As outlook on the power T&D industry in India and major growth drivers
The Indian electrical equipment industry comprises of two broad segments – generation equipment and transmission and distribution (T&D) and allied equipment. The generation equipment sector stands for around 28 per cent while the T&D equipment sector accounts for close to 72 per cent of the total industry size.
Power-evacuation constraints and high T&D losses have attracted the attention of policy-makers for more investment in transmission infrastructure to match the investment in power generation. The outlook for the transmission sector for the next 5-7 years is bright, forecasts Sharan Bansal, Director, Skipper Ltd. He said, “The growth trajectory of the transmission industry is based on the facts such as increased emphasis on the grid reliability, decentralisation of the power generation due to increased focus on the renewable apart from the fossil fuel, and the increase in load centres arising from the urbanisation and major thrust on rural electrification.”
India’s transmission network capacity has been lagging power-generation capacity. To counter this, dedicated efforts are being made by the government to improve India’s transmission networks. A capital expenditure of Rs 2.6 trillion (Rs 1.0 trillion in substation and Rs 1.6 trillion in transmission lines) is foreseen in transmission and distribution sector during the 13th Five -Year Plan. In terms of volume 62,800 ckm of transmission lines and 128,000 MVA of transformation capacity will be needed during this period.
The estimated private sector investments in T&D is expected to reach Rs 3 trillion by 2019 including government support of Rs 1 trillion through Deen Dayal Upadhyay Gram Jyoti Yojana (DDUGVY) and the Integrated Power Development Scheme (IPDS).
Bansal observes, “There will be more opportunities for private players in the sector, since there are growing incidences of electricity shortage due to inabilities to evacuate excess power from production surplus states.” For example, in Chhattisgarh generation capacity is more than 30,000 MW and peak demand is 3,300 MW while just 7,000 MW transmission capacity for power evacuation.
Dr. Katsutoshi Toda, Managing Director, Toshiba Transmission & Distribution India Pvt Ltd believes that India will continue to invest in T&D infrastructure to fulfil the dream of delivering 24×7 ‘Power to All’ and there is already a significant amount of investments in this area. He adds, “A lot of smart technologies are being deployed to ensure that the traditional thermal generation, the transmission and also the intermittent renewable in different parts of the country can be integrated into the grid. A lot of smart technologies are being deployed and we are seeing a good uptick there.”
At the end of 12th Five -Year Plan, 42 per cent growth in the transmission line capacity addition is expected and 69 per cent in the substation capacity. By the end of 12th Five-Year Plan it is expected that the national grid inter regional power transfer capacity will be 72,250 MW.
The government is also targeting to bring down T&D losses in the power sector to 15 per cent by 2019 from over 20 per cent currently. Such severe electricity losses during the T&D process affect the country’s economic growth adversely, which is why India requires infusion of large amount of capital and modern technology into the Indian power T&D sector.
The government is focusing more on T&D sector especially in the smart grid and ultra high voltage segment. “We believe power saved is power generated and we are constantly undertaking our role in reducing the losses. Backed by Toshiba Group’s superior technology and lineage of over 100 years in T&D, TTDI aims to supply integrated solutions in the T&D sector by bringing in new technologies like Gas Insulated Switchgear, Solid Insulated Switchgear and Gas Insulated Transformers and solutions like underground substation installations that can be custom-engineered as per the project plan and requirement. Our systems effectively contribute to the T&D sector, in order to deliver reliable electricity from power plants to factories, transportation systems and even our homes,” says Toda.
While sharing his views on the power T&D industry in India, Harish Agarwal, CEO, Supreme & Co Pvt Ltd says, “In the context of discoms, the Ujwal Discom Assurance Yojana (UDAY) already has 27 member states that are ushering in operational and financial efficiency within their discoms. Aggregate technical and Commercial Losses (AT&C) have come down from 24 per cent in FY16 to 22 per cent by April this year. The gap between the average cost of supply (ACS) and average revenue realised per unit sale came down to
Rs 0.4 per unit by December last year from Rs 0.56 per unit in March the same year.”
Agarwal adds, “Although total sales of the industry in FY16 grew up by around 1 per cent from FY15, industry seemed to have squeezed their margins on account of low priced imports and tough competition in global market. In order to utilise its capacities which were hit by imports, industry depressed their prices and simultaneously increased exports (where also benefit was not high). Decline in PBT was therefore, inevitable; the same decreased by around 22 per cent from FY15 to 16. Based on established accounting standards, health of the industry can said to be ‘Good’, but significant potential of this industry still remains untapped. Also, industry needs to gear up in order to capture increasing global market.”
Such growth in power sector will entail exponential demand for electrical equipment, believes Agarwal.
