The recently concluded fiscal year 2024 (FY24: April 1, 2023 to March 31, 2024) was very eventful for the interstate transmission system (ISTS) market, especially considering schemes bid out under the tariff-based competitive bidding (TBCB) mechanism.
The recently-released draft National Electricity Plan (Vol.2 — Transmission) indicates massive investment of Rs.4.76 trillion in the power transmission sector during the five-year period FY23 to FY27 [April 1, 2023 to March 31, 2027].
In physical terms, the planned addition is 1,23,577 ckm of transmission lines and 7,22,940 MVA of transformation capacity. Interestingly, of the total transformation (substation) capacity envisaged, as much as 4,38,675 MVA (or over 60 per cent) would come on the ISTS side. This effectively means near-doubling of the total ISTS substation capacity that existed as of March 31, 2022.
Based on the actual performance in FY23 and FY24 (up to October 2023), it very much appears transmission infrastructure capacity addition is gaining the desired momentum.
For instance, in FY24 (up to around mid-February 2024) over 20 ISTS schemes have already been awarded under the tariff-based competitive bidding (TBCB) route —by far the highest in any fiscal year so far. Added to this are several schemes allotted under the RTM route.
It is abundantly clear that over the next 2-3 years, hectic activity will be seen in the power transmission space, and that too, involving high-end technology like 765kV AC and HVDC.
Developers will need to strengthen their supply chain management if they have to complete their projects on time. Typically, ISTS-TBCB projects have a stringent gestation period of 18-24 months.
When it comes to HVDC-based transmission systems – there are quite a few that would be coming up for award in TBCB mode – concerns of equipment availability are already surfacing. Though CERC has provided an extension in timelines, developers will need to contend with paucity in supply as there aren’t too many HVDC equipment suppliers even at the global level.
Domestic transformer manufacturers will need to expand their manufacturing, and more importantly, testing capabilities, as the demand for 400kV and 765kV transformers is poised to rise. Reportedly, smaller transformer manufacturers, which were complaining of over-capacity, are now booking orders, as a consequence of bigger players witnessing an overflowing order book.
On a technical note, India’s efforts to complement renewable energy generation with battery energy storage systems (BESS) have not really fructified as expected. This has warranted the need for higher transmission infrastructure, and that too with grid-balancing technology like STATCOM, VSC, etc. This will exert more pressure on equipment suppliers.
ISTS transmission service providers – both Power Grid Corporation of India and the private sector – would need to ensure availability of equipment and services, given the massive quantum of work on hand. Equipment manufacturers would have a expand capacity, whilst ensuring not even the slightest compromise on quality.
It is hoped that by end-FY27, India’s cumulative goal of 5.80 lakh ckm of transmission lines and 18.27 lakh MVA of substation capacity is realized, with little or no shortfall.
The author of this article, Venugopal Pillai, is Editor, T&D India, and may be reached at venugopal.pillai@tndindia.com. Views are persona.
Though power T&D continues to undoubtedly be a thrust area in terms of public and private investment, it is a matter of concern that the pace of transmission infrastructure upgrade of late has been slower than expected.
During the first eight months of FY24, addition of new transmission lines and substation (transformation) capacity has fallen short of target. According to latest statistics released by Central Electricity Authority (CEA), India could add 7,844 ckm of new transmission lines in the April-November period of FY24, meeting only 64 per cent of the targeted 12,236 ckm. In terms of substation capacity addition, the target achievement was barely 57 per cent with actual addition standing at 32,961 MVA.
Falling short of the target, and very significantly at that, is just one aspect. The actual performance in FY24 also does not comparable favourably with that in FY23. In the case of substation capacity, actual addition in FY24 (April to November), was 24.6 per cent lower than in the same period of FY23. When it comes to transmission lines, actual addition in FY24 was only marginally higher than in the previous year.
The shortfall in target achievement is largely arising from poor performance of state transmission utilities, which are mainly associated with 220kV-rated transmission infrastructure. Central utilities, mainly comprising Power Grid Corporation of India Ltd (PGCIL), and private utilities have done relatively better. This is why transmission infrastructure upgrade, at the 765kV level, has not been way off the target.
During FY24, a record number of interstate transmission system (ISTS) schemes have been awarded. The winning developers represent a healthy mix between PGCIL and private developers. This would ensure that the pace of 765kV and 400kV transmission infrastructure addition would be healthy in the coming years. The 220kV upgrade remains a matter of concern as it is largely a state government prerogative.
