Smart Grid Solutions in India - Arvind Patravali

Smart Grid Solutions in India
IS 831: White paper
Arvind Patravali
5/2/2011

Table of Contents
Executive Summary ........................................................................................................................ 1
India’s Electricity Needs ................................................................................................................. 2
Current Electricity Needs ............................................................................................................ 2
Power Sector Reforms ................................................................................................................ 4
Future Electricity Needs ............................................................................................................. 4
Role of the Smart Grid to meet future electricity needs ............................................................. 5
The Smart Grid ............................................................................................................................... 7
What is the Smart Grid? .............................................................................................................. 7
Opportunities for Smart Grid in India ......................................................................................... 8
Cost-Benefit Analysis for Smart Grid in India ........................................................................... 8
Implementation barriers for Smart Grid in India ........................................................................ 9
Smart Grid Projects in India ..................................................................................................... 10
Indian Smart Grid Market ............................................................................................................. 12
Indian Smart Grid Market Size (2009 – 2015) ......................................................................... 13
Indian Smart Grid Market Segmentation .................................................................................. 15
Indian Smart Grid – Competitive Landscape............................................................................ 20
Communication/IT Layer - Analysis ........................................................................................ 20
Recommendations to Companies .................................................................................................. 24
Appendices .................................................................................................................................... 26
References ..................................................................................................................................... 28

Executive Summary

With a population of over 1200 million people living across 28 states, India is the second most
populous country in the world. With a major power deficit of around 10% and more than 400
million people in India without access to electricity, providing electricity to these people is both
a social and economic development imperative.

It is clear that demands on the electricity sector will increase at a dramatic rate and require
massive investments in the electricity infrastructure. The Indian Power sector, with aggregate
technical and commercial losses around 28% of total electricity production, has often been
referred to as a leaking bucket with holes deliberately crafted to benefit various stakeholders in
the system. Strategically it is important that these holes be fixed simultaneously with making
investments for additional power capacity.

With Smart Grid Solutions using information and communication technologies it is now possible
to track and plug power leaks as also proactively manage the peak power demands and reduce
the power deficit in the country without increasing the installed capacity. In a huge democracy
such as India plugging these leaks has often been difficult due to various issues which need to
be addressed by the Indian government through legislation and technology.

This report while highlighting the context and challenges in the Indian Power sector also
attempts to quantify the market opportunity for Smart Grid Solutions to enable companies
strategize entry into the Indian market.

1

India’s Electricity Needs

Current Electricity Needs
The Annual Report 2009 – 2010 of the Central Energy Authority (CEA) – Ministry of Power1
indicates that India has an installed power generation capacity of 169,749 Mega-Watt (MW) as
on 31st December 2010 - fifth largest in the world. In addition, a substantial amount of captive
production capacity amounting to around 15,000 MW exists mainly in the industrial sector,
according to official data. The country generated a total of 746 million Mega-Watt hours (MWh)
in FY 2009 – 10 to meet the demand of 831 Million MWh2.

Below is a bar & line graph showing Supply and Demand of electricity in India during the period
2004 to 2010.

Supply and Demand of Power in India during 2004 - 2010
900 12%

800
10%
700
Million Mega-Watt hour

600 8%

500
6%
400

300 4%

200
2%
100

0 0%
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Demand Supply % Deficit

The peak power deficit in the country has been to the tune of 10.1 % and could even be as high
as 25% if we were to take into account captive production, the potential electricity demand of

1
http://www.cea.nic.in/report.html
2
Refer Table 1 in Appendix

2

about 80,000 villages that are yet to be electrified and the latent demand in other parts which
could not be met due to load shedding.

India is heavily dependent on thermal resources - coal, gas (65%) for a significant portion of its
electricity needs with the balance coming from hydroelectric power (22%), renewable energy
sources – solar, wind (10%) and nuclear energy (3%)3.

Of the total installed power capacity about 48% is provided by state power plants and 31% by
central power plants. The balance 21% is met by the private sector which has made an entry
into the power sector over the last two decades.

Below are a set of pie-charts which show the breakup of production by source and sector.

Breakup of Production by Source Breakup of Production by Sector

3%
10% 22% 31%
48%

65% 21%

Hydro Thermal Nuclear Renewable Energy State Private Centre

Annual per capital electricity consumption is dismally low at 733 Kilo-Watt hour (KWh) as
compared to the global average of about 2,500 KWh. Roughly 45% of the power consumed
goes to the industrial sector, followed by 27% to the agricultural sector and 16% to residential
requirements4. The balance 12% is consumed by commercial enterprises, transport and other
sectors. Officially a population of 426 million5 (36%) is without access to electricity.

Aggregate technical and commercial losses (AT&C) are officially reported at around 28%6 of
electricity produced. Technical losses in the system have been high primarily due to inadequate
investments over the years for system improvement resulting in unplanned extensions of the
distribution lines, overloading of the system elements like transformers and conductors, and
lack of adequate reactive power support. Commercial losses are mainly due to low metering

3
Refer to Table 2 in Appendix
4
5
6
T&D Loss in the Country Presentation & Wiki

3

efficiency, theft and pilferages. These can be eliminated by improving metering efficiency,
proper energy accounting and improved billing and collection efficiency.

Coupled with un-metered power to the agricultural sector these losses have serious eroded the
financial viability of many State Electricity Boards (SEBs). It is reported that the combined cash
loss of State Electricity Boards was expanding by nearly $22 billion7 (almost 1.5% of India’s GDP
- $1430 billion in 2009) per year of which about 40% ($9 billion) was estimated to be due to
technical losses and the balance 60% ($13 billion) due to commercial losses.

