Power has always been regarded as a country’s most important infrastructure enabler and key growth driver. With continuing growth of population, rise of general prosperity, etc. rise in electricity demand in India would continue to outpace generation capacity expansion. In the last decade or so, the government has taken various initiatives to improve the power situation in the country, but has not been very successful. The widening power demand and supply gap is paving the way for growth of backup power sources such as gensets, inverters, and uninterruptible power supply (UPS).
According to Frost & Sullivan analysis, the backup power market (consisting of only UPS and inverters) was estimated at approximately Rs.48,500 million in CY2012. With rising demand for reliable and uninterrupted power supply, the backup power market has witnessed major growth due to steady demand from end users such as information technology/information technology enabled services (IT/ITeS), manufacturing and industries, banking, financial services and insurance (BFSI), healthcare, small and medium businesses/enterprises, and the home/residential segments.
Demand Drivers and Challenges With power demand and supply gap expected to widen further owing to increased consumption, delay in operationalizing planned power plants, and with reduced confidence in the national electricity grid, end consumers are being forced to plan for power outages by investing in backup power sources.
Some of the factors contributing to growth of the backup power market are:
- Expansion of banking network across semi-urban and rural areas, rise in number of bank ATMs, and growth of the IT/ITeS sector in tier 2 and 3 cities
- Development of airports, sea ports, warehouses, cold storage chains, and special economic zones (SEZs) across the country
- Development of single-specialty, multi-specialty hospitals, and healthcare centers in major cities, urban, and semi urban areas across the country
- The emerging retail, commercial, and residential sector which is expected to contribute significantly to growth of the backup power market
- Change in lifestyle in urban cities with round-the-clock power demand has created additional demand for backup power solutions
Major challenges facing the industry include competition from the unorganized sector, increasing cost of raw materials, increasing price pressure due to severe competition, and frequent changes in currency exchange rates that has led to erosion of margins.
Absence of Quality Power
Unreliable and poor quality of power supply has been a major issue in India since many years. Despite impressive growth in power generation in the last 3-5 years, power shortage still persists in the country. In addition, state transmission and distribution utilities have a very unreliable network, which is insufficient to deliver the whole of generated power to end users. Primarily, these utilities are under heavy losses, and therefore, they do not have sufficient funds to invest in the ageing infrastructure for its upkeep and upgrade.
Moreover, events such as the one that occurred in July 2012, when the country witnessed its worst grid collapse and more than 600 million people were left without electricity, has only strengthened the need for reliable backup power solutions. In today’s scenario, industries such as steel, textiles, process industries, etc., that need continuous and quality power supply and cannot suffer even a slight power interruption or voltage fluctuation, resort to either captive power plants or they have their standby backup power supply in place at facilities.
Also, due to technological developments, end users from sectors such as manufacturing, healthcare, BFSI, telecom, etc., are becoming very cautious regarding available power quality and are equally attentive about protection of their expensive electronic products. Increasing customer sensitization toward need of reliable and quality power to improve business productivity is further driving the backup power market in India.
Role of Renewable Energy The Indian backup power market has not only grown, but has also diversified considerably to include alternative energy solutions such as solar power, fuel cells, gas power etc. The market is moving toward solutions that are not only eco-friendly but are also non-polluting in nature. Backup power solutions based on solar energy have been the major focus for the last 3-4 years. Use of solar lighting systems as a prominent backup power solution in rural and semi-urban areas is rapidly growing, and therefore, prominent backup power companies such as Sukam Power Systems Ltd, Luminous Power Technologies, Swelect Energy Systems Limited, Consul Consolidated Pvt Ltd, etc., are already offering these solutions to the customers.
Use of fuel cells for telecom towers, solar hybrid UPS/solar inverters for household power requirements, are some key initiatives being undertaken by the industry to introduce eco-friendly solutions to the market. Particularly, in rural areas and semi-urban areas where power cuts on an average last up to 5-6 hours, these backup power solutions are expected to compliment the current conventional backup solutions.
Conclusion
According to Frost & Sullivan, the backup power market (consisting of UPS and inverters) is expected to grow at a Compound Annual Growth Rate (CAGR) of around 6-8 percent till 2015-16. Customers seek a single-point solution for their total power backup and protection needs, hence backup power suppliers are upgrading themselves as total power solution providers. Suppliers, in order to meet end users’ preferences such as reduced downtime, increased energy savings, and system efficiency, are making efforts to incorporate the same in their product offerings. The backup power market is being consolidated globally and this has had an impact on India as well.
(This article has been authored by Energy & Power Systems Practice, Frost & Sullivan)