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Feature | February 2014

The back-up plan

Generator sets must grapple with augmented power situation over the past few years, and yet gensets are considered necessary in most industries and city businesses. As the government cracks the whip on DG sets, industry majors are turning towards "green" gensets that guzzle less fuel and pollute less. PROJECTS INFO provides an overview of the industry and the market.

Motors or generators are among the crucial equipment required while running a manufacturing unit. Whereas motors are drivers of the machinery, generators (gensets) play an equally important role in the precarious power availability situation in India.

The country faces acute power shortage due to the inability of an inefficient and outdated power infrastructure to meet the growing demand from public as well as the industries. India has been suffering consistent grid failures and power blackouts since independence. In 2012, the simultaneous failure of northern, eastern and north-eastern grids left many parts of the country in the dark. Thus, our country remains energy-starved despite the government implementing various progressive measures to maximise the country's power generation capacity and many players coming out with cost-effective gensets.

According to a report by the Central Electricity Authority (CEA), India loses about $68 billion, or about Rs 414,800 crore of its gross domestic product (GDP) due to electricity shortage. The northern states of Delhi, Haryana, Uttar Pradesh, Himachal Pradesh and Uttarakhand were the worst affected with a deficit of 7.1 per cent, or 2,912 MW. Even the northeastern region of Assam, Manipur, Meghalaya, Arunachal Pradesh, Tripura, Nagaland and Mizoram recorded a deficit of 5.9 per cent.

Therefore, in such a scenario, the importance of power backup increases, thereby leading the gensets industry to boost in the Indian market. But although the energy deficit is rising, the market is still in its growing stages and is expected to be stable at least in the next decade with a lot of infrastructure projects upcoming. Genset market will also grow considering the increase in demand of quality power. In the sub 10-kVA range and based on applications, diesel gensets will always take precedence. In the higher power ratings, gensets will keep its own stead. In the case of inverters, one must also appreciate that consumables costs and maintenance costs of batteries, etc. are increasing.

The power backup market in India varies within the three different segments generators, UPS and inverters. Major players like Kirloskar Oil Engines Ltd (KOEL), Mahindra-Powerol, Cummins India, Greaves Cotton, Ashok Leyland, Eicher, Caterpillar, MTU and few other imported brands are seeing huge market potential to grow in India.

Sanjay Jadhav, Sr Vice-President, Sterling and Wilson Powergen, a manufacturer of generators, articulates, "We have approximately 9-10 per cent power deficit with peak power deficit being at the rate of 20 per cent. At the same time there is consumption growth at 10 per cent y-o-y. Thus, we will definitely need more power as well as power backup."

With the rising demand, there have been many changes in technological trends in the field of power over the last ten years. "We treat this as an opportunity to continually improve on what we already offer. Over the last decade, we have continued to develop our range of small, medium and large diesel and gas engines, which provide clean and efficient power from 5-2,500 kVA, to meet our customers' requirements, and give a peace of mind to thousands of people," informs Pankaj Jha, South Asia Marketing Manager, Perkins Engines Company Ltd.

New CPCB norms
The new Central Pollution Control Board (CPCB) II norms, which will be applicable from April 1, 2014, aims at reducing pollution, and cost of medical care, etc. Also, all the manufacturers, importers or assemblers of diesel generator sets in India will comply with the cleaner emission standards, for products up to 800 kW. This was a long overdue notification and will soon be welcomed.

PJM Khan, General Manager Business Development & Performance Support, Cooper Corporation, says, "Any effort weather it is small or big from this new norm will help the people, because it is going to contribute to maintain cleaner air and a better environment."

Everything related to the new norms is been considered as a positive step by the manufacturers as it will strengthen the productivity of the product. In fact, India will witness more fuel efficient generators, which will benefit the end customer. The new range of generators will thus have improved technology as it will rather minimise the pollution and will contribute to the climate change issues. Moreover, since the new set of guidelines will have stringent norms, it is expected that with the improvement in technology, the prices of the power backup material may increase, slightly.

Required changes
Upgradation, modifications, technology changes are envisaged for few components or parts of the engines in order to make them CPCB norm compliant. They are EGR, fuel pumps, injection systems and turbo chargers. Even, logic control in gensets would have to undergo change. Only acoustics for gensets would not undergo any change. Typically, engines form 50-70 per cent of the gensets price depending on whether they are acoustic enclosure gensets (50 per cent) or open gensets (70 per cent).

