India’s Power Sector Must be Financially, Physically Resilient to Secure Investments it Needs
April 26, 2021. By Manu Tayal
Q: “Ministry of Power's Early Commissioning Incentive Policy Needs to be Revised”
Ans: The early commissioning incentive policy of the Ministry of Power (MoP) needs a revision given that transmission projects now need to be commissioned in tandem with renewable energy projects, in 18-24 months, suggests Manish Agarwal, CEO – Infrastructure & Solutions Business, Sterlite Power, in an exclusive conversation with Manu Tayal, Associate Editor, Energetica India. Agarwal also suggested various policy changes required to boost the transmission sector, challenges of the transmission sector, the significance of the development of power infrastructure in light of the OSOWOG initiative, etc. Here’re the edited excerpts from that interaction:
Q: “How can the transmission sector propel India’s Renewable Energy dream through Greenfield projects?”
Ans: Considering India’s 2030 targets of adding renewable energy (RE) up to 450GW, a strong interconnected Grid with the ability to carry power from any point to any point and often in both directions is extremely important to deal with the intermittency of Renewable Energy generation. Hence, the transmission sector will drive the energy transition in the country and must facilitate the twin objectives of 24X7 energy access and affordability. To attain its true potential in the next decade, the Power sector will have to move towards flexible transmission network planning, freedom of design to promote innovation, greenfield projects together with capacity augmentation of existing transmission infrastructure, and energy storage solutions. The networks have to be planned for n-1, and where appropriate, n-2 contingencies, for a truly robust transmission grid. Transmission planners should carry out an objective evaluation of transmission plans around the key dimensions of time, space, and capital while defining & deciding projects.
Interestingly, in developing countries like Bangladesh, ~50 percent of new transmission lines that are approved and under implementation are on high ampacity and low loss products, while this stands at ~30-35 percent in Indonesia. India can consider a similar strategy for long-term planning of new lines, at the Centre and State level.
Q: “As India’s energy mix is diversifying more towards clean energy, is the grid/ transmission structure ready to take up the integration challenge?”
Ans: An emerging challenge from RE integration into the grid is that huge generation capacities are being added much faster than evacuation systems can be built. Hence, transmission systems should be planned ahead of generation. Additionally, developing power transmission infrastructure is a bigger challenge as compared to RE power generation, as the transmission is a linear project, crisscrossing innumerable districts, habitats, and regions. RE-rich zones, with high solar insolation and wind speeds with abundant and economical land parcels, are all located away from the load centres. The challenge then is to build transmission lines that consume the least right of way (RoW), commissioned in matching time frames of RE projects, and with the availability of efficient capital resulting in the least cost of supply. Solutions are available to build lines with higher line capacities at higher voltages, using lesser RoW and for enabling faster execution of projects e.g. by use of aerial technologies in construction. Through a conductive policy & regulatory framework which is open to new technology adoption, it is possible to accelerate the adoption of these solutions and get better results.
In addition to being available on time, another important aspect is to have a Grid that is robust and one that provides for element outages (n-1 criteria) in different parts of the network as well as is suitable for variations in power flows. These could be due to peak or off-peak load scenarios or high RE or low RE generation scenarios etc. While transmission planners do look at all these aspects, the speed at which the planned projects get awarded and completed needs acceleration. There are situations when utilities may have to operate transmission lines at higher than their rated capacities or by resorting to load shedding or by operating the network in split or radial modes. This compromises the security and 24x7 power availability to consumers, which must be avoided. It is the responsibility of all stakeholders to not only plan well but also to make sure that projects get commissioned as per the plan on time.
Finally, Retrofitting existing transmission infrastructure and augmenting capacities can be done in a timely and cost-effective manner as these do not require additional space/RoW which otherwise often takes a lot of time to sort out. Importantly, this is an environmentally friendly solution as well, which does not require any alterations to en route forests, habitation, or vegetation, as the enhancement of capacities is undertaken within the same existing power corridor.
Q: “In your view, what are the biggest challenges of the power infrastructure sector currently?”
