Power Up: Is India’s T&D sector set for big leap?

The Indian economy is observing signs of restitution and so is the power sector. A shift in the Government of India’s focus to reinforce the power T&D system opens up profuse opportunities for the transformer market too. The Government of India is encouraging investments at the transmission and distribution level to boost access to reliable and continuous power supply through schemes such as Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY). The scheme aims to provide power for every village and thus provide power to everybody. This necessitates huge investments in the T&D sector including use of energy efficient transformers, besides renovation, modernisation, restructuring, and up gradation of the sub-transmission and distribution infrastructure.

Major manufacturers have geared up their manufacturing facilities to meet the surge in demand due to this. The Bureau of Indian Standard and Ministry of Power are keenly working to ensure that quality products are procured by the electricity boards and have consequently fixed mandatory Level-2 rating for distribution transformers for DDUGJY scheme. As power is one of the most essential components of infrastructure vital for the economic growth and welfare of nations, the existence and development of sufficient infrastructure is important for continual growth of the Indian economy.

The government has foreseen an investment plan of Rs 2.6 lakh crore in transmission sector during the FY17-22, of which estimated Rs 1.3 lakh crore has been allocated for intra-state transmission capacity. Apart from this government’s focus is on railway electrification and providing last mile connectivity and electrifying villages so that it can accomplish the set target.

In the past couple of years, Indian power transmission and distribution (T&D) sector has observe rise in activities, with government pushing programs such as electrifying villages, railway electrification and enhanced public private participation and electricity for all by 2019.

The government has introduced policy reforms to boost private participation that has activated a fresh thrust for buying and sales of transmission assets. The companies having core business in EPC or power generation and won electric transmission projects are now ready to monetise such assets to follow new projects. Investment firms have also revealed interest and adding to this, there are some companies, with core business in renewable, now eying T&D assets.

With a huge buyer interest from transmission companies and yield-based investment firms, industry experts say it may be a good time for T&D sector.

The financial health of the state electricity distribution firms has enhanced due to lower transmission and distribution (T&D) losses, tariff hikes and cost rationalisation. Traditionally known to be the weakest link in the energy value chain, the swivel of discoms is also being driven by volume growth. Discoms have also gained from healthy tariff hikes allowed in most states between 2011-12 and 2015-16 apart from cost rationalisation initiatives. The electricity regulator had lowered the incentive income available to thermal generators for the period between 2013-14 and 2018-19, which resulted in a dip in per unit costs. The government has also worked on coal linkage rationalisation, which has led to lowering of fuel cost for some plants.

The mode of development of transmission projects is as important as planning for the expansion of the future grid. A recent report by Crisil has rated the power transmission sector as the most attractive for infrastructure investment in India. The success of inter-state transmission system public-private partnership projects on the tariff-based competitive bidding model is testimony to the stoutness of the PPP model of the sector.
In some cases, tariffs have reduced by 30 per cent and project execution time by 40 per cent. Moreover, the Revised Tariff Policy of 2016 has suggested the competitive bidding model for intra-state projects. A big measure of success for the transmission grid is the formation of intra-state networks that will bring electricity closer to the consumer.

India’s T&D sector ready for the big leap
Sunil Wadhwa, Managing Director, GE T&D India Limited says “T&D sector in India has transformed in terms of capacity and technology adoption. From a 132/220kV grid, the national grid has matured to 800kV and even tested a 1200kV substation at Bina. In terms of capacity the last two five-year plans, saw the substation capacity addition being ramped up from 400 GVA to 687 GVA at the end of 2017 with a plan to reach 980 GVA by 2022.” With focus on bridging last mile connectivity, Central and State governments are investing considerably in inter-intra state grids creating new demand for T&D players.

Various Generation mixes like thermal, hydro, nuclear and renewables being implemented and planned by Govt of India only augment the demand for an equivalent T&D infrastructure to evacuate and balance such diverse generation on the grid, he adds.

“Expansion in industry and infrastructure like railways, airports, oil & gas will only add on to the growing demand for T&D network across the country driven largely by government investments in this space. Alongside, with India’s Energy Security plan, we are now seeing SAARC grids taking shape and regional interconnections with Bangladesh, Sri Lanka, Nepal & Bhutan are being planned and implemented,” says Wadhwa.

Indian Grid is the world’s largest single-phase grid and is progressively moving towards digitisation and shaping up at par with national grids of developed countries. With so much technology implementation and expansion, the Indian grid is ready for the big leap in the coming years, he further states.

