Wärtsilä, a Finland-based global leader in marine and energy solutions, entered India in early 1980s. Today, Wärtsilä is not just catering to the domestic market, but is also exporting auxiliary units for engine driven power stations from India. The Dollar Business caught up with M. Rajagopalan, Market Development Director (Middle East & Asia) at Wärtsilä India Ltd., to understand the company's future plan of action.

Ahmad Shariq Khan | July 2016 Issue | The Dollar Business

TDB: Wärtsilä has been operating in India for quite some time now. What have you learned from the experience and how has the journey been so far?

M. Rajagopalan (MR): We started operations in India in 1983, and have always had a good customer-centric business model. We have been constantly meeting demands of a very specific consumer segment that includes large cement plants, chlor-alkali plants, textile units, etc. When we entered the Indian market, fuel prices were low; hence, we were preferred over grids and electricity distribution companies (discoms) by these factories and plants as we assured low-cost, reliable power. Also, we were an obvious choice because 10-12% or more of the expenditure in these industries was power cost. Thus, saving money on operations, in the long run, meant saving crores of rupees. However, since 2003-04, this market has been shrinking because of a rise in oil price, and as such we have been continuously looking at new applications to support our business. So, throughout our journey in India, we have been constantly innovating our business model to stay ahead of competition. India is one of the few big markets where electricity needs will continue to grow and Wärtsilä is well-positioned to serve this market.

TDB: Do you think the government is creating an enabling environment for players in the energy sector? What are the key challenges that the sector faces?

MR: Over the years, in order to offer best energy solutions, we have worked with various developers across the country. And at the moment, we are looking for some enabling business environment in the power sector.

For instance, the present method of inviting competitive bids is based on lowest cost at a normative load factor of 85%, and the merit order despatch system which purely depends on the marginal cost of the plant. The system is designed keeping base-load coal plants in mind and discourages participation of peaking power plants – power generation cost of peaking plants may be high but they definitely balance the grid demand with quick despatches.

So, we believe, the current policy is too tailored and leans towards coal  plants. It’s time to have a system that incentivises all relevant technologies which contribute to system reliability. Besides, other challenges have mainly come from changing market
dynamics, such as fuel prices.

TDB: Wärtsilä has been a forerunner when it comes to clean energy. How would you describe Wärtsilä’s strengths and weaknesses, especially in Indian market?

MR: We have a long history in India. We know the needs of the Indian market and are committed to fulfiling them. Based on the technology we offer, I would like to mention that our USP as an energy solution provider, in context of renewable energy integration, are plants with quick start-stop characteristics and fast ramp-up capabilities. In situations where wind and solar energy generation drops or fails, our plants can restore the power supply really fast. Unlike coal-based plants, our plants require less time to install and start operations.

Today, many coal-based plants in India operate at a plant load factor of 60% or less, which adds to the operating cost of a manufacturing unit. So, what sets us apart is that unlike coal-based plants, where efficiency goes down owing to varying demand, we offer optimal load and best efficiency. Whether the plant is running at 10% or 90% capacity, our efficiency remains the same throughout.

We also offer the best option in terms of modularity; you can divide the investment into phases and also can despatch the plant’s capacity in smaller chunks. Hence, depending on the demand, you can keep adding 10 MW, 20 MW or whatever is required in the later stages. However, this isn’t something possible in a coal-based plant.

TDB: India is largely dependent on coal-based power plants to meet its energy demand and will continue doing so in the foreseeable future. According to Technology Information Forecasting and Assessment Council (TIFAC), the share of coal in the electricity generation mix is likely to range from 50-60% in 2035. How do you see the future shaping for India’s energy sector?

MR: A combination of a large installation of base-load coal plants and renewable energy plants is a difficult mix to handle, without compromising on efficiency and reliability. We need balancing solutions that enable baseload plants to function efficiently at close to full load and allow full absorption of renewable energy into the grid. This is where Wärtsilä’s technology can play a role. So, when planning the national capacity, we need to plan for an optimal mix of all three types of plants, base-load, renewable energy and peaking/balancing plants. The intention should be to reduce overall carbon emission, while ensuring reliability at highest efficiency.

A Technical Committee, set up by the Ministry of Power, has recently come up with its report on the challenges of renewable energy integration and grid balancing. I believe the Committee has accurately identified problems in the current grid system. It has identified some eight or nine issues that need to be addressed on an urgent basis. And Wärtsilä can be of help in at least four of them.