Ans: India has already achieved its 100% electrification target due to the accelerated and focussed efforts put in by the Government. While this in itself is a great achievement, India still lags far behind in per capita consumption w.r.t global average and even far behind developed economies. To achieve this growth, we have to make sure that electricity generation (sustainable & environmentally friendly) is sufficient.
Transmission and sub-transmission networks should be robust and sufficient for all variations and contingencies. Importantly, the distribution network, which is the last mile, must be capable and efficient enough to provide 24x7, reliable and affordable electricity to every citizen of this country. Not only every household needs this electricity but also very soon, roads and highways need the infrastructure as electrical vehicles are slated to take over the transport sector. While a lot is being done for the generation and EHV transmission infrastructure, it is the sub-transmission and distribution network, which remains sub-optimal. Plagued by high distribution losses, contingency planning and higher frequency of element outages need to be resolved sustainably. Hence both bottom-up and top-down planning needs to be carried out in a coordinated manner to ensure that the network is optimized w.r.t load and generation growth. Sterlite Power is in a unique space of building greenfield transmission infrastructure projects on a BOOT or BOOM basis as well as uprating and upgrading existing transmission infrastructure to enhance capacities. We also have a very strong team to support the planning of networks in a holistic manner keeping the plans optimized w.r.t time, space, and capital.
Q: “In the backdrop of India's proposed ‘One Sun, One World, One Grid’ initiative, what will be the priority for India’s power infrastructure?”
Ans: The task of developing a vision, implementation plan, road map, and institutional framework for implementing “One Sun One World One Grid” (OSOWOG) has been taken up by ISA. While the vision document and road map gets developed in the next few months, it would be imperative to ensure that the development of such grids is done in the most cost-efficient manner – as has been done very successfully in the past in the entire country as well as internationally by adopting the PPP model. This mode of infrastructure development has been in place for several years and has yielded unparalleled savings in tariffs for the end consumers. Development of InterContinental Grids via PPP route would not only enable access to previously unreachable energy resources but also safeguard consumer interest by making sure that the delivery of power is done in the most cost-efficient way possible.
The OSOWOG framework will enable a platform for global cooperation on this grand vision. India will have to strengthen its ties with like-minded international partners and evolve a global consensus to achieve its goals. Once consensus is evolved there will have to be a standardization of cross-border regulatory and interconnecting standards. There will be a need for a clear roadmap and long-term agreements with member countries to ensure implementation. In terms of preparation, the domestic industry needs to prepare itself to cater to the need for technological interventions such as high power, high depth submarine cables, energy storage, real-time AI-based smart grid infrastructure to manage the overarching Grid infrastructure. For this, there is an urgent need to build capacity and capabilities. We need to be a leader in developing solutions both technological and regulatory to address the challenges of large cross-border power exchange. There is also a lot of learning that can come from global best practices, especially in EU Power markets, which have dealt with transnational power markets and infrastructure.
Q: “What will be your key suggestions for the policymakers to provide a boost to the power transmission sector?”
Ans: The Govt has played a pivotal role in spurring private investment in the sector, debottlenecking of some critical challenges, and creating funds aimed at the development of the power sector. The TBCB framework & its strong payment security mechanism has opened the development of transmission projects to the private sector. Clear guidelines concerning RoW were issued by the Ministry of Power (MoP) in 2015. Energy Access, Make in India, Industrial growth and EV penetration will boost electricity demand, requiring a sizeable installed capacity of generation. Funds like PSDF have enabled the development of power systems in the country. Govt’s plans to set up ultra-mega RE parks in Ladakh & Kutch regions and offshore wind energy in the coastal regions are the right steps in this direction.
Additionally, several actions can help boost the power sector.
• Long-term perspective planning for transmission should be carried out given the RE target of 450 GW by 2030 and RE developers should be provided with the right economic incentives to locate their projects in a way that ensures optimal utilisation of transmission assets.
• Given that transmission projects, need to be commissioned in compressed time with the RE projects, which take 18-24 months, a State Support Agreement (SSA) is a necessity for on-time commissioning of transmission evacuation infrastructure. Under the SSA, the States would extend proactive support in accessing the Right of Way, Forest, and Wildlife Clearances, applicable permits from State/ local authorities, etc. Similar SSA can be instituted for the development of RE projects. The framework of SSA is implemented in Roads and Airport development and has been a key enabler for addressing project commissioning issues.