The government’s mission is to develop existing power infrastructure by 2019 to help reach power to even the remotest part of rural places. It is not only taking major steps to generate electricity through renewable sources but also strengthening the T&D network. “Initiatives such as UDAY and others for financial turnaround of power distribution companies is supporting to overcome any financial burden and to help in developing good transmission network. Investments upto figures of Rs 2.5 lakh crore in T&D sector is planned to strengthen the network,” says Santosh Patil, Business Head Solar, Ganges Internationale Pvt Ltd.
He adds, “Major investment in transmission is expected in the southern region with increase in renewable energy installations followed by the Northern and Western region. In the distribution sector, the Western region is expected to receive highest investments followed by the southern, northern and eastern region. Power transmission is considered as important as power generation in India.”
Major growth drivers
The power sector globally for the next few years will be very demanding because of the rising energy demand in developed and developing markets. The T&D sector globally is expected to attract investment of $1 trillion over next 5-7 years. Indian power sector is witnessing massive transformation in terms of implementation of policy, technology upgradation and investments in the renewable sectors to harness the potential of natural sources of energy. “India is already self-sufficient in terms of energy generation and is contributing to the export of power to neighbouring countries which is opening up huge potential in the T&D sector. Power Ministry with the state discoms has been driving very effectively the implementation of IPDS/DDUGVY schemes which has opened up opportunities in the distribution sector,” informs Toda.
“Power sector reforms, policies and investments to meet the energy demand are the major growth drivers,” states Toda. He adds, “New policies like UDAY, Open Access, Tariff Based Competitive Bidding (TBCB), focus on the renewable sectors, smart grid projects and other infrastructure growth plans especially the proposed thrust by government in railways will also drive the electrical equipment industry in the near future.”
With the ‘Make in India’ thrust, the manufacturing sector will see huge opportunities in new technology development, building up manufacturing base to cater to the global markets and claim global leadership. This needs manufacturing sector to develop high quality process and norms which shall meet the global standard to make the grid reliable, safe and affordable.
TTDI is positioning to address the above markets by offering complete products and solutions which are energy efficient and highly reliable to the grid. In line with its ‘Make in India and Export from India’ commitment, the company made a 3-billion Yen investment (approximately $ 30-million) in 2016. It also boosted production capacity for transformers by 50 per cent by setting up a new manufacturing line for Ultra High Voltage transformers up to 1,200 kV and improving manufacturing and operational efficiency of distribution transformers. In the field of
switchgears also, the company established a new line for production of Gas Insulated Switchgears (GIS) and Solid Insulated Switchgears (SIS). This expansion allowed TTDI to meet the growing demand in India and in countries across the world.
With the government’s ambitious plans to install 100 GW of solar power capacity by 2022 and 10 GW of wind power every year, evacuation of this power will be a challenge. Realising this, the central transmission utility, Power Grid Corporation of India (PGCIL), is developing nine high capacity green transmission corridors.
The government has also announced a Desert Power Plan, which outlines the transmission capacity needed to evacuate solar and wind power from the desert regions of India by 2050. India is planning to construct several cross-border interconnections with its neighbouring countries to boost power trade. These links are part of the country’s larger plan of creating an integrated SAARC power market. Four new interconnections – one each with Bhutan and Sri Lanka and two with Nepal – are either under way or at the planning stage.
“The changing requirements of the transmission system are driving technology developments in the area. High performance conductors (HPCs) are already being used, while R&D is being carried out on superconducting cables. Towers are being designed to lower RoW requirements. FACTS and HVDC transmission technologies are offering increased flexibility in meeting transmission challenges. It is estimated that in excess of Rs 2 lakh crore has to be invested into transmission capacity building,” informs Bansal.
Agarwal highlights few major growth drivers as:
• Capacity creation in sectors such as infrastructure, power, mining, oil and gas, refinery, steel, automotive and consumer durables are driving demand in the engineering sector.
• Nuclear capacity expansion will provide significant business opportunities to the electrical machinery industry.
• A comparative advantage in terms of manufacturing costs market knowledge, technology and creativity
• Key market drive supply side is energy efficiency. Innovative solutions like product retrofitting and online condition monitoring. While on the demand side it is power development programme – thrust on skill development, minimise power theft, and export opportunities.
• Government should encourage only domestic industry participation as regards tenders for domestically funded projects
• Price preference to domestic manufacturers should be given in ICBs
• Testing of equipment from a foreign supplier be mandatorily done in Indian laboratories
• Minimum procurement by any utility should be of ‘Made in India’ products
• More funds for R&D
• Export incentive to 100 per cent ‘Made in India’ products.
