowledge chemicals), and from various end user industries (Industrial, Agricultural and Consumer markets). The Indian Chemical industry contributes 3.4-3.5% to the global Chemical industry, and is expected to grow at the rate of 9% per annum to reach USD 211 billion by 2020-21 and USD 298 billion by 2024-25. This should lead to fresh capacity creation, both in terms of Greenfield and Brownfield.
Energy efficiency and CO2 emission reduction, thus, are playing a crucial role in driving the demand for thermal renewable based steam turbines in various process heating and power generation applications. With cheap coal prices and supportive policies for coal-fired power plants in the country, the demand for fossil fuel steam turbines is also expected to grow.
The Global Steam Turbines Market came down from a level of 139 GW in calendar year (CY) 2010 to 39 GW in CY 2019 - a compounded average decline of 13%
Fossil Fuel based power generation, which was earlier the main fuel source, declined from 69% in CY 2010 to 43% in CY 2019, whereas Thermal Renewable based power generation increased from 3% in CY 2010 to 17% in CY 2019.
Broadly divided into three ranges:
In terms of MW sold for the past five years, the global steam turbines market has seen the sharpest decline in the > 100 MW range, where the Compounded Average decline was to the extent of 30%. In the case of < 30 MW and > 30 – 100 MW range, the market has been steady and has registered a CAGR of 3% and 2% respectively.
Unlike in total steam turbine market, wherein Fossil Fuel still dominates, in the Sub 30 MW, the growth of Thermal Renewables has been quite consistent and strong. Fossil Fuel’s share has remained flat at 28%, while the dominance of Thermal Renewables is quite significant at ~ 65%.
In the five-year period (2015-19) and also in CY 2019, Triveni held a market share of 20% in the global market for 5-30 MW range.
In 2019, the Indian steam turbines market, in terms of MW, grew by 1% compared to 2018. The market held steady in 2019, supported by Fossil Fuel fired power plants, followed by Thermal Renewable based power plants (including Biomass, Waste Heat and Waste to Energy). Majority of the steam turbines’ requirement in 2019 was in captive power generation and energy intensive segments like Steel and Process Cogeneration segments like Cement, Pulp and Paper, Chemicals and Fertiliser etc. With the Manufacturing sector on the growth trajectory and industries like Sugar, Steel, Cement and Pulp and Paper segment expected to increase production, the demand for steam turbines should remain robust in the future.