• The early commissioning incentive policy of MoP needs a revision given that transmission projects now need to be commissioned in tandem with RE projects, in 18-24 months.
• Transmission planning needs to consider various technologies and plan for grid-level energy storage systems to increase the reliability of the grid and the quality of power delivered. Planning should also consider the possibility of developing inter-regional, inter-country, and inter-continental transmission networks.
• Investments in the infrastructure sector in general and the power transmission sector, in particular, need to be promoted through an enabling regulatory framework that ensures a level playing field between the public and private sector. The risk-reward framework must be just and equitable.
• The construction of transmission lines is mandated to follow the design and technology prescriptions of CEA. RFPs often do not leave enough scope of adopting new relevant technologies which in most cases unduly increase the asset's Capex thereby increasing per unit tariff. Hence, RFPs should specify the technical performance matrix instead of specifying materials and designs.
• State Governments are expected to contribute financial resources for the development, strengthening, and modernisation of the intra-state grid, which could have been allocated for other social sectors like health, education, etc. The Standing Committee on Energy pointed out the deficiency of funds and the mismatch between the goals set and funds allocated for the deployment of transmission infrastructure. With States already struggling with the loss of revenue and health crisis on account of the COVID-19 pandemic, the need to allow competition in the state transmission sector gains added importance. The limited resources available with the State governments should be put to better use and private capital invited to develop the infrastructure. Infrastructure such as Transmission should only be developed under the competitive route, with the State focussing its efforts on planning the network to meet the State GDP targets and diverting state resources to health, education, and other social sectors.
Q: “How do you see the future outlook of the country’s transmission sector?”
Ans: The Government has been very proactive on the power sector reform agenda, which is marked with swift and strong measures taken to address various issues. This clarity of thought and intent has helped the Power sector weather the COVID-19 pandemic impact resiliently.
The energy mix of our country is changing, with the increased focus on RE. The growth for the transmission sector would come from developing evacuation infrastructure for renewables and strengthening state grids to transmit this RE power within the states. The past 18 months have seen Transmission projects with a value of around Rs 27,000 Cr come up for competitive bidding. This clarity in outlook has encouraged private developers to enter the market with the auctions witnessing widespread participation and intense competition. India is bestowed with RE potential in specific regions of the country, the hot deserts of Rajasthan and cold deserts of Ladakh have high solar irradiance and the southern states have high wind speeds. This potential must be tapped at the least cost and renewable energy transmitted to the load centres for India to achieve its Net-Zero Carbon target by 2050, an announcement for which is under consideration with the Government of India. A roadmap to tap this RE potential with the commensurate requirement of developing inter and intra-state transmission projects and energy storage systems (BESS and PSS) will draw the interest of global investors flushed with patient capital.
Going forward, the key priority would be to make the power sector resilient both physically and financially by bringing in much-needed reforms in electricity tariffs. The IEA anticipates India’s power system to grow to an installed capacity of up to 1500 GW by 2040 with a target of 450 GW coming from RE, by 2030. This will push the scale of India’s power market beyond the size of the EU’s synchronised grid, which connects around 1000 GW of installed generation across 27 Countries. India’s power sector must be both financially and physically resilient to secure the investments it needs to meet the country’s electricity demand and shift to cleaner energy.
On the technical side, as already mentioned above, solutions to uprate and upgrade existing infrastructure to enhance corridor capacities will go hand in hand with greenfield projects to keep up with the challenges of RoW as well as the speed of project completion. Deployment of Flexible AC Transmission Systems (FACTS) will also play a role along with energy storage systems to manage the substantial proportion of RE in the total power pool. As Grid size grows bigger and bigger and with international & intercontinental interconnectors, the level of automation, communication, and the go-to decision making and control mechanisms will also play a significant role.
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India’s Power Sector Must be Financially, Physically Resilient to Secure Investments it Needs