'Distributive generation, an answer to India's power problem'

Wartsila India is an Indo-Finnish joint venture promoted by Wartsila Corporation with a 51 per cent share. The company is a leading supplier of distributed generating stations for industries, utilities and independent power producers (IPPs) and is an important power supplier to Indian shipyards and ship owners. It also has a 100 per cent subsidiary which looks after Operations & Maintenance business.

Wartsila India has been supplying base-load power plants to all major industries in India since 1983. It also delivers total energy solutions for power plants and complete shipping solutions for all ocean-going vessels, navy and offshore oil and gas installations. It enjoys a 60 per cent market share in the installed capacity of heavy fuel oil segment which includes two- stroke and four-stroke engines.

Wartsila has identified both utilities and IPPs as key focus areas, constituting a third of total revenues in the next few years.

Mr. Ole Johansson, President & CEO, Wartsila Corporation, who was in India recently, spoke to Ramnath Subbu about Wartsila India plans.

QUESTION: What is Wartsila's role in India?

ANSWER: The reason for Wartsila being in India is the power sector. We have been here for more than 15 years and have played an important part in the development of the Indian power generating scenario. Our offering in this field is of distributive power generation and our operations here are no different from those in 52 other countries. In many of them, we are even in the power generating sector. It is partly dependent on the type of technology we offer.

From an environmental standpoint, distributive power generation seems to be the way to grow in order to bring down emissions and get better efficiencies of plants. The other part is to have speedy implementation of projects because with big plants, you tend to have long construction times, completions risks, financial problems and so forth.

What are the growth opportunities that India presents?

The rural market is one and industry is the other. India has to make sure industry has power and if there is not enough power in the grid and mega plants do not come on stream, then they will have to build a captive plant and should be allowed to do so.

Can you elaborate on your other businesses?

We are leading suppliers of ship engines in the world. Shipping has always been a global business and shipping companies are basically all global. They trade in a global environment. They source their equipment, their ships, their spare parts in the global market. Only a global player can survive in that kind of a market. We are a leading supplier of that kind of equipment. On the global scene, Indian shipbuilding is quite limited and ships built here are comparatively small. Even then, we are present here for engines built here - harbour tugs to which we supply engines and have an active role.

Globally, our business is divided a third each into operations and maintenance, power and shipping. In India, power has been the biggest business. If we look at growth, the O & M business will see considerable growth.

Can you throw more light on your O & M business?

We have more than 2000 MW. We operate around 300 MW with customers who have been far-sighted to see that we run the plants and our job is to make sure they have power when they need it. We have developed our people - someone has to be on standby all the time and then you need to have access to additional crew if there are bigger projects. If we go from 300 MW to 2,000 MW, there is quite some scope and I am quite excited about it.

In power generating equipment, it is a broader portfolio of gas engines because globally, I see a trend of gas which is obvious. That means, we are developing our product offering so that we always have bigger variety of gas based products.

In marine products engines, it is upgraded products with high efficiencies and low emissions. We have 600 people in R&D globally in four R&D centres and their main focus is emissions.

How can India overcome T & D losses?

My solution is to generate power close to where you consume it. Avoid loss by placing the generating capacity where the load is. Move towards captive power and the other solution is small, municipal power generating facilities that serve communities rather than serving the communities via long distance high voltage lines. That way, you can deal with all elements of T&D losses and there are many as you know.

What is your experience with distributive power in India?

When you look at electrification of rural areas, it is not different from electrification of island nations - there a number of them - examples, the Caribbean, Philippines, Indonesia, where Wartsila has been strong.

When you talk to industry in India, you meet satisfied customers using captive equipment and the people have access to reliable power. In Europe, many countries use distributive power to bring new additional capacity into their network, examples, Denmark, the U.K., Spain and France. Here, distributive power generation has been implemented in a combined heat and power mode. They take care of waste heat using it for using it for heating/cooling and industrial purposes. Hopefully, the U.S. is also moving in that direction. We are extremely active in western U.S. - particularly California.

One of the main reasons for the current problem in California is that the regulatory framework is not fully liberalised - only in part. This means that the distributor is stuck in between - buying in a free liberalised market at high prices and selling in a regulated market - and that does not work.

What would be your suggestions to the regulators in India?

I would start by allowing industry to do captive generation. The second step is allowing use of captive power not only for themselves but also for neighbours - they become like IPPs (independent power producers) - that way at least you would get installed capacity fully utilised and people who have access to adequate finances would be willing to invest.

What are your future plans in India and where does India fit in the Wartsila's global scheme of things?

Last year, we delivered 2000-3000 MW of power generating equipment. In India, we delivered 250-300 MW of the same. This makes India one of the biggest markets for us.

It is important to stress the way the global economy and industry is developing. We are moving away from a manufacturing economy of the 1980s. Typically then, goods were produced in India and also converted here. That is important but not key anymore. We are moving into an open world where there is interchange of components and products on a global scale and we are all part of this big network.

We are moving towards a service economy where we are providing products that we assemble from components and source globally.

The Indian power sector has been in the news largely because of the Enron (Dabhol Power Company) imbroglio. Is there any impact of this on your plans here?

There is no direct impact. It is clear that we have all seen big plants put on hold. Enron may be one of the reasons but there are financial problems with big plants generally. The fact is that States are not in a position to foot the bill for big plants in general. As I interpret it, there should be, over time, an opportunity for smaller scale distributive power generation capacity. Then, we have an additional thing and that is the 18,000 villages which are not connected to the grid today. That also needs to be addressed. Fuel, which is easily transportable, that is, oil, in my opinion, is a viable alternative.

What about the Enron issue per se?

The Enron issue is something the international finance community is looking at closely. There has to be a solution in the interest of the consumer, the State and Enron but how and when, I cannot comment.

Mr. Ole Johansson

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