Pradyot Kumar Paine, COO-T&D Business, Sterling and Wilson states “There has been various policy measures initiated and implemented providing support to the T&D sector. In 2018, the government had announced plans to achieve a national renewable energy target of 100 GW by 2022, subsequently from solar & wind energy etc. Up till March 31st 2018, we have achieved 20 GW, which means that we need to guarantee 80 GW of solar capacity in the next four years or earlier.”

To support this government initiative, the T&D sector will need to focus on creating transmission lines and substations / load centres that accomplish the 100 GW solar capacity target in established power system, he adds.

“For the next financial year, the government has already allocated more than Rs 100,000 crores, which will be shared by central and state utilities and private players. The transmission and distribution sector are undergoing a major change as constant efforts are being made to develop India’s per capita power consumption. In the coming years, we are anticipating significant growth and development within the sector”, asserts Paine.

Sunil Misra, Director General, IEEMA says “Earlier transmission infrastructure in India assumed an utmost significance as the distribution of energy resources and consumption centers were particularly unbalanced. Generation projects were largely trying to situate in pit head/resource rich areas eventually depending on the huge network of transmission infrastructure for their consumption. However, in recent times, with arrival of renewable energy on the scene and conventional power plants taking a back seat, the nature of transmission planning and their evolution is bound to see a major transformation.”

Government of India came out with an ambitious plan to develop 1,00,000 MW Solar and 60,000 MW Wind generation capacity by 2022. Grid integration of such large scale solar/wind generation capacities requires balancing actions because of natural intermittency of such generations, he adds.

“The transmission planning would be involving other controlling mechanism like forecasting of renewable generation, spinning reserve, dynamic compensation, renewable energy management centers and real time monitoring. Also, transmission infrastructure is not only required to meet the evacuation needs but also support the open access requirements (creating superfluous capacities) of the generators,” further adds Misra.

It is time the states adopt a successful central model for building the network and reap the benefits of private participation. This will guarantee that the states can focus their energies on distribution reform and last-mile connectivity, and at the same time, bring down the tariff for the end-consumer.

Milind Thekedar, Managing Director, JBS Enterprises Pvt Ltd says, “Some years back, even if some consumer had put up his own power plant, it would have to be compulsorily captive. It could not be at a place different than the place of consumption. He was not allowed to synchronize with the grid and even if could manage to do so, the tariff was very low. Moreover, the entire generation, transmission and distribution was managed by state electricity boards. All the state boards were operating as separated islands. This led to a large scale lethargy in all the above three activities. As far as transmission lines are concerned, the idea of maintenance was limited to cutting trees before and after monsoon. There was imbalance in per cent utilisation / load factor.”

The picture took a complete turnaround when Electricity Act 2003 came in force, electricity became saleable & tradable commodity, the generation, transmission & distribution became responsibility of three separate entities / public limited companies, when national grid building came into being.

With these changes, an awakening came that generation, transmission & distribution can become profitable. This encouraged the utility companies (public & private sector, both) to look at transmission lines as a standalone profit center, independent of generation & distribution activities, because now, power generated by anyone and at any geographical location could be transported to any user (including utilities themselves) at any geographical location. The private players saw this as a good business opportunity in power infrastructure sector, examines Thekedar.

The cap established on minimum availability of 98.00 per cent automatically triggered attention to proper maintenance of transmission lines. With these favourable conditions, India is sure poised for a big leap in T&D sector, he further adds.

Various Generation mixes like thermal, hydro, nuclear and renewables being implemented and planned by Govt of India only augment the demand for an equivalent T&D infrastructure to evacuate and balance such diverse generation on the grid
Sunil Wadhwa, Managing Director, GE T&D India Limited

In recent times, with arrival of renewable energy on the scene and conventional power plants taking a back seat, the nature of transmission planning and their evolution is bound to see a major transformation.
Sunil Misra, Director General, IEEMA

To support this government initiative, the T&D sector will need to focus on creating transmission lines and substations / load centres that accomplish the 100 GW solar capacity target in established power system.
Pradyot Kumar Paine, COO-T&D Business, Sterling and Wilson

When Electricity Act 2003 came in force, electricity became saleable & tradable commodity, the generation, transmission & distribution became responsibility of three separate entities / public limited companies, when national grid building came into being.
Milind Thekedar, Managing Director, JBS Enterprises Pvt Ltd