Power Sector Reforms
Over the past three decades, the Government of India has taken steps to reform and
restructure the power industry. From 1975-1991, generation grew at the Central level but
supplies were still inadequate. Following State efforts, the National Electricity Regulatory
Commissions Act was brought into law in 1998, which helped create independent regulators at
the State level and led to the formation of the Central Electricity Regulatory Commission.

The Electricity Act 2003 was enacted to consolidate the laws relating to generation,
transmission, distribution, trading and the use of electricity, and to promote competition. The
Act allowed the entry of private companies into generation, transmission and distribution.

With the objective of bringing Aggregate Technical & Commercial (AT&C) losses below 15% in
five years in urban and high-density areas the Government of India initiated the Restructured
Accelerated Power Development & Reform Program (R-APDRP)8, in 2008, in order to have an IT
enabled reliable and verifiable baseline data of revenue and energy in APDRP project areas.

Future Electricity Needs
The Ministry of Power aims to achieve a per capita electricity consumption of 1,000 KWh by
2012. This would require about 1,150 Million MWh electricity generation per annum or about
230,000 MW installed generation capacity.

Under the current 11th five year plan (FY 2007-2012), the Ministry of Power has envisioned an
addition in generation capacity by 80,000 MW and setting up of an integrated National Power
Grid with about 37,700 MW of inter-regional power transfer capacity

With the current focus of the Government of India on development of power infrastructure, it
is estimated that a total of about $170 billion would be invested on this sector during next five

7
http://energybusiness.in/measures-wipe-losses-sebs-phases-shinde/
8
http://www.apdrp.gov.in/rapdrp/

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years. Of this, about $108 billion would be invested on power generation and rest on
transmission and distribution9.

Assuming an average economic growth rate of 8% between 2010 and 2030 and 5.8% thereafter
up to 2050 India’s electricity production is projected to increase almost 8.8 times from 746
million Mega-Watt hour (MWh) in 2010 to 6,600 million Mega-Watt hour (MWh) in 2050. The
corresponding power generation capacity is projected to increase almost 5.8 times from
170,000 Mega-Watt (MW) in 2010 to almost 1000,000 Mega-Watt (MW) in 205010.

Role of the Smart Grid to meet future electricity needs11
With the tremendous demand for electricity as projected in the previous section, coupled with
huge technical and commercial losses and limitations for making investments in power
generation, it would appear that the only way forward for India is to harness the power of
information and communication technologies to plug leakages, improve efficiencies and create
a Smart Grid for India which would not only meet the future electricity needs of the country but
also transform the entire, transmission and distribution infrastructure in the country. India,
with its vast resources in technology and innovation, has the unique opportunity to take the
leadership role in the future in implementing Smart Grid solutions not just in India but also in
other countries.

We give below areas where Smart Grid technologies can significantly help India meet its future
energy needs.

 Supply shortfalls. With increasing population and per capital consumption of electricity,
India’s peak power demand will continue to outpace its’ installed power. Official estimates
of India’s peak deficit are around 10%, but it could be as high as 25% taking into
consideration other requirements mentioned earlier.

A smart grid would allow more “intelligent” load control, either through direct control or
economic pricing incentives that are communicated to customers in a dynamic manner.
Such measures would help mitigate the supply-demand gap and reduce the peak load by at
least 5%.

 Technical and Commercial Loss reduction. India’s average technical and commercial losses
are reported to be about 28% with annual financial losses to State Electricity Boards of
about $22 billion.

9
www.iquestsolution.com
10
Technology Development Prospects for the Indian Power Sector – IEA – Feb 2011
http://www.iea.org/papers/2011/technology_development_india.pdf
11
The Smart Grid Vision for India’s Power Sector – White Paper

5

With about $13 billion of the financial losses due to commercial reasons such as low
metering efficiency, theft and pilferages, there is significant incentive to deploy smart grid
solutions to improve the metering, billing and collection efficiencies.

 Renewable energy. To meet the power deficit, India has moved away from central power
production to distributed generation, especially of renewable energy such as wind and solar
power. These sources of energy can now be integrated into the power grid.

With information and communication technologies the power grid can be managed
effectively to monitor and integrate the central and distributed sources of power
generation as also take advance action to prevent outages.
 Economic Savings. As a result of various smart grid initiatives it would be possible to bring
the peak power deficit and technical and commercial losses to manageable levels, if not
eliminate them completely, during the foreseeable future.

Considering that every unit of power saved is equivalent to 1.5 units of power generated,
this would be the most compelling driver for implementing smart grid solutions urgently to
meet the power needs of the country.

 Managing the “human element” in system operations. Labor savings are not a prime driver
for the smart grid in India, as contracts for outsourcing are inexpensive. However,
automated meter reading would lower recording and other errors or even deliberate errors,
which are thought to be significant reasons for losses.

 Technological leapfrogging. Perhaps the most intriguing driver for India is the potential to
“leapfrog” into a new future for electricity, as it did with telecommunications. Also, the
“smart” in a smart grid is ICT (Information and Communication Technologies) — an area of
unique capability in India.

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The Smart Grid

What is the Smart Grid?
Simply put, a smart grid is the integration of information and communications technology into
electric transmission and distribution networks. The smart grid delivers electricity to consumers
using two-way digital technology. This is, so as to firstly enable the efficient management of
consumers’ end uses of electricity. Secondly, to enable efficient use of the grid by identifying
and correcting supply demand-imbalances instantaneously, thereby improving service quality,
reliability, and reducing costs.