Other procedural requirements
The design and testing of engines is a 2-3 year procedure. With CPCB norms being pre-defined, engine manufacturers have adequate time to adhere to the norms.

Certification is obtained for individual engine platforms, which means, engine ratings do not determine need for certifications.

Certifications can be obtained from independent certification agencies (India or Abroad) or research bodies like Automotive Research Association of India (ARAI) or Austria (AVL).

Even international certifications and accreditation are valid in India.

Impact on competition
Implementations of the new norms will unlikely result in any competitive or technological advantage to an engine manufacturer. This applies to both MNCs operating in India and local players.

Domestic companies are unlikely to be at a disadvantage to their MNC counterparts, consequent to the implementation of the revised norms.

Significant advantage for MNC players would be on the availability of technology know how from the global operations. This is by virtue of high budgets for R&D activities.

Other players can always do technology tie-ups or access know-how from independent agencies like ARAI and AVL.

Impact on cash flow
Upgrading engines to make them CPCB compliant would entail some capital expenditure for setting-up facilities or infrastructure.

Consequent to the implementation of revised norms, prices of engines would increase by 10-15 per cent. With engines comprising 50-70 per cent of gensets, the prices of gensets would increase by 5-7 per cent.

Industry had implemented price hikes in June 2012, but that is in lieu of cost increases.

There will be strong probability of another round of price hike in conjunction to implementation of CPCB norms.

Scope
Generator gives economical, uninterrupted, reliable power, wherever and whenever an individual requires to keep the work the different industries without interruption. Due to the high growth of industries and scarcity of the electric power, many industries require standby power generation unit to work 24x7 without any interruption. So to fulfil this requirement, generator is the technically perfect solution with best fuel efficiency and emissions.

Manish Dev, Sales Head, Global Power Systems, manufacturer and exporter of gensets, said, "Genset does not depend upon the power availability or non availability. It is basically the requirement for critical operations like hospitals, hotels, malls, factories, etc. where they cannot afford any power cut."

The generators are classified on the basis of use of fuel, which includes petrol generator, diesel generator, gas generator, and dual fuel generator. Among all these, diesel generators are one of the least expensive, most reliable DG technologies that have expanding opportunities among home owners and commercial facilities like hospitals and data centres that require mission-critical power in the event of a grid outage. The diesel generator set market in India is a well organised and highly competitive market. It can be broadly classified as small diesel generators (15-75 kVA), medium diesel generators (75.1 375 kVA) and large diesel generators (375.1-2,000 kVA). The market witnessed steady growth rates in the last decade on account of chronic power shortages and rapid growth across several segments such as industries, infrastructure, telecommunication and information technology (IT) and IT enabled services.

Green initiatives
Technology in the genset industry was virtually stagnant for many years as the emission norms were way behind international standards with no effort being made to align then as they have done in the automobile industry. Thus, technological upgradation in any product will certainly be an added advantage not only for users but also for manufacturers. Our industry has been always blamed for polluting environment, and now with these rules, we will make sure that the industry will not create any mess in the environment.

"The Cooper Engines offer up to 30 per cent fuel benefits over competing already. Moreover, our engines are designed for compliance with Euro IV emission norms and the gensets are complaint with Indian future norms of CPCB II. We are looking forward to the removal of subsidy, as this will give further impetus to increase Cooper's market share," Khan added.

Jha further adds, "We have manufactured diesel and gas engines that have a reputation for precision engineering, enhanced durability and fuel efficiency for the life cycle of the engine. As we prepare to manufacture our 4000 Series engines in our Aurangabad facility in India, we continue to focus on innovation and excellence."

Meanwhile, upgrading the technology always is related to the products manufactured by European and American manufacturers. And, since, the export market is huge for this industry, the new norms will be a good opportunity to reach to the levels of emission norms required in those countries. The latest set of gensets will be powered with new/upgraded technology engines to meet the emission norms. Hence, the gensets also have better electrical technology like controls, etc. There is always scope to improve the technology and to make the engines more fuel efficient.

Challenges

  • Import of low cost diesel generators from China
  • Price competition from the unorganised diesel generator suppliers
  • Threat to continue due to the entry of new players
  • Rising diesel prices
  • Changes in emission norms
  • Lack of awareness on long term merits
  • Shortage of diesel engines

Major Players

  • Kirloskar Brothers
  • Cummins India
  • Caterpillar India
  • Greaves Cotton
  • Cooper Corporation
  • Su-Kam Power Systems
  • Kohler Power Systems
  • Mahindra Navistar Engines
  • Perkins India

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