According to Patil, a few of several growth drivers which are helping in growing the T&D sector in India include:
• Increase in Industrial activities: India is moving towards to become global manufacturing hub with investments seen across in various industries and their value chains
• Increasing power penetration to semi rural places and increase in per capita consumption
• Growing middle class and consumer base
• Strong policy support and strict guidelines
• Increasing government focus on infrastructure.
Excelling in global level
Power is a scarce commodity and a large part of the globe still faces shortage of power. With rapid urbanisation and industrialisation, the demand for power is growing day by day necessitating substantial investments in power generation and T&D infrastructure. Despite several improvements in power infrastructure, around 17 per cent of the world population is still without access to electricity. Global transmission towers market has grown historically and is set for a strong growth in the future as well.
According to World Energy Outlook (WEO) 2015, a total of $19.7 trillion investments are expected to flow in the power sector between 2015 and 2040, averaging $760 billion per year. The global electric power transmission network is set to expand from 5.5 million circuit kilometres (ckm) of high voltage transmission lines in 2014 to 6.8 million ckm by 2020, representing a CAGR of 3 per cent.
Bansal believes, in order to succeed in the rapidly evolving global manufacturing landscape, Indian companies will need to embrace a targeted approach to some of the key elements of manufacturing competitiveness, including:
• Embracing advanced technologies to drive competitive advantage: Advanced technologies are increasingly underpinning global manufacturing competitiveness. The 21st century manufacturers have to fully converge the digital and physical worlds where advanced hardware has to be combined with advanced software, sensors, and massive amounts of data and analytics to result in manufacturing excellence.
• Develop a balanced approach across the global enterprise: Increasingly sophisticated tools and strategies will be required to optimise the global manufacturing enterprise from a talent, technology, operational, financial, tax and regulatory perspective. The core of this approach is achieving a successful balance across a variety of drivers, including talent management, innovation investments, portfolio optimisation, cost competitiveness, manufacturing footprint, and supply chain in challenging and rapidly evolving new markets.
• Leverage on strengths of ecosystem partnerships beyond traditional boundaries: Adoption of innovation strategies aimed at embracing a broader ecosystem approach, developing and taking advantage of integrated manufacturing and technology clusters and partners, will be a growing imperative going forward. Competitiveness will be directly correlated to the strength and robustness of an organisation’s collaborative networks and ecosystems.
• Talent retention: A focus on creating differentiated talent acquisition, development and retention strategies to be regarded as ‘employers of choice,’ as well as identifying and nurturing new models of collaboration that leverage key sources of talent outside of the organisation will be key.
In FY17, India, for the first time in history, became a power-surplus country, leaving behind a historical legacy of increasing power deficit. In the April-February period of the current fiscal, it exported around 5,798 MU to Nepal, Bangladesh, and Myanmar. As per the Central Electricity Authority, India is likely to end FY17 with 1.1 per cent excess electricity supplies.
“Power sector boasts of a diversified, matured and strong manufacturing base backed by a robust supply chain. Rugged performance design of equipment to meet tough network demand and presence of major foreign players, either directly or through technical collaborations with Indian manufacturers is a testimony of unique advantages India holds in this sector,” says Agarwal.
Explaining how Indian manufacturers will excel in global level and grab this opportunity Toda says, “Quality, longevity and sustainability of products remain the cornerstones of competing in a global landscape. Our endeavour to manufacture and supply superior quality products that are made in India has resulted in securing many overseas orders from Finland, Kenya, and Bangladesh.” TTDI also signed a MoU with Kenya Power to help curb T&D losses in Kenya’s national grid. From product assembly, to fabrication, oil purification and conductor, most of the parts and materials are manufactured in TTDI’s factory that make its products cost effective with greater quality control and also ensure quick delivery.
He adds, “In our endeavour to improve quality and productivity through technology transfers from Japan and continuous Kaizen (improvement) activity, we have manufactured amorphous core distribution transformers that can limit transmission losses at a low load factor contributing to efficient power transmission.”
The technology up gradation and Government of India drive to reduce the T&D losses has resulted in innovation and adoption of latest manufacturing practices by the manufacturers which is resulting in producing very high quality and reliable products making it at par with global players thereby opening up huge opportunities for the global markets, observes Toda.
TTDI has emerged as the global production hub of Toshiba’s T&D business to cater to product and component requirements across the world. By manufacturing and supplying eco-friendly, world class and innovative products, the company will export to global markets and contribute to the growth of industries for the next India.
Patil said, “Demand for power installations in the T&D network is quite huge and tremendously increasing. With growing focus of GOI on delivering efficient and better power network including smart cities, Indian manufacturers are adapting themselves with advance technologies to produce better products suitable for harsher Indian environment. I feel this experience will advance them to grab global opportunities.”