State government utilities should actively considering engaging private enterprise in transmission network augmentation, through the TBCB (tariff-based competitive bidding) mechanism. Some states like Uttar Pradesh, Madhya Pradesh, Odisha, etc, are working towards it but by and large, the penetration of the TBCB culture in intrastate transmission system (InSTS) projects is still very poor.
The power T&D value chain ranges from extra high-voltage lines for interregional and interstate transmission, to intrastate lines, culminating in the downstream distribution network.
Inadequacies at any stage would be a weak link in the value chain, and would militate against the ultimate objective to reaching electricity to the smallest and remotest consumer.
The author of this article, Venugopal Pillai, is Editor, T&D India, and may be reached on venugopal.pillai@tndindia.com. Views expressed here are personal.
It is envisaged that carbon-free sources will account for nearly 70 per cent of India’s aggregate power generation capacity by FY32, according to information released in Parliament.
There has been a noticeable revival in the number of interstate transmission system (ISTS) schemes awarded under the tariff-based competitive bidding (TBCB) route, in recent months.
Going by recent trends, the ongoing fiscal year FY24 will most likely to see the highest number of ISTS-TBCB schemes ever awarded in any year so far. During the period April 1, 2023 to around December 7, 2023 (roughly first three quarters of FY24), a total of 15 ISTS-TBCB schemes were awarded, according to an analysis by T&D India. At least six more schemes are likely to be awarded in the remaining period of FY24. This compares very favourably with 18 schemes awarded in FY23, nine in FY22 and three in FY21.
What is also conspicuous is that the power transmission developer base is witnessing increasing engagement from the private sector. In recent years, entities like GR Infraprojects, Megha Engineering and ReNew Power, to name a few, have joined the power transmission development space. It is also very heartening to note that a seasoned utility like Tata Power, which was largely away from the competitive bidding arena, recently made its debut by winning an ISTS-TBCB scheme in Rajasthan.
Most of the ISTS-TBCB schemes currently being awarded are related to renewable energy evacuation from RE-rich destinations like Gujarat, Rajasthan and Karnataka, among others. These projects, with a typical gestation period of 24 months, are being developed to support India’s massive RE ambition of 500 GW of installed power generation capacity from non-fossil fuels.
Today, there is much euphoria surrounding the 500-GW RE target – both on the generation and transmission side. However, it must be borne in mind that RE is a tricky business. From the generation perspective, the plant load factor is intrinsically low. This means that a given RE installed capacity will not result in the same electricity output as that of comparable conventional thermal power capacity. Besides, RE generation, due to its inherent intermittency, requires much technological intervention on the transmission side.
The true and full potential of renewable energy can therefore be realized only if RE generation is backed by grid-scale batter energy storage systems (BESS). India is making a sincere beginning in this domain but it will take some time before BESS establishes itself as an integral component of the T&D value chain.
It is therefore imminent that despite all the traction that RE is gaining, there will have to be a fast-track build-up of conventional (thermal) power generation capacity so as to forestall a shortfall in medium-term electricity demand.
The author of this article, Venugopal Pillai, is Editor, T&D India, and may be reached on venugopal.pillai@tndindia.com. Views expressed here are personal.
First a bit of a background: KPS1 Transmission Ltd is a project special purpose vehicle (SPV) that was incorporated by bid process coordinator REC Power Development & Consultancy Ltd (RECPDCL) to develop an interstate transmission system (ISTS) scheme officially termed as “Transmission scheme for injection beyond 3 GW RE power at Khavda PS1 (KPS1)”.
After adopting the regular tariff-based competitive bidding (TBCB) procedure, Megha Engineering & Infrastructures Ltd (MEIL) was declared as the successful bidder, and the project SPV “KPS1 Transmission Ltd” was transferred to MEIL The transfer of the SPV took place around April 21, 2023, and this transfer symbolizes the formal “zero date” for the project that was expected to commissioned in 21 months thereafter.
In August 2023, Adani Energy Solutions Ltd (AESL), formerly Adani Transmission Ltd, announced that its board approved the proposal to acquire “KPS1 Transmission Ltd” from its original owner MEIL. As of September 30, 2023, this acquisition was complete as AESL showed KPS1 as one of its under-construction transmission projects, in an investor presentation filed on stock exchanges.
