Group 3 Sec D Project

8/3/2019 Group 3 Sec D Project

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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 onshore.


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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

Group 3 Sec D Project

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