Thus, the smart grid concept is not confined to utilities only; it involves every stage of the
electricity cycle, from the utility through electricity markets to customers’ applications. The
emerging vision of the smart grid encompasses a broad set of applications, including software,
hardware, and technologies that enable utilities to integrate, interface with, and intelligently
control innovations.

Below is exhibit which shows the Smart Grid as a combination of existing Electrical Grid
infrastructure with Information and Communication infrastructure built on top of it.

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Opportunities for Smart Grid in India
1. Regulations: The regulatory environment is India is very favorable for international
companies to enter and setup pilot projects on Smart Grid technology. If these projects are
successful the government will grant them contracts to implement them across the nation.

2. Economics: Smart Grid technology at the earliest can help reduce commercial losses due to
theft by installing tamper proof smart meters and good monitoring. In the short-term, the
savings from this could be upto $13 billion annually. In the long-term there is the added
benefit of minimizing transmission or technical losses by proper grid optimization and
improving the grid infrastructure. Overall, savings could be at the least $22 billion annually
over the next 5 years.

3. Environmental: Currently India is under a lot of pressure to reduce its carbon emissions as
imposed by international regulatory organizations. By implementing smart grid technologies
and using higher renewable energy sources, India has the potential to offset this CO2
emission is a short time frame without compromising on growth and productivity.

4. Technology: The Smart Grid technology is already proving to be very reliable and having
multiple benefits. It is reaching main stream deployment in cities across developed
countries. It is being considered the future for power grids across the globe.

Cost-Benefit Analysis for Smart Grid in India
The Indian power grid infrastructure is similar to the grid infrastructure in US. On the same lines
we expect the costs and benefits from the implementation of Smart Grids in these countries to
be comparable and have therefore used the data from the US for carrying out the cost-benefit
analysis for India.

 Cost of Deployment: Based on the Electric Power Research Report Institute (EPRI) report
released in 2011, the cost of modernizing the US electricity system and deploying a fully
functional smart grid would range from $338 billion to $476 billion over the period 2010 -
203012. This estimate reflects technologies related to the grid, information, and
communication technologies; market structures; demands of an increasingly digital society;
more widespread deployment of renewable power production and its integration into the
grid; expansion and maintenance of existing infrastructure; and technologies and systems to
address grid security.

12
http://www.greencarcongress.com/2011/04/epri-20110408.html

8

 Benefit of Deployment: The benefit of such a smart grid implementation would correspond
to be between $1.3 trillion and $2 trillion12 for the US market. The benefits would include
cost reduction; enhanced reliability; improved power quality; increased national
productivity and enhanced electricity service, among others. The Smart Grid will allow the
benefits resulting from the rapid growth of renewable power generation and storage as well
as the increased use of electric vehicles to become available to consumers.

 Benefit to Cost Ratio: Using the above cost and benefits numbers as a gross indicator of
profitability we find that the ‘Benefit to Cost Ratio’ ranges from a low of 3.85 times to a
high of 4.2 times (with an average of 4 times) indicating thereby that investing in the Smart
Market can be a very profitable proposition.

 Payback Period: Based on the ‘Benefit to Cost’ Ratio of 4 times we expect the payback
period to would be anywhere between 3 to 10 years (with an average of about 5 years).
Smaller investments like smart meters would have shorter payback periods, where as larger
investments such as grid optimization, demand response and improving transmission and
distribution having longer payback periods.

Implementation barriers for Smart Grid in India13
1. Policy & Regulations: As much as the regulations are favorable for international players to
come and invest in the Indian smart grid market, it is at the same time mired in old policies
which do not address the clean and renewable energy supplies which Smart Grid hopes to
bring in. Going forward regulations needs to focus on renewable energy sources, carbon
reduction and allow more private and foreign direct investments.

2. Financial viability of State Electricity Boards: While some State Electricity Boards have
indeed made substantial progress in implementing power reform, reducing technical and
power losses and becoming financial viable, the rest are still struggling with rampant
pilferage, un-metered supply and subsidies and yet to be motivated to move towards the
implementation of Smart Grid technologies.

3. High capital and operating costs: Upgrading the aging electric grid would require high
capital investment and companies would seek proof-of-concept before making investments
in Smart Grid technologies.

4. Smart Grid Eco-System: The time lag in development of a Smart Grid Eco-System capable of
collectively offering the hardware, software and consulting advice could one of the
deterring factors in implementing Smart Grid technologies in India.

13
http://www.iemr.in/userfiles/SMAR%20GRID%20CHALLENGES.pdf

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5. Technology maturity and delivery risk: Technology is one of the essential constituents of
Smart Grid which include a broad range of hardware, software, and communication
technologies. In some cases, the technology is well developed; however, in many areas the
technologies are still at a very initial stage of development and are yet to be developed to a
significant level. As the technology advances, it will reduce the delivery risk; but till then it’s
a risk factor. Also technology changes very quickly adding to the risk.

6. Lack of awareness: The average Indian consumer has low awareness of how power is
delivered to their home as well as what their power consumption patterns are. This is
mainly because literacy levels in India are low. Without educating the end-consumer, Smart
Grid Technology cannot leverage its full potential in a market like India.

Smart Grid Projects in India
With Smart Grid buzz gaining momentum across the world, every country is rolling out pilot
projects to test the combination of technologies that may best suit their unique needs.
Similarly, in India, private companies, utilities, distribution companies, and startups in close
collaboration with government, are engaged in various smart grid projects.

