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Economy Overview

In 2022, the global economy faced a series of turbulent challenges. High inflation rates, the most significant in several decades, led to tightened financial conditions in most regions. Additionally, Russias invasion of Ukraine had a lasting impact on economic activity. The rapid spread of COVID-19 in China also hampered growth during the year.2 However, the recent reopening of economies has paved the way for a rapid recovery. Global governing bodies have undertaken various initiatives to mitigate existing economic risks. Monetary policies are anticipated to focus on restoring price stability, while fiscal policies aim to alleviate cost pressures while maintaining a suitably tight stance. In addition, structural reforms can play a crucial role in lowering inflation by enhancing productivity and addressing supply-side constraints.2 These collective measures are expected to support economic stability and reduce the impact of prevailing risks.

As per the latest International Monetary Fund (IMF) estimates published in January23, the global economy is projected to grow at 2.9% in 2023 (vs estimated 3.4% in 2022) and 3.1 % in 2024.1 In 2022, Middle East and Central Asia have been the highest contributor to the global real GDP, while Emerging and Developing Asia are expected to be the highest contributors in 2024. Euro area is estimated to grow at 1.6% in 2024, whereas United States and Latin America are expected to grow at 1.0% and 2.1% respectively in 2024.3

Indian Economy Overview

The Indian economy has staged a full recovery, ahead of many nations and has positioned itself to ascend to the pre-pandemic growth path in FY23. However, India must also cope with the challenge of controlling inflation. Fortunately, actions taken by the government and RBI along with decline in global commodity prices has led retail inflation levels reaching to 5.7% in December22 and 5.66% in March23, which are within the RBI upper tolerance target of 6%.4 As per IMF, Indias real GDP grew at 6.8% in 2022 (estimates)5 and expected to grow at 5.9% in 2023 and 6.3% in 2024, with resilient domestic demand despite external headwinds. As per CEIC, Indias per capita GDP reached USD 2,301 in March22, an all-time high resulting in a significant increase in demand driven by consumption.7 Industrial production also increased supported by persistent demand conditions. For the first half of FY23, the Industrial Sectors overall Gross Value Added (GVA) increased by 3.7%, above the 2.8% average growth seen in the first half of the previous decade.9 In 2023, nearly 15% of the worlds growth is forecasted to come from India.5 These growth projections are partially based on the economys resilience, which can be observed in how quickly private consumption rebounded, while the governments capital expenditure, which surged by 63.4% in the first eight months of FY23 was also a major contributor.9 India will also be able to maintain a positive growth-interest rate differential owing to the governments policy of capital expenditure led growth, which will result in a sustainable debt to GDP over the long term. To connect India to international supply chains, the Production Linked Incentive (PLI) programmes were created with an expected investment of 4 lakh crore during FY22–27.6 As per the Indian Brand Equity Foundation (IBEF) In FY22, investments under PLI programmestotalled INR 47,500 Crs, which reached 106% of the years set objective.10 Due to PLI initiatives, production/sales of 3.85 lakh crore and the creation of 3.0 lakh jobs have been registered.10 The Indian economy has also begun to prosper from more formalization, greater financial inclusion, and economic possibilities brought forth by technologically driven economic reforms.

Sources:

4-https://www.livemint.com/economy/retail-inflation-drops-to-5-66-in-march-from-6-44-in-feb-11681306477940.html 5-https://www.thehindu.com/business/Economy/ india-remains-a-bright-spot-to-contribute-15-of-global-growth-in-2023-imfmd/article66540985. ece#:~:text=For%20FY%202023%2F24%20 (April,growth%20rate%20among%20major%20 economies 6-https://www.ibef.org/economy/indian-economy-overview 7-https://www.ceicdata.com/en/indicator/india/gdp-per-capita 8-https://www.livemint.com/news/india/indian-economy-to-contribute-15-of-global-growth-in-2023-imf-md-kristalina-georgieva-11677062849103.html

9 - p i b . g o v . i n / P r e s s R e l e a s e I f r a m e P a g e . aspx?PRID=1894918 10- Economic Survey 2023: PLI schemes to create 60 lakh jobs, textile & auto in focus (moneycontrol.com) Image Source: https://api.anarock.com/uploads/ research/CII_ANAROCK_THE%20HOUSING%20 MARKET%20BOOM_2023.pdf

India Renewable Overview

The Indian renewable energy sector is the fourth most attractive renewable energy market in the world. India was ranked fourth in wind power, fifth in solar power and fourth in renewable power installed capacity, as of 2020. Installed renewable power generation capacity has gained pace over the past few years, posting a CAGR of 15.92% between FY16-22. India is the market with the fastest growth in renewable electricity, and by 2026, new capacity additions are expected to double. With the increased support of the Government and improved economics, the sector has become attractive from an investors perspective. As India looks to meet its energy demand on its own, which is expected to reach 15,820 TWh by 2040, renewable energy is set to play an important role.

