Interview with Atul Sobti: “The sector is transitioning from a single fuel-centric to a diversified energy mix”

“The sector is transitioning from a single fuel-centric to a diversified energy mix”

Although the country’s power mix is experiencing significant disruptions with a greater influx of renewables, coal-based power is expected to remain the backbone of the Indian power sector, says Atul Sobti, chairman and managing director, Bharat Heavy Electricals Limited (BHEL). In a recent interview, Sobti discussed the outlook for the power equipment market, new and emerging technologies, as well as the plans and targets for BHEL. Excerpts…

How has the power equipment industry evolved over the years?

BHEL was set up with the objective of attaining self-sufficiency in the indigenous manufacturing of heavy electrical equipment, particularly in the power sector. I am proud to say that we have answered the nation’s call and today, we are self-reliant in power plant equipment manufacturing. Although there were several bumps in our journey of attaining self-reliance, it was largely stable and predictable up to the late 1990s. The notification of the Electricity Act, 2003 was a watershed moment in the history of the Indian power sector. Since then, the pace of change has multiplied many times.

Buoyed by the fast pace of economic growth, the country witnessed a spurt in demand for power and hence, saw an undivided focus on accelerated capacity addition during the last decade. The domestic power equipment manufacturing capacity has also increased from 6-10 GW in 2005 to about 25 GW today. The industry has matured with higher spending in research and development and successful indigenisation of high-end technology such as supercritical power plants, high-voltage, direct current (HVDC) equipment and GIS equipment. Consequently, cheap and inferior quality equipment imports are being eliminated from the market. Today, we are a globally competitive manufacturing organisation. So, on the whole, the past two decades have been transformative, progressive and very satisfying.

What is the state of the power equipment industry? What are the biggest challenges?

The industry is going through a challenging time. Capacity underutilisation, lock-in of capital and other resources in stranded assets, and uncertainty about future demand are some of the major concerns for the sector. This is a result of the prevailing uncertainty regarding the demand growth trajectory, new technologies, evolving energy mix and affordability. In the past three years, the biggest positive has been the government’s efforts to address and resolve outstanding issues and bring clarity through a balanced and holistic approach.

Did the industry see an improvement in equipment orders during the past year?

Ordering activity in the conventional thermal sector was generally subdued during the past few years. However, the last year saw an increase in activity compared to previous years. With the changing energy mix, it will be tough for the thermal sector to get back to the high levels of 2008-10. However, despite the changing energy mix, coal is expected to be the mainstay of the Indian power sector. I foresee a good demand for renewables as well as an improvement in thermal power ordering owing to the growth in the GDP and the fructification of various sectoral policies. Currently, our primary focus is on the conversion of non-executable orders to executable ones. At BHEL, this focus has resulted in the conversion of some of the major non-executable orders to executable ones in the recent past.

What are your expectations regarding equipment orders for the power sector in the next two years? What will be the key business opportunities for equipment providers?

Many tenders are at the final stage of ordering and we are favourably placed in good number of these. A strong tender pipeline is also visible for the medium term. Going forward, activities are expected to be centred on the implementation of new emission norms for power plants and the replacement of old sets with supercritical technology. From a long-term perspective, I see a growing realisation and consensus about the demand and supply mix to emerge soon that will benefit the complete power value chain.

What have been the significant business highlights for BHEL in the past year?

The year 2016-17 was the last year of the Twelfth Plan. During this period, we contributed 45,274 MW of generation capacity, surpassing the government’s target for BHEL by 9 per cent. On the order inflow front, we secured the largest ever export order valued at Rs 100 billion to set up the 2×660 MW Maitree TPP in Bangladesh on an engineering, procurement and construction basis. We also won a major order from Powergrid Corporation of India Limited for ±800 kV, 6,000 MW HVDC terminals associated with the HVDC Bipole Link between the western and southern grids. Other significant orders are the 18×145 MW Palamuru Rangareddy Lift Irrigation Scheme in Telangana and the 57.6 MLD ultrafiltration water package order from the NTECL Vallur TPS. During the year, we also received a series of orders in renewables, transportation, defence and other verticals.

What are some of the promising and relevant new technologies that BHEL plans to introduce in the Indian market?

At BHEL, we have always been at the vanguard of the technological revolution. We have indigenised subcritical and supercritical thermal technology,  and commissioned the country’s first, highest rating and indigenously manufactured 800 MW boiler at APPDCL Krishnapatnam, the first in-house manufactured 800 MW TG (turbine generator) at Yeramarus TPS and the country’s first 660 MW indigenously manufactured supercritical set at NTPC Barh. We have contracted more than 40 supercritical sets till date. To usher in the next technological era, we are pioneering efforts in advanced ultra supercritical (AUSC) technology for power plants along with the Indira Gandhi Centre for Atomic Research and NTPC, under the aegis of the Government of India. BHEL is offering complete customised solutions to power plants for achieving the revised emission norms. Other recent developments include execution of the 765 and 1200 kV ultra HVAC transformer and reactor by BHEL, manufacture of IGBT propulsion technology for locomotives and ACEMU,  supply of STATCOMs for industrial and grid applications, manufacture of GIS up to 420 kV, supply of hotel load converter 2×500 kV for Shatabdi trains, supply of phase shifting transformer and 500/630 kW power conditioning unit for solar PV generation. Our focus has always been to keep India abreast of the state-of-art-technologies and we will continue to work towards this goal.

What are BHEL’s key priorities for the next few years? What will be the main focus areas?

The thermal power segment is at a crucial juncture today in the midst of changing global priorities, disruptive technological developments, rapidly evolving system architecture and a change in the mindset of key stakeholders and consumers. Given this scenario, a two-pronged strategy needs to be adopted by BHEL. First, given our large footprint and established credentials in the power sector, we will be working to diversify into other fuels and technologies in the conventional power domain as well as enhance our presence in the transmission segment.

Second, to capitalise on the emerging opportunities in the solar, transportation, defence, aerospace and water business segments, we aim to increase the share of business from these areas in order to build a more diversified BHEL of tomorrow. Work in these areas is already under way and some of our recent developments showcase our resolve in this regard. We have augmented the manufacturing capacity for solar cells and solar modules. We have recently entered into a technology collaboration agreement with Japan’s Kawasaki Heavy Industries Limited for the manufacture of stainless steel coaches and bogies for Metro Rail. Similarly, we are taking various initiatives to enhance the contribution of other businesses like defence and water in our top line.

What is the company’s outlook for the power sector for the next few years?

The power sector is currently undergoing a transition from a single fuel-centric to a more diversified energy mix, wherein there is a specific place for each energy source. We are seeing a reduction in the reliance on coal-based power and a rapidly increasing share of renewables in the energy mix. However, in the next few years, till the time we are able to find a techno-economically viable solution to complement the inherently variable and intermittent renewable sources of energy, we will have to necessarily rely on coal-based power.

The narrative of the power sector will be governed by two factors — sustained economic growth would propel electricity demand and we would be required to shift to cleaner power in line with our commitments to the international community. Demand for electricity is widely expected to increase by 1,000 BUs every 10 years. From the supply perspective, the energy sector in the world and in India is going through a transition. Market forces should stabilise the energy mix taking into consideration availability, affordability and adaptability. With regard to the shift to cleaner power, two major developments are the replacement of old sets with new, more efficient plants and installation of emission control equipment in the existing fleet as well as upcoming capacity.

We are geared up to address the nation’s requirements in all of these areas. So, we consider the current downturn in the sector to be a short-term blip. In the long term, enough steam is left to power our growth aspirations.