1. Smart Grid Pilot in Electronic City, Bangalore - India14: The Bangalore utility company,
Bangalore Electricity Supply Company (BESCOM), is pursuing Smart Grid Pilot, which may
potentially become India's first Smart Grid pilot. The project is supported by Ministry of
Power, Government of India and the United States Agency for International Assistance
(USAID). Central Power Research Institute (CPRI), which has been appointed as consultant
for the project will carry out the feasibility study along with the International Partner. The
Electronic City, a 332 acre industrial complex housing 100 plus IT companies and
educational institutions, located outside Bangalore is chosen as the site for the study.

2. Smart Grid Pilot in West Bengal – India14: The West Bengal State Electricity Distribution
Company Ltd (WBSEDCL), a wholly-owned state government enterprise, recently
announced a first of its kind Smart Grid pilot in India that will pin-point power theft
or unauthorized consumption in real-time basis. According to state secretary, Malay De,
Singapore Power Ltd will be appointed as consultants for the project, which will be
completed in next 2-3 years. To start with, the WBSEDCL will enter in agreement with
US technology provider, which will supply technology and run the project. The pilot will be
executed in south Kolkata locality Garia that has 50,000 customers consuming
45 MW power. The project, which is estimated to cost $80 million, is going to be first such
large-scale pilot project in India. According to Secretary, Malay De, it will probably be the

14
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first such project in the world where entire power generation, transmission, and
distribution will be brought under single roof of control.

3. Smart Grid Pilot in Mangalore – India15: Mangalore Electricity Supply Company (MESCOM)
is setting up a Smart Grid Pilot system in Mangalore, a city in Karnataka state of India. It
covers around 250 installations, including industries, domestic connections and streetlights.
As a part of this project which began three months ago, streetlights are being switched off
automatically by means of a centralized control system in some areas where not much light
is needed from 12 a.m. to 4 a.m. Instead of load shedding during the peak hours in
evening, consumption is being reduced when the demand shoots up.
4. Telvent to Implement Smart Grid Project for Maharashtra India16: On June 16, 2010
Telvent, the IT company for a sustainable and secure world, announced its agreement with
Larsen and Toubro Ltd. to partner on a contract for Maharashtra State Electricity
Distribution Co. Ltd. to implement baseline data and information technology (IT)
applications for energy accounting, auditing and IT-based consumer service centers for 95
towns in India.
With Telvent Smart Grid Solution, Maharashtra is able to effectively measure the aggregate
technical and commercial losses and increase reliability and quality of electric supply to its
customers, as well as enhance the operation of the distribution network.
For Telvent and Larsen and Toubro, this project is a new opportunity to deploy state-of-the-
art technology using the Telvent Smart Grid Solution which provides the necessary toolset
for utilities to take an active role in the rapidly emerging smart grid systems.

15
http://www.smartgridx.com/2011/02/smart-grid-pilot-project-in-mangalore.html
16
http://www.telvent.com/en/business_areas/smart_grid/news_center/2010/Telvent-to-Implement-Smart-Grid-
Project-for-Maharashtra-India.cfm

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Indian Smart Grid Market

In this section we will attempt to define the market size, various segments and the companies
in these segments for the Smart Grid in India; with the objective of enabling companies to
understand how big the opportunity will be over the next five year, as also decide their strategy
for entering the India market.

The methodology being followed is as follows:
1. Evaluating the Indian market size in the next 5 years

2. Identifying the segments in the Indian market size

The Indian Smart Grid Market consists of 6 layers or segments -

 Power Layer

 Communication/IT Layer

 Demand Response Layer

 Grid Optimization Layer

 Distributed Generation & Storage Layer

 Smart Charging and V2G (Vehicle-to-Grid) Layer

We will be specifically focusing on the Communication/IT Layer since payback periods are
shorter and several players would want to gain early entry and promote adoption of their
technologies as commercial deployment cost have started dropping as in the case of smart
meters.

3. Identifying the players and their interactions in each segment

In each segment we will identify the current players and interactions with a view to
understand the competition and dynamics of the market as also decide the best possible
strategy for entering a particular segment either independently or through acquisitions,
joint ventures, equity stakes, technology licensing or marketing arrangements with current
players.

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Indian Smart Grid Market Size (2009 – 2015)
We expect the Indian Smart Grid Market to evolve in the following manner over the period
2009 -2015:
 In 2009 the Indian Smart Grid Market is assumed to be negligible, as technology was still
being tested in developed countries.

 In 2010 it is assumed that this market would be equivalent to 1% of the US market share as
foreign companies, having developed and tested Smart Grid technologies in other countries,
would seek to enter the Indian market and launch pilot projects in partnership with the
Indian Government and private players.

 From 2011 to 2015 the investment in smart grid technology in India would increase
exponentially because of the successful pilot smart grid projects initiated in 2009-2010 as
well as due to favorable policies created by the Indian government for foreign companies to
enter and invest.

Assumptions on the Indian Smart Grid Market Size
We calculated the market size from 2009-2015 by making certain logical assumptions on the
available data. Below are the list of these assumptions and the rational on how we arrived at
them.
 The Global Smart Grid market size in 2010 was $89.7 billion17, as suggested by ZPryme
Research Consulting. This is estimated to reach $200 billion by 2015 at a CAGR of 17.39%.

 Similarly, the US Smart Grid market size in 2010 was $25.7 billion 16, by ZPryme Research
Consulting. This is estimated to reach $50 billion by 2015 growing at a CAGR of 14.24%.

 Based on media reports, India has only started investing in Smart Grid technology from the
year 2010.

 It is known that the Indian Electric Grid infrastructure is very similar to the US Electric Grid.
We expect money spent on modernizing the grid and making it intelligent (by investing in
Communications/IT, Distribution & Storage and Grid Optimizing) would follow similar
patterns as the US.