As of October 2022, Indias installed renewable energy capacity (including hydro) stood at 165.94 GW, representing 40.6% of the overall installed power capacity. The country is targeting about 450 Gigawatt

(GW) of installed renewable energy capacity by 2030 – about 280 GW (over 60%) is expected from solar.

Indian Solar Overview

Due to its favorable location in the solar belt (400 S to 400 N), India is one of the best recipients of solar energy with abundant availability. The installed solar energy capacity has increased by 24.4 times in the last 9 years and stands at 66.7 GW as of May 2023. In the first half of 2022, India has saved US$ 4.2 billion in fuel costs through solar power generation, as well as 19.4 million tonnes of coal. India has generated 70.24 BU of solar power in the first nine months of 2022, a 36% YoY increase.

Government Initiatives

1. Solar city per state-approved and approved setting up 59 solar parks of 40 GW across the nation. The government is also giving a push to Floating PV Projects.

2. The Union Cabinet approved the National

Green Hydrogen Mission with a total initial outlay of INR 19,744 Cr, including an outlay of INR 17,490 Cr for the SIGHT programme, INR 1,466 Cr for pilot projects, INR 400 Cr for R&D, and INR 388 Cr towards other Mission components.

3. PLI scheme in Solar PV manufacturing with financial outlays of INR 24,000 Cr introduced under Atmanirbhar Bharat. Imposition of Basic Customs Duty of 25% on Solar Cell & 40% on Solar PV Modules

4. The medium and long-term target for off-shore wind power capacity additions are 5 GW by 2022 and 30 GW by 2030.

5. In 2018, a national policy was announced to promote a large grid-connected wind-solar PV hybrid system for efficient utilization of transmission infrastructure and land. A way to address the intermittency challenge of one source of renewable power is to combine solar and wind, achieving better grid stability. It provides flexibility in the share of wind and solar components in hybrid projects, however, the capacity of one resource must be at least 25% of the rated power capacity of another resource.

6. The Solar Energy Corporation of India (SECI) implemented large-scale central auctions for solar parks and has awarded contracts for 47 parks with over 25 GW of combined capacity

7. Floor prices of the RPO have been set to provide certainty to companies. The floor price has been set at US$ 144 per MW.

8. Providing interest rate rebate of 0.25% over and above the existing interest rate rebate offered to new wind energy projects.

9. All fiscal and financial benefits offered to new wind power projects will be extended to repowering projects.

10. Budget 2022-23 announced the issuance of sovereign green bonds, as well as conferring infrastructure status to energy storage systems, including grid-scale battery systems.

Opportunities

Indias ambitious renewable energy goals are transforming its power sector. Rising population and widespread electrification in rural homes is fuelling the demand for energy to power homes, businesses and communities. The Central Electricity Authority estimates Indias power requirement to grow to reach 817 GW by 2030. According to data from the Ministry of Power, Indias power consumption increased 1.64% YoY in October 2022 to 114.64 billion units (BU).

Foreign Collaborator Country Indian Company FDI Equity Inflow (US$ mn)
Asian Development Bank India Avaada Energy Pvt Ltd. 50
Asian Development Bank Philippines Renew Power Ventures Pvt. Ltd. 44.69
AIRRO Singapore Re Ltd. Singapore Diligent Power Pvt. Ltd. 41.07
ORIX Corporation Japan Lalpur Wind Energy Pvt. Ltd. 37.75
ENEL Green Power Development B.V. Netherlands BLP Energy Pvt. Ltd. 32.61
DEG-DEUTSCHE-InvestitionsUnd-

Entwicklun

Germany WELSPUN Renewables Energy Pvt Ltd. 32.50
ENERK International Holdings Ltd. Seychelles RKM POWERGEN Pvt Ltd. 32.50
OSTRO Renewal Power Limited Mauritius OSTRO Energy Pvt Ltd. 32.21
AREVA Solar Inc. USA AREVA Solar India Pvt Ltd. 31.53

India has an electricity-GDP elasticity ratio of 0.8. Thus, 7% growth in energy supply will be required if India is to grow at 8%. This shows that electricity will continue to remain a key input in Indias GDP growth. It has been estimated that renewables will comprise 49% of Indias power generation by 2040. Over the last few years there has been an increase in the percentage contribution of renewable energy to total installed capacity. In 2013-14, the contribution was 12.92%, which increased to 29.14% as of October 2022.Replacing coal plants with renewable sources is expected to save India Rs. 54,000 crore (US$ 8.4 billion) annually due to reduced power costs. https://www.ibef.org/download/1691982223_ Renewable_Energy_May_2023.pdf

