Rental Power Solutions

Catering to a niche but growing market

Consumers have the choice to buy power from the grid, or generate their own power, or use power from rented systems. Rental power plants (RPPs) basically meet the power requirements of consumers who need power at short notice and for a short duration.

Rental power solutions mainly serve three purposes. First, they can be used for continued operations in case of a failure of the main/existing power source. Second, they can be used in areas where no other power source is available and the rented power solution is the only source for providing power continually for a required duration. Third, rental power solutions serve the purpose of both continual and non-continual usage for variable loads/power demands, particularly for industries running motors or other equipment, that demand varying power during their operation.

For a consumer, the choice between renting a power plant and buying one or setting up a power facility is subject to a number of factors. One of these is the time duration for which the supply is required, as RPPs typically work better as a temporary or back-up supply option.

Another key consideration is the cost of power procurement. Rental power solutions are certainly more cost-effective as they do not require a huge investment, thus limiting the liability of the user. In addition, there is no sunk infrastructure cost. No large down payments or interest costs need to incurred, thus preserving the borrowing capacity of companies.

Flexibility is another advantage of rental power solutions as consumers can increase or decrease the rental period and also the amount of power required. Further, consumers do not have to set up a distribution and transmission network at the site and, as a result, can focus on their core business. Other considerations include space availability with the consumer and the desired turnaround time for setting up a plant.

Key trends

The scale of rental power services offered in India varies widely. The key drivers for the power rental market are power deficit, and economic and industrial growth. The industry is fragmented with several small players and a few large ones.

Rental power service providers offer units ranging from a simple stand-alone temporary power package to the multi-MW level that can operate on fuels such as natural gas, coal and diesel. The increasing number of infrastructure projects has necessitated economical, uninterrupted and reliable power supply wherever and whenever needed. RPPs find maximum opportunities in the construction sector where diesel generator (DG) sets are deployed not only for meeting the power needs at sites in remote and difficult terrain but also to tide over frequent power supply interruptions. They, moreover, have a plug-and-play configuration that makes them easy to install, connect and power on in a matter of days. The construction industry requires power sources that can be swiftly delivered, rapidly installed and easily operated anywhere and this is where RPPs prove to be the most advantageous. In addition to utility and construction, these solutions find a significant market in the metals and mining, manufacturing, shipping, refinery, telecom, oil and gas, and shipping sectors. They are also used by utilities in case of power shortages.

Liquid fuel-based generation for back-up remains the mainstay for industries with high speed diesel fuel being preferred the most, followed by naphtha, light diesel oil and furnace oil. However, the rising cost of diesel and more stringent environmental norms may impact this demand going forward. Moreover, renewable options like solar photovoltaic are expected to substitute DG sets as a reliable source of power in the long run.

The rooftop leasing (under gross metering) concept is gaining popularity. Under this arrangement, the renewable energy services/supply company (RESCO) developer leases the rooftop and pays a fixed lease/rental to the building owner over the time of the lease period for installing solar panels on the rooftop. The RESCO developer exports the solar energy to the utility at a predetermined feed-in tariff approved by the regulator.

Conclusion

As per independent industry estimates, the power rental market is expected to grow from an estimated $13.73 billion in 2017 to $20.64 billion by 2022, at a compound annual growth rate of 8.49 per cent. With growing power requirements, rental power solutions are likely to remain relevant to address the challenges of intermittency, reliability and sustainability, which are yet to be fully addressed by other conventional and renewable energy technologies.

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