17
Data was taken from the below link
http://www.slideshare.net/zpryme/smart-grid-market-research-united-states-hardware-and-software-companies-
should-prepare-to-capitalize-on-the-smart-grid-in-the-united-states-and-international-marketsmarket-growth-
opportunities-trends-report-zpryme

13

 We have assumed that the India’s smart grid market size can be expressed as a %age of the
US market size from 2010-2015, but with a time lag due to India’s late entry in this arena.

 We expect the Indian smart grid market, though very nascent now, to grow aggressively and
overtake US in investments by 2030 thus following a standard “S” curve.

 The Smart Grid market in India would grow very aggressively in the next 5 years due the
importance and impetus provided the Indian Ministry of Power through the formation of an
“Indian Smart Grid Task Force” whose sole purpose is to advise the Indian Government on
investments opportunities.

Below is a table which shows how we arrived at the Indian Smart Grid Market Size from 2009-
2015 based on Global & US market size projections available, from ZPryme Research
Consulting.

Global US India's market size as a %age India
Year (USD billions) (USD billions) of US market size* (USD billions)
2009 69.3 21.4 0% 0.0
2010 89.7 25.7 1% 0.3
2011 110.1 30.0 5% 1.5
2012 130.5 34.3 10% 3.4
2013 151.0 38.6 17% 6.6
2014 171.4 42.8 26% 11.1
2015 200.0 50.0 37% 18.5
* Percentages indicated are reasonable estimates based on needs, size of economy and lag in implementation of the
Smart Grid in India.
India'S market size was calculated using the 'assumed' %ages and their corresponding US market sizes.

14

The graph below gives a visual representation (of the above table) and shows the growth in
market sizes of Smart Grid across the Global, US & India during the period 2009-2015.

Smart Grid Market Size, 2009 - 2015
250 40%

35%
200
200

%age of US Smart Grid Market Size
30%
171
151
25%
150
USD (Billions)

131
110 20%

100 90
15%
69
50 10%
50 39 43
30 34
21 26
19 5%
7 11
0 0 2 3
0 0%
2009 2010 2011 2012 2013 2014 2015

Global US India India's market size as a %age of US market size

Indian Smart Grid Market Segmentation
The Indian Smart Grid Market can be segmented into 6 layers as in the US Smart Grid market.

1. Power Layer: The power layer relates to the power generation facilities which use different
sources of energy such as coal, oil, gas, nuclear and hydro. Renewable sources of energy
such as solar, wind, biomass and geothermal are adding to these existing sources of energy
and increasing the supply of electricity in developing countries.

We have not considered the power layer as part of the smart grid ecosystem since the role
of smart grid in this layer is limited to integrating distributed sources of energy such as
renewable sources and not contributing to generation of power per se.

2. Communication/IT Layer: This layer consists mainly of Advanced Metering Infrastructure
(AMI) and corresponding technology and softwares to support the communication between

15

the applications and grid infrastructure for better grid management. We see many smart
meter manufacturers and IT companies being the primary players in this market.

Advanced Metering Infrastructure (AMI) refers to a system that collects, measures and
analyzes energy usage by enabling data to be sent back and forth over a two-way
communications network connecting advanced meters (“smart meters”) and the utility’s
control systems. AMI provides utilities unprecedented system management capabilities,
allowing for the first time the possibility of having consumers make informed, real-time
choices about their energy usage.

We have assumed that the Communication/IT Layer of the Indian Smart Grid Market in
2015 will contribute 29% of the total market share, making it a $5.3 billion18 market. This
would be much higher than the 14% that this segment would normally represent in the
global smart grid market in 2015, based on Pike’s Research19. The rationale behind this is
that Asian countries will be lagging behind developed countries in smart grid technology
deployment and will be ramping up their investments in this segment just as developed
countries will be reaching saturation in this segment. Countries are incentivized to invest
first in the Communication/IT layer, especially in smart meter and software installations for
communication, due to its high returns and faster payback periods.

3. Demand Response Layer: Demand Response (DR) is a relatively simple concept. Utility
companies incentivize electricity customers to reduce their consumption at critical, “peak”
times, on demand. Contracts, made in advance, specifically determine both how and when
these companies can reduce an end user’s load.

It is expected that demand response will be one of the first applications of Smart Grid to
capture a critical mass of market penetration. The on-going deployment of approximately
40 million smart meters20 in the U.S. will open the door for DR programs to be offered to
millions of residential energy users for the first time. The same will happen when Smart Grid
technologies, especially smart meters, are made available in India. These utility scale smart
meter deployments will accelerate the pace of DR adoption, as the needed communication
backbone between the end users and the utilities will be in place.

Demand response is a win-win solution for utilities and customers. At times of peak energy
demand, DR is a cheaper, faster, cleaner and more reliable solution than adding a peaking
power plant. While concerns for the environment are increasing, the fact that both the

18
Taken from the Smart Grid Market Share breakup by Segments in 2015 Graph, at end of this section
19
http://smartgrid-for-india.blogspot.com/2009/12/200-billion-investment-in-smart-grid-by.html
20
http://www.infraxinc.com/resources/collateral/documents/TheSmartGridin2010_2431.pdf

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utility and the consumer save money will be key driver in the mass adoption of demand
response programs.