The takeover of TBCB assets is not new but the acquisition of KPS1 Transmission is unique in many respects. It is for the first time that a TBCB project has been acquired so early in its life. As of September 2023, when the acquisition was completed, MEIL had barely begun pre-project activities.
So far, acquisitions of TBCB projects are seen to have taken place after project was operational. Developers like Larsen & Toubro, Kalpataru Projects International Ltd, Techno Electric & Engineering have sold their operational TBCB assets as they wanted to exit the power transmission development space, and focus on EPC contracting.
There have also been cases where developers have sold their operational TBCB assets to infrastructure investment trusts like India Grid Trust (IndiGrid) and Powergrid Infrastructure Investment (PGInvIT).
There have also been instances where the developer was fraught with financial difficulties and the projects were stranded. This was the case with Essel Infraprojects, for example. These stranded assets were then acquired by other developers as part of the debt restructuring package worked out by lenders.
The acquisition of KPS1 Transmission by AESL, barely when the project has taken off, therefore stands out remarkably.
This acquisition has another dimension to it. In the initial bidding stage of KPS1 Transmission, four bidders had qualified – MEIL, Adani Transmission, Power Grid Corporation of India Ltd and Sterlite Power. However, in the final bidding stage, only three were qualified for submission of final bids, and in this, Adani Transmission did not feature. It is therefore interesting to see that a company that did not qualify to submit its bid for a project ultimately ended up acquiring it from the winning bidder.
In many respects, therefore, the case KPS1 Transmission AESL is strangely unique.
The author of this article, Venugopal Pillai, is Editor, T&D India, and may be reached on venugopal.pillai@tndindia.com. Views expressed here are personal.
Industry body IEEMA recently held its Annual Convention that witnessed several keynote addresses on the broad subject of strategies for the new energy paradigm.
One such presentation dwelt on the subject of innovation. When we speak of innovation, what immediately comes to our mind is innovation in products or technologies. However, innovation need not, and should not, limit itself to technology. Innovation in areas like financing, for instance, needs attention. Innovative financing models can go a long way in making India’s infrastructure development a cost-effective exercise.
Some years ago, Energy Efficiency Services Ltd (EESL) devised the OPEX model – a true financial innovation – for funding the rollout of 5 lakh prepaid smart meters in Bihar. This was a huge success. In fact, it can be proudly recalled that during the pandemic years, when state power utilities were struggling to reach physical bills to its consumers, especially in rural and semi-urban areas, Bihar discoms were garnering revenues of up to Rs.5 lakh per day, thanks to prepaid smart metering and the inherent facility of digital payment.
Today, the RDSS envisages the TOTEX model that seeks to finance the rollout of a massive 25 crore smart prepaid meters, largely from funding from the private sector. Coming to think of it, the TOTEX model is a amplified extension of the OPEX model that EESL had introduced. This significant financial innovation is poised to have a huge positive impact, and that too nationwide.
Even when one speaks of technical innovation, the process is fraught with practical complexities. Companies that are engaged in manufacturing of electrical equipment, for instance, have immense scope for technological innovations. For instance, it is often spoken in industry circles that the basic design of a transformer has not changed from the time of Faraday! A transformer-less grid is hard to imagine but is it in the realms of possibility? Only serious innovation can provide the answer.
Companies are mostly engaged in day-to-day activities and the inclination towards innovation is limited, by design. This is also borne out in India’s low R&D expenses to GDP ratio. There are several startups and unicorns that devise technical innovations. However, these innovations cannot be deployed readily as they are generally futuristic in nature.
Hence, while technical innovations chug along, either through startups and R&D works of companies, there should be parallel emphasis on other forms of innovations like those on the financing or strategy side. Startups should be encouraged to devise financial innovations, and not just technical ones.
As financial innovations can generally be deployed with less lead time, they can contribute to overall cost-effectiveness and efficiency, which is after all ultimate aim of innovation.
The author is this post, Venugopal Pillai, is Editor, T&D India, and may be contacted on venugopal.pillai@tndindia.com. Views are personal
Policy reforms and technology intervention will hold the key to bringing commercial viability to India’s power distribution reforms. In the entire power value chain, it is the last-mile distribution where almost the entire commercial losses are concentrated. Resurrecting the power distribution space is therefore the only way to make the power value chain a profitable enterprise.
Very recently, the Union power ministry introduced “time of day (ToD)” tariffs. This was done by suitable amendments to the “Electricity (Rights of Consumers) Rules, 2020”.
