The power transmission segment today boasts of high-tech systems, an integrated pan-Indian grid and a huge network. It clearly owes much of its growth to public sector giant Power Grid Corporation of India Limited (Powergrid). In an interview with Power Line, I.S. Jha, chairman and managing director, Powergrid, talks about the company’s growth so far, the challenges ahead and the sector outlook…
How do you assess the progress made in the power transmission segment over the past two decades?
In the 1990s, the role of transmission was limited to the evacuation of power from generators to the load centres through linear transmission lines. There existed five separate regional grids. The initial interregional links were planned for the exchange of operational surpluses amongst the regions. However, later, when the planning philosophy graduated from regional self-sufficiency to a national perspective, interregional links were planned associated with generation projects that had beneficiaries across regional boundaries. The past 20 years have seen the integration and strengthening of regional grids into a single interconnected robust national grid.
The synchronisation of all regional grids has helped in the optimal utilisation of scarce natural resources, with the transfer of power from resource-centric regions to load-centric ones. Further, it has paved the way for the establishment of a vibrant electricity market, facilitating power trading across regions. The achievement of “One Nation, One Grid, One Frequency” has yielded results, facilitating the seamless flow of power across the country and helped reduced the cost of electricity in the spot market from more than Rs 8 per unit in 2010 to about Rs 2 per unit today. On numerous instances, “one price” has been witnessed across the country. The concept of power transmission thus has evolved during this period as an enabler of power markets.
How has Powergrid evolved as an organisation over this period?
Two decades ago, Powergrid was still evolving as an independent organisation and had just completed the amalgamation process. From that stage on, it has today assumed the leading role in the transmission segment. Recognising its pivotal role, it was also designated as the central transmission utility (CTU) and entrusted with even higher responsibilities of sectoral development. The period from 2000 to 2010 saw Powergrid maturing in its role as the CTU and enabling various regulatory changes, of which the most important was the introduction of open access. It also became a navratna company. In the past five years, it has commissioned and added assets at an exponential rate, more than doubling its gross assets and creating a robust national grid. Today, it carries more than 45 per cent of the power generated in the country. During the last four years of the Twelfth Plan, Powergrid’s contribution to the country’s total transmission line length addition, transformer capacity addition and interregional capacity addition has been 43 per cent, 65 per cent and 81 per cent respectively. The country’s interregional power transfer capacity has been enhanced to more than 61,000 MW from 27,750 MW at the end of the Eleventh Plan period.
How different are the challenges for the power transmission segment at present as compared to two decades ago?
There are many issues that need attention during the development of transmission systems. Planning of transmission for renewables, matching the transmission infrastructure between intra-state and interstate systems, right of way (RoW) and land acquisition are prominent among them.
Owing to its commitment to reduce global emissions and considering the benefits of green energy, the government has set a very ambitious renewable energy target of 175 GW by 2022. We all know that renewable generation plants have short gestation periods of 8-12 months, whereas transmission system development takes 24-30 months. Therefore, planning transmission corridors well before setting up a renewable plant is very challenging. Further, most of the generation now coming up is merchant in nature, where the beneficiary is not identified. Transmission planning for such generation plants is very crucial as the beneficiary may require power in any part of the country. It has been observed that the development of interstate transmission and intra-state transmission systems does not match at various locations. Power transmission requires continuous and sufficient wires. Any mismatch results in network congestion and non-utilisation of the entire infrastructure. Thus, proper coordination is needed between the interstate and intra-state systems. Power transmission requires linear land for laying of transmission lines. Two decades ago, there was less infrastructure development and hence more land was available for transmission lines, and there was less resistance from land owners for government projects. Today, land owners have many opportunities for the utilisation of their land and so the problems of ROW are greater.
What are some of the strategies and measures needed to overcome the challenges being faced by the power sector?
The government has been extremely supportive in resolving the various challenges faced by the power sector. Various stakeholders are also working towards developing strategies and taking necessary actions. There has been a significant improvement in the forest clearance process. Transmission project developers have permission to start work after Stage I or in-principle approvals.