4. Grid Optimization: Grid optimization entails a wide array of potential advances that will
give utilities and grid operators digital control of the power delivery network. The addition
of sensor technology, communication infrastructure and IT will help optimize the
performance of the grid in real-time, improving the reliability, efficiency and security. Grid
operators will gain improved situational awareness as fundamental system-wide visibility
and analytics will now be in place. While AMI deployments lay the foundation for utilities
having control of millions of end user devices, real-time command and control of higher-
level grid devices is of equal, if not greater, value in the current push for overall grid
efficiency.

Grid Optimization serves as an umbrella term that encompasses improvements in three
main areas, namely System Reliability, Operational Efficiency and Asset Utilization and
Protection.
Grid Optimization will help reduce distribution losses (technical and commercial) of upto
30% through optimal power performance and system balancing giving it a predictable high
ROI, and hence making it an attractive investment opportunity for a lot of companies. In
India we will see many new entrants in this segment.

5. Distributed Generation and Storage: The distribution generation is one of the most
revolutionary aspects of the smarter grid. It will not only enable integration of renewable
sources of energy such as solar and wind but also integrate individual to mass producers
across the nation, which wasn’t possible in the existing infrastructure. This true “plug and
play” scalability and interoperability will promote the same wide-spread deployment in
distributed generation that occurred with personal computers and cell phones, bringing a
profound transformation to electric generation in the coming decade.

The advancement of storage technologies holds the promise of revolutionizing the existing
power delivery system. The electricity grid has historically contained a negligible amount of
electricity and energy storage. The chief problem has been that storing electricity is
incredibly expensive. While this remains a challenge – and there presently remains no single
ideal storage technology – the possibility of storage breakthroughs in the next few years is
high, as there is more attention now being given to storage as a necessary, viable and
potentially very proﬁtable technology.

We have assumed that the combined segments of Demand Response, Grid Optimization
and Distributed Generation and Storage will contribute 70% of the Indian Smart Grid

17

Market in 2015 making it a $12.9 billion21 market. This is lower than the 84% that this
combined segment would represent of the global smart grid market in 2015, based on
Pike’s Research.

6. Smart Charging & V2G: One of the most discussed and anticipated “applications” of Smart
Grid is the introduction of the plug-in hybrid electric vehicle (PHEV). The PHEVs will heavily
depend on higher quality and longer lasting batteries along with smart charging and vehicle-
to-grid options. The latter two can be provided by the Smart Grid.

Smart Charging - The key to the success of plug-in hybrids as an environmentally friendly
solution and one that doesn’t crash the grid is how and when they re-charge. The ideal
would be for them to do so in the evening hours, when utilities’ inexpensive base-load
generators keep turning and consequently there is a lot of spare capacity available.

V2G - Vehicle-to-grid (V2G) in the next 5 to 10 years might very well emerge as one of, if
not, the most transformative applications of Smart Grid. While we believe that the market
fundamentals are not yet in place for the V2G to take-off as, firstly, PHEVs will need to ﬁrst
be introduced at a price point that attracts a large mass of individuals, especially the middle
income Indians, beyond just the early adopters and, secondly, we still may be one or two
generations away from having the right battery.

We have assumed that Smart Charging and V2G layer of the Indian Smart Grid Market in
2015 will represent 1% of the total market share, making it a $185 million 21 market. This
would be marginally lower than the 2% that this segment would represent of the global
smart grid market. The reasons are very much the same as stated for the other layers.

21
Taken from the Smart Grid Market Share breakup by Segments in 2015 Graph, at end of this section

18

Please find below a graph which shows the Smart Grid Market Share breakup for Global vs.
India in 201522 by the segments/layers mentioned earlier. What is interesting to note from this
graph is that Indian Communication/IT segment will make up a larger %age of the Indian Smart
Grid market in comparison to same segment on a global scale.

22
Also shown in Table 5 of Appendix.

19

Indian Smart Grid – Competitive Landscape
In view of favorable conditions through government regulations, technology innovation, low
competition and high return on investment several players are entering the various segments
of the Indian Smart Grid market.

Below, is a snapshot of the players currently in the various layers of the Indian Smart Grid.

Market Size
Layers Players
in 2015
Honda, Mahindra, General Motors, Tata Motors, Hero Electric, Tara
Smart Charging and V2G International, GE, Nissan $0.18 billion

Distributed Generation
GE, IBM, ABB, GridPoint, State Electric Boards (SEBs)
& Storage

Grid Optimization ABB, Siemens, Schneider Electric, Alstom $12.9 billion

Demand Response Ecolibrium Energy

GE, Cisco, Ericsson, Siemens, Echelon, eMeter, Itron, PowerGrid,
Communication/IT Layer Landis+Gyr, Tridium, IBM, SAP, Microsoft, TCS, Infosys, HCL, Wipro, $5.3 billion
Telvent, Capgemini, Accenture, KEMA

GE, ABB, Reliance Energy, Essar Group, GMR, Larson & Toubro,
Power Layer State/Govt. owned Power Plants,

Communication/IT Layer - Analysis
The Communication/IT Layer of the Indian Smart Grid Market, a $5.3 billion market in 2015, can
be broadly classified into 4 sub-segments based on the existing players.

1. Communication Companies – These include companies which manufacture smart meters;
companies that provide communication hardware infrastructure; companies that provide
the transmission lines for Electric Grid.

2. Consulting Companies – These companies provide consulting experience to hardware and
software communication companies planning to deploy smart grid technology as they have
some experience by doing so in developed countries.

20

3. IT Companies – These companies provide software to the hardware equipment, including
smart meters, which will complement the communication infrastructure of the future smart
grid.

4. Power and Transmission Companies – Essentially utility companies, including power
generation and transmission companies which are working with Communications and IT
companies to help adopt smart grid technologies faster and thereby improve productivity
and experience for customers.