ToD tariff marks a paradigm shift from the ubiquitous “same tariff” regime that has always been the historical norm. Basically, under the ToD mechanism, the electricity tariff will vary according to the time of the day (ToD). This can bring about a drastic change in the way electricity is consumed.
A consumer can now prefer to run heavy loads when tariffs are low. In other words, consumers will feel dissuaded to indulge in high electricity consumption when tariffs are high. This can, over a period of time, potentially flatten the peak demand curve.
It is not that the ToD tariff culture is entirely new to the nation; some private power distribution utilities have been experimenting with ToD tariffs on a pilot basis. In general, it is intuitively clear that electricity tariff in the day should be higher than that at night. This is for the simple reason that peak demand would exist during the day time when maximum consumption from industrial and commercial consumers takes place. However, now with renewable energy (mainly solar) expected to dominate the energy mix, tariff during solar hours (duration of eight hours as specified by the respective State Electricity Regulatory Commission) would be 10-20 per lower than normal tariff. In non-solar hours, tariff would be 10-20 per cent higher.
What ToD tariff is expected to do is to create “conscious” consumption of electricity. Right now, electricity is available practically round-the-clock – both in urban and rural areas. This makes electricity an “on-tap” commodity with consumption dictated by no factor other than need. When ToD comes into the picture, the dimension of tariff will set into the minds of the consumer. One can therefore expect that there electricity consumption will become judicious in nature.
The ToD facility will complement the benefits of smart prepaid metering. In a broad sense, while prepaid metering will ensure that power distribution companies become commercially viable (as monies will be collected before actual consumption of electricity), ToD tariff can help the consumer extract maximum electricity consumption for the payment made.
Two important benefits will accrue from the ToD tariff regime — rationalization and judicious management of electricity consumption. Both of these can prove effective agents of demand side management.
The author Venugopal Pillai is Editor, T&D India, and may be reached on venugopal.pillai@tndindia.com. Views are personal.
Ever since the “net zero” philosophy has gained currency, there has been a rethink in the entire energy value chain. Right from power generation to last-mile power distribution, experts are working overtime in devising a culture that could significantly reduce carbon emissions, as a precursor to the cherished net-zero ambition.
According to information recently tabled in Parliament, a preliminary study shows that India’s AT&C losses have climbed down to around 17 per cent in FY22 from around 22 per cent in FY21. This is based on information filed by 56 state government-owned discoms that account for more than 96 per cent of the country’s total input energy.
The decline in AT&C losses has resulted in a reduction in the gap between Average Cost of Supply (ACS) and Average Realizable Revenue (ARR). The ACS-ARR Gap (on subsidy received basis, excluding Regulatory Income and UDAY Grant) has declined from Rs.0.69 per kwh in FY21 to Rs.0.22 per kwh in FY22.
It is well known that India has targeted to restrict its AT&C losses to below 15 per cent, and as such, the performance in FY22 augurs well towards this goal.
The Union power ministry has said that the decline of 5 percentage points in AT&C losses and Rs.0.47 in the ACS-ARR gap in one year is the result of a number of initiatives taken by the ministry that includes among other things revision in the prudential lending norms of the two leading financial institutions – PFC and REC. Discoms that need financing will need to commit to an action plan, endorsed by the respective state government, to reduce AT&C losses within a timeframe. Discoms that are seeking funding under the Rs.3-trillion RDSS will also need to adhere to a time-bound loss reduction trajectory.
All said, over the past two decades, the Central government (with different leaderships) is doing much to extricate state discoms from the financial mess that they are in. One must bear in mind that electricity is not a purely “Union” subject. It is more of a “State” subject with Central intervention merited only in deserving cases. However, it appears that most states tend to take Central support for granted. It is high time that state governments take full responsibility of their power value chain – most importantly the distribution part – and work towards resurrection.
Free electricity, or highly subsidized electricity, has traditionally been a popular political plank but there should be serious rethinking on this matter. Mobile telephony is a prospering business and has extremely deep penetration even in the lower socio-economic class. The idea of “free mobile telephony” would sound absurd even to the lower social rung that is happily paying for the service.
India’s per capita power consumption is way below the global average. There is huge demand for electricity – across all social strata – without any condition precedent of “free power”. Given this, power distribution can be an extremely profitable business but only if seen from a business perspective and not a political one.
(The author of this article, Venugopal Pillai, is Editor, T&D India. He may be reached on venugopal.pillai@tndindia.com.)