The delegation of more powers to regional offices of the Ministry of Environment, Forest and Climate Change and the easing of compensatory afforestation conditions in tariff-based competitively bid projects have been other key initiatives. Further, RoW compensation guidelines have been reviewed. As per the new guidelines, the land cost below the tower base will have to be compensated at a value of 85 per cent of the cost of land. The compensation towards the diminution of land value under RoW (15 per cent of the land cost) will also have to be provided. This is in addition to the compensation provision present earlier.
To overcome RoW challenges, a dedicated identified RoW approach could be adopted for utility services in cities. So, while planning a city, planners should allocate a corridor for laying gas pipelines, electricity lines, telecommunication fibre, tower spaces, etc. This approach would minimise the RoW requirements and will work best for greenfield projects. This integrated approach should be a feature of smart cities. The government is also trying to address the weak financial health of discoms through the implementation of the Ujwal Discom Assurance Yojana (UDAY) for the takeover of discom debt by the states, compulsory feeder and distribution transformer metering and smart metering for all consumers. For strengthening of distribution networks in urban areas, the Integrated Power Development Scheme is being implemented, which would enable infrastructure upgradation, underground cabling and the setting up of GIS substations in densely populated areas.
Apart from the above, reverse auction to secure gas supply for power plants, increase in the renewable purchase obligation of utilities for the absorption of higher renewable energy, implementation of ancillary services and reserve regulation for stricter grid discipline, implementation of green energy corridors for renewable energy evacuation, and the National Smart Grid Mission for new technologies in the distribution segment are some of other initiatives that are shaping the future of the power sector.
What have been Powergrid’s biggest accomplishments in the past one year?
During the past year, we have capitalised projects worth Rs 317.88 billion, the highest amount for any year. We have commissioned 13,717 ckt. km of transmission lines, which is also the highest. Our gross fixed assets surpassed Rs 1,500 billion. Our annual income crossed Rs 200 billion for the first time, and the profit after tax surpassed Rs 60 billion. Further, tenders for more than Rs 500 billion were issued.
A significant achievement was the commissioning of Pole-I of the Northeast-Agra high voltage direct current (HVDC) project, which is the first-of-its-kind long distance HVDC project. Our first tariff-based competitive bidding line was also commissioned well within time and cost schedules. Another key achievement was the increase in the transfer capacity towards the southern region grid by 71 per cent, from 3,450 MW to 5,900 MW within a span of two years. Besides this, additional international links to Nepal and Bangladesh were commissioned during the year. The transmission system for the NP Kunta solar park was also commissioned within a record one year.
What are the company’s key priorities for the next two to three years?
We have close to Rs 1,400 billion worth of projects in hand at various stages of execution. We are targeting a capex of about Rs 1,000 billion for transmission projects over the next four years. Our top priority is to complete the works in hand. Further, we are focusing on new business opportunities coming up in the transmission and distribution segments. Smart grids are the building blocks of smart cities and the government’s initiative to develop 100 smart cities will open the doors for investment in the distribution system. Powergrid is also looking for new projects, nationally as well as internationally, in the transmission, sub-transmission and distribution segments through the engineering, procurement and construction route.
What is your outlook for the power sector by 2020 and Powergrid’s role in it?
We may not be witnessing accelerated demand growth at present, but over the next few years, UDAY will start showing results and the health of discoms will improve. This will lead to growth in energy demand from 7.6 per cent per annum (seen over the past 15 years) to almost 10 per cent per annum. This spurt in demand will rejuvenate the generation segment. There is already a target of 175 GW for renewables by 2022.
The role of Powergrid will be to ensure that an adequate evacuation system is available. It will also play a role in improving generators’ efficiency with discoms being able to procure power from cheaper sources, and in enhancing grid stability in light of the rising share of renewables. More transmission will mean more flexibility and robustness of the grid.