Below is an exhibit which shows the interactions between the various companies from the 4
sub-segments of the Communication/IT layer of the Indian Smart Grid market.

Communication/IT Layer
NTPC
NDPL PowerGrid

KPTCL
GE Ericsson
KEMA L&T Communications
Companies
OPTCL

BESCOM Microsoft Telvent Wipro
Consulting
Cisco Companies
Capgemini Echelon Itron
Reliance
Energy Information
Technology
Tridium HCL Infosys Companies
Siemens
Google
Power &
Transmission
IBM eMeter BPL Companies
Accenture
Global (Govt. & Private)

TCS SAP
Landis+
Gyr

Analyzing the Interaction Patterns
On analyzing the interactions between the various players in the Communication/IT layer of the
Indian Smart Grid market, over the last few years, we see the following patterns emerge.

21

 Cisco, a major player: Looking at the interactions between the companies we see that
Cisco, is one of the major players in this segment. It is working with IT, Consulting, Utility
and Power generation and transmission companies to create an ecosystem for Smart Grid in
India23. Some of its ecosystem members are
o System Integrators & Consultants – Accenture, Capgemini, HCL, Infosys & Wipro
o Power and Utility Integrators – Schneider Electric
o Technology Vendors – Echelon, Itron, Telvent

 Partnerships: We find that majority of the interactions were partnerships which have
happened in the recent past.

 Smart Meter companies growing: We are seeing many smart meters companies in this
segment. In the above chart, some of the big smart meter players entering the Indian
market are Itron, eMeter, Echelon, GE and Landis +Gyr. If you look closely one can see that
eMeter is already gaining prominence due to the number of connections, in total six, it has
with other players. (In this paper, we judge prominence of player based on the interactions
it has with other companies.)

 Microsoft & Google not yet dominant: Based on the research done we see that Google
with its meters and Microsoft with its software competence have not yet partnered with
companies in this segment. We could speculate that this might be due to their late entry
into this layer of the Indian Smart Grid market.

 PowerGrid - a significant player in this segment: We are seeing that PowerGrid
Corporation, a Government of India Enterprise (which manages regional power grids), is
working with a lot of State Utilities companies in the states such as Karnataka (KPTCL –
Karnataka Power Transmission Corporation Ltd.), Orissa (OPTCL – Orissa Power
Transmission Corporation Ltd.), Meghalaya and Pondicherry to bring in the Smart Grid
technology onto the existing grid. It is also working with the National Thermal Power
Corporation in Maharashtra towards Smart Grid goals. Ericsson and Bharti Airtel are some
of its customers on the telecom side.

 IT Companies doing Consulting too: While doing the research it was found that companies
such as Infosys, TCS, Wipro, HCL and SAP were doing IT consulting work for many
companies along with implementing the software solutions.

 HCL expanding Smart Grid Partner Ecosystem: HCL Technologies, a leading global IT
services provider, in 2011 announced a significant expansion of its smart grid partner

23
http://www.cisco.com/web/strategy/energy/ecosystem_partners.html

22

ecosystem by forging strategic alliances with two leading data management software firms
focused on the smart grid market: eMeter and Tridium24.

 GE & IBM not yet significant players in this segment: GE and IBM both have extensive,
established presence in India and have a large amount of experience in implementing end-
to-end Smart Grid solutions. GE is one of the top producers of smart meters in the US, after
Itron. IBM is currently implementing a 70 million euro end-to-end Smart Grid System for
Malta, an island country in the Mediterranean Sea.

Both these companies have not really capitalized on this segment, in the Indian Smart Grid
market, by partnering with a lot of companies.

Our analysis of the interaction patterns in the Communication Layer indicates that while the
market is still fragmented, large companies are likely to establish their presence quickly. We
expect companies seeking to enter the Indian market to be aware of these players and
interactions and accordingly strategize their entry into the market.

24
http://smartgrid-for-india.blogspot.com/2011/04/hcl-partners-with-emeter-and-tridium.html

23

Recommendations to Companies
Here are a few high level recommendations for foreign companies planning to enter the Indian
Smart Grid Market, especially the Communications/IT layer in the next few years –

1. Enter India through Partnerships: There are many incentives for foreign companies to enter
the Indian market. Firstly, the benefit to cost ratio in Smart Grid Technology is extremely
high, ranging from 3.85 to 4.2 times. Secondly, the Indian Smart Grid market will be worth
$18.5 billion and the Communications/IT layer of that would be worth $5.3 billion by 2015.
Thirdly, there isn’t a lot of competition in this market, as it still very nascent, along with the
regulations being favorable for foreign investment.

Given all of the above, companies should be very eager to enter this market. But before
entering companies need to decide how they are going to enter this unique environment
and be successful. Based on precedence, foreign companies which have entered the Indian
market have done well when they have partnered with existing or local companies and
adapted to the local needs. We feel acquiring an existing player could also be a viable
option, but that would depend if the entering company has the financial resources to do so.

One of the recommendations is for foreign companies to partner will existing players who
understand the market well and are successful doing business here. This would definitely be
less cost intensive and risky.

2. Partner with Cisco, eMeter or HCL: For a company planning to make investments on the
communication side of the business, they should consider partnering with Cisco. Reason
being, that Cisco is investing a lot in creating a Smart Grid Ecosystem25 by partnering with all
the relevant companies and hence building up its competencies. It is already working
towards facilitating the adoption of Internet Protocol (IP) based communication standards
for smart grids that will benefit the energy industry as well as business and residential
customers. Also Cisco has the, overall, highest number of interactions with other companies
in the Communication/IT layer.

