“Power demand in India has been falling in the wake of the ongoing COVID-19 lockdown. What are the key measures that will ensure smooth sail for the power transmission sector?”
The power demand in India, the world's third-largest energy consumer, has been falling in the wake of the national lockdown announced on 25th March. We have seen the peak demand dropping to 20-25% since the lockdown announcement which in energy terms translates to a reduction of 25-28%. In India, the fall in the energy demand is mainly due to commercial and industrial establishments which are shut owing to the lockdown. These establishments are the largest consumers of electricity consumption at 52% of the consumption mix.
The fall in the power demand has led to a cascading impact on all stakeholders in the power value chain, from Discoms to Generators and Transmission Licensees. Due to the lockdown, Discom sales have plummeted and they are unable to bill and collect bills from their consumers. The collection has dropped to around 40% for many, thus, significantly impacting their ability to pay generators and transmission licensees. The GoI is planning to support the Discoms with a financial package through PFC and REC, which should address this issue.
CERC through a recent order has reduced the late payment surcharge which Discoms have to pay for missing the bill payment due date of 45 days from 1.5% per month to 1% per month, This is a good measure in these times and ensures that there is no moratorium of payments and Discoms are obligated to make the payment due to Gencos and Transcos.
“What opportunities do you see for Renewable Energy integration to the grid post the national lockdown? Will it make way for a cleaner energy policy framework?”
Renewable energy holds the key to making the recovery post the pandemic sustainable. India’s climate promise of deploying 175 GW by 2022 is a step in the right direction and concerted efforts have been made by the government to ensure the energy goals are met.
As a project developer, we are bullish about the strong pipeline of green energy corridor projects envisaged by the Government for grid integration/ evacuation of power from the upcoming RE capacity being developed across the various the country and in States to meet the 175 GW RE target by 2022 and 450 GW by 2030.
In many countries, the renewable energy contribution in the generation pie has exceeded that of conventional generation consistently during the COVID-19 situation. Countries have now experienced that the grids are robust and can operate successfully with a higher proportion of RE. The cleaner air and water with low levels of pollution have boosted the resolve and the drive towards greater RE deployment.
The efforts should be doubled to increase RE capacity, and it should go hand in hand while preparing the grid for it to transmit these vast amounts of variable and intermittent injections of renewable energy supply. Electricity grids, therefore, would have to be modernized across Indian states. Technological innovations like uprate and upgrade of networks, system strengthening using cutting-edge technologies like MCMV towers, etc are transforming the energy delivery networks. As a leading player in the transmission sector, we not only build high-quality transmission infrastructure assets but also provide end to end solutions for upgrading, praying, and strengthening existing networks.
We also feel there is a large requirement of grid integrated battery energy storage systems (BESS) to balance out grid intermittency and demand management caused by the fast integration of RE energy sources into the grid. Considering the steep price declines being witnessed in battery prices globally, it would best to select developers to set-up these grid-integrated storage parks under an availability-based, fixed-annuity, tolling-revenue model akin to the competitive framework prevalent in transmission. We are currently working with the state government and utilities to help them identify immediate opportunities where storage could be economically beneficial and develop the business model framework.
“Sterlite Power has recently bagged key Green Energy Corridor projects. Please tell us more about it. In your view, how is India developing its green energy corridors?”
We won our first GEC project - Lakadia-Vadodara transmission project in 2019 which involves laying 330 km of 765 kV double-circuit transmission lines connecting the wind energy zones of Bhuj region to the load centers in Gujarat and Maharashtra. Due to the current lockdown, the work at the project sites had been suspended. However, with the new MHA order in place, we have gradually resumed operations at the site with all the safety and social distancing protocols in place.
The Government’s RE capacity addition targets have led to significant action at the Transmission front. Green Energy Corridor (GEC) is the name that has been given to the Government of India’s plan for Grid integration/ evacuation of Power from the upcoming RE capacity being developed across the various the country and in States to meet the 175 GW RE target by 2022. This is a comprehensive Transmission plan for integrating the identified RE zones of 66.5 GW, being implemented in two phases. About 28 GW of RE projects are planned under Phase-I (up to Dec-2020), and the balance 38.5 GW will fall under Phase-II (2021-22).
The past 15-18 months have seen 23 transmission projects – with a project value of around Rs 27,000 Cr – come up for competitive bidding in two phases. This has greatly encouraged private developers to enter the market with the auctions witnessing widespread participation and intense competition. By some estimates, competitive bidding on tariffs for these projects have effectively reduced the cost of delivery of Power by about 35%-45% to the consumers.
“Greenfield projects are flourishing in India with the issuance of several tenders across the country. How crucial will it be for the country to accomplish its renewable energy targets?”
Energy is a critical input to fuel the growth momentum of a developing economy like India. The government has consciously committed to having renewable energy sources to meet this growing energy appetite.
Transmission plays a critical role to connect the RE sources to the load centers. We reckon the investment requirements in transmission sector to the tune of around Rs 5 lakh crore in the next 10 years to create a vibrant State, National & Interregional SAARC grid. These investments would largely cater to enabling renewable generation evacuation into the grid, energy access to consumers, inter-regional energy exchange, and managing peaks and intermittencies through storage.
In the last 10 years, around 57 projects with an investment of more than Rs 80,000 crore have been awarded under the competitive bidding framework, out of which 23 projects have already achieved commissioning. A steady rise in the number of bidders from 3 to 7 in the last 1-2 years demonstrates the increasing interest in the transmission sector. The competition has also led to about 35-40 percent transmission tariff reduction compared to a normative cost-plus tariff of these transmission assets.
The strong appetite shown by investors for transmission assets should reassure the Central Government that the requisite ISTS transmission network in the country could be built using private investments rather than crowding out public funding.
“Recently, the power ministry has proposed amendments in the Electricity Act, 2003. What are your thoughts on the same? How it will help the industry?”
The proposed amendments to the Electricity Act 2003 are focused towards addressing the issues faced by the Distribution sector, specifically on the aspects of determination of retail tariffs at cost by the Regulators, Direct Benefit Transfer (DBT) by State Government to customers, honoring and enforcement of contracts through Electricity Contract Enforcement Authority (ECEA) and introducing the concept of Distribution Sub-licensee. These are major amendments, which if implemented in the true spirit, will put the Discoms on the path to financial and commercial sustainability. If we are able to fix the Discoms, we fix the sector per se.
A financially viable distribution sector reduces the counterparty and revenue recovery risks, which in turn gets reflected through lower risk premiums by banks in lending rates and rate of return expectations by investors. Consumers are thus, able to benefit from lower tariffs in bid out projects.
“With the rising stress due to COVID-19 lockdown, what future do you envisage for the country’s transmission sector to cater to power demands in upcoming times?”
Power transmission infra is a bigger challenge as compared to power generation in the development phase as the transmission is a linear project and crisscrosses innumerable districts, habitats, and regions. Despite the current COVID situation, we strongly believe that India’s power infrastructure will continue to grow. With the policy push tilted towards renewable energy, India’s transmission sector needs to keep pace with the generation. We at Sterlite Power, are aligned with the government’s vision of 40 percent electricity generation from non-fossil fuel sources by the year 2030.
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