The areas highlighted in the study include the need for strengthening our transmission system – in case of surplus renewable energy in one state (e.g. solar energy in Rajasthan), we should be able to transport the surplus energy to other states without much transmission loss.

Another major concern that policymakers have correctly identified is the need for equipping our grid operators with more flexible power generation sources so that they are always equipped with some alternatives to meet the varying demands. Going forward, we would like to collaborate more actively with the Ministry on these aspects.

TDB: When it comes to ease of doing business, how has been your experience interacting with different states?

MR: We don’t directly deal with states. We supply our equipment to power plant developers and they are the ones who interact with states. Further, as of now, I believe, State Electricity Regulators are guided by Central Electricity Regulatory Commission (CERC), and the relevant framework is also assigned by the Centre, which is implemented by different states with a few minor alterations. Having said that, so far we have not faced any difficulty in dealing with various stakeholders across the country.  

TDB: Do you manufacture in India or you simply source your products from your global manufacturing hubs? How do you view 'Make in India'?

MR: As of now, Wärtsilä does not make power engines in India. We source them from Finland (Wärtsilä’s headquarter) or from Italy. This arrangement helps us achieve economies of scale. However, we do use a lot of India-made auxiliaries. In a power plant, the core equipment i.e. the engine-generator set typically constitutes about 40-45% of the entire plant. The Balance of Plant (BoP), consisting of the remaining systems, components, and structures, is usually sourced from Indian suppliers. We also engage local contractors for civil works and construction.

Having said that, we have an assembly unit at Khopoli, near Lonavala in Maharashtra – from there we export our products to many countries. We also have workshops in Visakhapatnam and Cochin shipyards. Since we have many project teams in India, we embark upon many overseas assignments from the country. If, in near future, demand for our products rises in this part of the world, we will surely explore the possibility of assembling our engines in India.

TDB: Of late, limited availability of gas has been a concern for new power plants. How do you see the situation?

MR: Recently, production at several combined-cycle gas turbine  (CCGT) based power plants had to be stopped because gas was not available at a competitive price in the domestic market. Even imported R-LNG was too expensive. In fact, the situation created an impression that gas-plants are not viable at all. However, we have been explaining that gas can compete with coal when it comes to base-load operations.

It's preferable to use gas for operating flexible plants such as ours for peaking, renewable energy balancing, standby reserve needs, etc. Our plants will serve a definite purpose and will complement coal and renewable energy plants. The plants will run only when needed and so the operating cost will be low.

TDB: India’s per capita consumption of power is very low when compared with other developing nations. Your take...

MR: The per capita consumption of power in India is low because many villages in India still do not have electricity – over 400 million people in India still do not have access to power. In my opinion, a higher per capita consumption of power can mean only two things – either there is huge wastage or the quality of life is very good. In India, we do not want wastage. Rather, we want the quality of life to improve. This is the reason we are in favour of improving demand side efficiency, and as such promote usage of LED bulbs, efficient fans, ACs, etc.

TDB: What are Wärtsilä’s future plans?

MR: Balancing intermittent renewable energy is one area where there is a huge scope for growth in India – I think we have the right solution. In fact, a few years ago, we acquired a UK-based company that has a very good portfolio of high-technology products and systems for mid-sized LNG terminals. Hence, we are well placed when it comes to offering a complete range of products, integrated solutions, and services to Indian energy players. We also plan to tap the market for efficiency improvement solutions for fertiliser companies and refineries. We have also recently entered the solar energy segment and offer utility-scale solar photovoltaic (PV) power plants of 10 MW and above, as well as hybrid power plants comprising solar PV plants and internal combustion engines. In fact, Wärtsilä is the first company to offer utility-scale solar hybrid plants. We have already bagged our first solar project in Jordan and we now want to repeat the success story in India.

TDB: What would be your message for Indian policymakers?

MR: If stakeholders plan a 100 MW plant, we need to tell them to consider a 20:80 proportion of non-coal and coal based power plants, to achieve maximum efficiency. Coal could be the best option for base load, but for top-up energy needs and balancing intermittent renewable energy, hybrid plants like ours are ranked among the best in the world.

Further, rural electrification holds tremendous growth potential. And government should tap into this potential. Initially, there may be issues related to installation and transmission losses in remote areas, and can be a burden on the exchequer. However, I believe, a forward-looking government must realise that rural electrification can have a multiplier effect on the economy.

Villagers may initially use electricity for basic purposes, but going forward they will start buying electrical appliances such as fan, coolers, television, etc., which will increase tax revenues of the government. That’s how an economy grows. Hence, when it comes to electricity, I believe the government needs to have a long-term vision.