For a company planning to focus only on the smart meter side of the business, they should
most likely partner with eMeter. This company essentially provides software that enables
electric, gas and water utilities to realize the full benefits of the Smart Grid. It was rated by
Bloomberg New Energy Finance in 201126, for 2 years in a row, as one of the best companies
in the world in the field of clean technology and innovation. Also it has potential to change
the energy landscape in a very significant way by playing a significant role in the world’s
25
http://newsroom.cisco.com/dlls/2009/prod_091709.html
26
http://www.emeter.com/company/news/2011-press-releases/emeter-selected-as-new-energy-pioneer/

24

transition to a lower carbon energy system. Also e-Meter has the most number of
partnerships, among smart meter companies, in the Indian Smart Grid market.

For companies planning to focus on the IT implementation of the Smart Grid market, they
should partner with HCL Technologies. The reason being, this company is expanding its
smart grid partner ecosystem by forming strategic alliances with eMeter and Tridium. This
would enable HCL to become an end-to-end integration service provider to the utility
companies.

3. Work with the Indian Government: Right now, the biggest stakeholder in Smart Grid
Technology deployment is the Indian Government, as it owns much of the existing electric
grid infrastructure. If a foreign company works directly with the Indian Government, on
smart grid pilot projects, and given that they are successful, then most likely the
government will award long-term contracts to these companies along with other parts of
their business. It is worth noting here that the Indian Government plans to invest $170
billion on the electric grid infrastructure over the next 5 years, of which $62 billion will be
spent on distribution and transmission. There is the added advantage further for the
entering companies to also work with state owned utility companies.

25

Appendices

Table 1: India’s Electricity - Demand, Supply & Deficit (2004 - 2010)
Year Demand (MWh) Supply (MWh) % Deficit
2004-05 591.4 548.1 7.32%
2005-06 631.6 578.8 8.36%
2006-07 690.6 624.5 9.57%
2007-08 737.1 664.7 9.82%
2008-09 777 691 11.07%
2009-10 831 746 10.23%
Source: Power Scenario at a Glance – Central Electricity Authority Planning Wing Integrated Resource Planning
Division, January 2011

Table 2: India’s Power Installed Capacity – 2010 - Sectors
Renewable
Hydro Thermal Nuclear Total
Sector Energy % age
(MWh) (MWh) (MWh) (MWh)
(MWh)
State 27.26 52.16 0 2.82 82.24 48%
Private 1.43 19.75 0 13.96 35.14 21%
Centre 8.68 39.12 4.57 0 52.37 31%
Total 37.37 111.03 4.57 16.78 169.75 100%
% age 22% 65% 3% 10% 100%
Source: Power Scenario at a Glance – Central Electricity Authority Planning Wing Integrated Resource Planning
Division, January 2011

Table 3: India’s Electricity Consumption Mix in 1998

Electricity Consumption in India in 1998
Industry

2% Transport
16%
8% 45% Agriculture

27% Commercial and Public
2% Services
Residential

Other Sectors

Source: http://www.iea.org/work/2006/gb/publications/india_electricity.pdf

26

Table 4: Indian Population having access to Electricity in 2010
Access to Electricity in India in 2010
Rural Penetration 52.5%
Rural Population (as % of total population) 72.2%
Rural Access (as % of total population)
= Rural Penetration x
Rural Population (as % of population) 37.9%
Urban Penetration 93.1%
Urban Population (as % of total population) 27.8%
Urban Access (as % of total population)
= Urban Penetration x
Urban Population (as % of population) 25.9%
Total Access (as % of total population)
= Rural Access + Urban Access 63.8%
Indian Population in 2010 1178 Mil
Population with Electricity Access 752 Mil
Population without Electricity Access 426 Mil
Source: http://en.wikipedia.org/wiki/Electricity_sector_in_India

Table 5: Smart Grid Market Share Breakup by Segment in 2015
Distr. Generation &
Storage,
Smart Charging & V2G Communication/IT Total
Indian Smart Grid Grid Optimization,
Market share Demand Response
Global 2% 84% 14% 100%
India 1% 70% 29% 100%
Distr. Generation &
Storage,
Grid Optimization,
Indian Smart Grid Smart Charging & V2G Demand Response Communication/IT Total
Market share (USD billions) (USD billions) (USD billions) (USD billions)
Global 4.00 168.00 28.00 200.00
India 0.19 12.95 5.37 18.50
Source: ZPryme Research Consulting & Pike Research Report

27

References
1. The Smart Grid Vision for India’s Power Sector: A White Paper – USAID from the
American People, March 2010

2. Electricity in India, Providing Power for the Millions – International Energy Agency, 2002

3. The Indian Electricity Market: Country Study and Investment Context - Peter M. Lamb,
August 16 2005

4. Power Sector in India – iQuest Solutions, Feb 2010

5. Power Scenario at a Glance – Central Electricity Authority Planning Wing Integrated
Resource Planning Division, January 2011

6. Smart Grid Analysis – A Division of NanoMarkets

7. Smart Grids Road Map – International Energy Agency

8. The Smart Grid – An Introduction – US Department of Energy

9. The Smart Grid in 2010: Market Segments, Applications and Industry Players – David J.
Leeds, GTM Research, July 2009

10. Smart Grid for India Blog - http://smartgrid-for-india.blogspot.com/

11. Technology Enabling the Transformation of Power Distribution – Infosys & CSTEP – Oct
2008

12. Technology Development Concepts for the Indian Power Sector – International Energy
Agency – February 2011

28

Smart Grid Solutions in India - Arvind Patravali

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