Rental Power Solutions: Growing uptake by utilities for flexible and steady operations

Growing uptake by utilities for flexible and steady operations

Power demand in India has followed an uneven trajectory. Years of power supply deficit have now given way to a power-surplus situation, primarily owing to the inability to exploit the latent demand. Government initiatives and schemes such as Saubhagya attempt to tap this latent demand and utilise the country’s power supply potential. Estimates suggest that Saubhagya alone would generate an additional power demand of 28,000 MW. As demand grows, the supply side too will have to be strengthened, which could take time. In order to maintain the demand-supply equilibrium, the supply side will have to be supplemented by other power arrangements. Rental power solutions represent one such arrangement.

Role of rental power

At present, consumers can  meet their energy demand through several available sources. These include direct procurement from the grid, captive generation and power acquisition through the open access route. Rental power is another source that enables customers to meet their demand for power at short notice. Rental power solutions are a preferred option for customers seeking power on an immediate basis or for a short duration. It primarily refers to the renting of generator sets that run on gas, diesel or other fuels to deal with temporary power shortages. Further, rental power solutions act as an important backup for industries. Instances of technical failures and sudden blackouts are not uncommon. In such situations, access to rental power solutions ensures that power failures do not adversely impact industrial activity.

Lastly, rental power solutions are central to industries that struggle with variable loads and power demand, and need a reliable source for continuous supply of power. For instance, the requirements of a construction project may change over time, thereby leading to a change in power demand. In such a scenario, temporary generators offer a relatively flexible solution since they can be hired on a long- or short-term basis and be scaled up or down to meet varying power requirements. Moreover, since these solutions do not involve an upfront sunk cost, they help companies to cut down on their capital expenditure and improve their profit margins.

Industry trend

The increasing number of infrastructure projects in the country has necessitated uninterrupted power supply and supplementary power arrangements that can be used as per project requirements. The need for continuous power supply has been a key driver for rental power solutions. A host of options are currently available, ranging from stand-alone temporary power packages to higher capacity systems that can operate on fuels such as coal, natural gas and diesel.

In the case of industries hiring rental solutions for backup, liquid fuel-based generation continues to dominate. Amongst fuels, diesel is the most preferred option followed by naphtha, light diesel oil and furnace oil.

Rental power solutions have been relatively more popular in the construction, and oil and gas sectors. The concept of rental power, which has traditionally been based on conventional fuels, is now being extended to the renewable energy segment, particularly the rooftop solar market. Under the present arrangement, developers rent the rooftops of households on a lease basis and feed the power back to the grid. Keeping in view the existing practices, the government is also reportedly planning to introduce a “rent a roof” policy to provide a further impetus to this market. Further, the rental power market is growing rapidly in countries such as Bangladesh and Pakistan to meet the rising power demand since delays in project commissioning have deeply impacted the supply dynamics in these countries.

The way forward

While diesel generators have been at the forefront of liquid fuel-based backup solutions, stricter environmental norms indicate that this trend may taper off. Moreover, as renewable energy gains a stronger foothold in the rental market, the demand for diesel generator sets is likely to decline. The rental power market, however, is poised for growth. Several studies suggest that the market is expected to grow at a compound annual growth rate of approximately 9 per cent. Further, given the huge potential that the market offers, a number of players are expected to join the fray and increase market competitiveness.