Rising Power Demand

The Central Electricity Authority estimates Indias power requirement to grow to reach 817 GW by 2030. According to data from the Ministry of Power, Indias power consumption increased 1.64% YoY in October 2022 to 114.64 billion units (BU). https://www.ibef.org/download/1691982223_ Renewable_Energy_May_2023.pdf

India experienced an all-time high in electricity demand last week due to hot weather and increased irrigation needs. The maximum demand met on August 17 reached 234 GW, surpassing the predicted 229 GW for the summer. https://economictimes.indiatimes.com/industry/energy/ power/power-demand-hits-record-highs-in-august-with-234-gw-peak/articleshow/102921745.cms?utm_ source=contentofinterest&utm_medium=text&utm_ campaign=cppst

Solar Parks in India

The government has sanctioned a total of 50 solar parks in 12 states, aggregating an impressive 37,990 MW capacity. Out of these sanctioned parks, 11 have been successfully completed, collectively generating 8,521 MW. Further, 7 Solar Parks have reached partial completion, contributing 3,985 MW to the nations solar capacity. The cumulative outcome of these endeavors has manifested in the creation of solar projects with an impressive 10,237 MW capacity within these solar parks, reflecting the nations strides towards sustainable energy adoption.

Highlighting the recent growth trajectory, the minister noted a substantial increase of 2,292 MW in the electricity generation capacity of solar projects housed within various solar parks during the past three years.

https://www.livemint.com/industry/energy/ indias-solar-power-projects-reach-impressive-10-2-gw-capacity-50-solar-parks-sanctioned-minister-11691584513831.html

India Rooftop Solar sector

Rooftop solar installation witnessed a tremendous growth in 2022 with sales of solar kits increasing globally to 5.2 million in the second half of the calendar year, 20% more than the units sold in the first 6 months. This was 18% higher than the previous peak in the second half of 2019. https://energy.economictimes.indiatimes.com/ news/renewable/sales-of-rooftop-solar-energy-kits-rise-to-5-2-million-globally-in-second-half-of-2022/102983055

India is deemed to add an additional 2.5 GW to 3 GW in the rooftop solar segment. The JMK research says that the rooftop solar segment about 2,232 MW was added in FY23 which was 1.2% higher than FY22 installations. Gujrat installed the maximum rooftop solar capacity of 687 MW during April 2022 to March 2023 period followed by Maharashtra and Kerela. https://energy.economictimes.indiatimes.com/news/ renewable/india-to-add-15-gw-of-new-utility-scale-solar-capacity-in-fy24-study/99462337

Additionally the Honble Prime Minister of India, Shri Narendra Modi launched the National Portal for Rooftop Solar on 30/07/2022.

EPC

According to Facts and Factors, the Global Power EPC Market size was valued at around USD 654.5 billion in 2021 and is estimated to grow about USD 848.7 billion by 2028, at a CAGR of approximately 4.9% between 2022 and 2028. h t t p s : / / w w w . g l o b e n e w s w i r e . c o m / n e w s -release/2022/09/27/2523604/0/en/Global-Power-EPC-Market-Size-to-Hit-US-848-7-Bn-by-2028.html The India power EPC market size was valued at USD 13.30 Billion in 2022 and is likely to reach USD 83.84 Billion by 2031, expanding at a CAGR of 22.7% during 2023–2031. The growth of the market is attributed to the increasing industrial operations across various sectors, sustained economic growth and government initiatives such as "power for all".

O&M

The global non-residential solar operations & maintenance (O&M) business is predicted to more than double to US$ 9 billion by 2025 from being a US$ 4 billion market in 2019, according to global research & analytics firm Wood Mackenzie. A steady growth in the global solar power industry has led to an unprecedented and rising demand for O&M services. Domestic solar O&M has emerged as a separate market with its own landscape and dynamics. As more and more solar plants get stable, an increasing number of O&M contracts are getting re-tendered, presenting a growing opportunity for O&M providers. https://www.pv-magazine-india.com/2021/11/25/ automation-in-solar-om-delivering-plant-roi/

Transmission

As of April 23, the National Grids interregional transmission capacity was 4,71,817 ckm of transmission line and 11,85,058 MVA of transformation capacity. Additionally, since 2014, the nations interregional capacity has grown by 212% to 1,12,250 MW. The Central Transmission Utility (CTU) and National Committee on Transmission have been given the authority to approve ISTS systems up to Rs. 500 crore, which has further streamlined the planning and approval process for the Inter-State Transmission System (ISTS). Additionally, POWERGRIDs CTU function has been split, and Central Transmission Utility of India Ltd. began operating as CTU on April 1st, 2022.