While the past few years have been extremely tough for equipment industry providers, the outlook for the segment is expected to turn bright. The modernisation of old power plants, installation of emission control equipment, investments in sub-transmission and distribution (T&D) under government programmes, and aggressive growth in renewables will be the future growth drivers. In a recent interview with Power Line, Vishal Wanchoo, president and chief executive officer, GE South Asia, spoke about the challenges and concerns for the equipment industry, GE’s performance and plans for the Indian market, and the outlook for the sector. Excerpts…
How do you think the power sector has progressed in the past one year?
There has been growth in the power sector over the past year, driven largely by renewables. India’s power and energy sector is one of the most diverse among the global economies and is moving rapidly towards deploying renewable and cleaner means of power generation. The scale of adoption of new technologies across the electricity value chain has put India in the global spotlight. Renewable energy sources contributed 70 per cent to the total capacity addition in the last fiscal, enabling in meeting the revised renewable energy capacity target of 227 GW by 2022.
The government’s sustained efforts to augment capacity have helped reduce the power deficit and enabled India to become a net electricity exporter. Central government initiatives such as the Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), Ujwal Discom Assurance Yojana, Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya) and Integrated Power Development Scheme (IPDS) gained traction, with progress seen in rural electrification, Power for All, reduction of AT&C losses and mitigation of the operational and financial inefficiencies of discoms and state electricity boards. The T&D segment is also witnessing a revival and is expected to grow in the coming years.
Auctions in the wind and solar segments have seen a significant reduction in tariffs, which will lead to a lower cost of electricity in the long term. However, it is creating cost pressures on suppliers and developers. Meanwhile, the coal sector has seen new ordering, though at a slower pace, and the new emission guidelines have created an opportunity for flue gas desulphurisation (FGD) SOx solutions. While there has been progress, we are still facing issues that need to be resolved.
What are some of the key unresolved issues?
Talking of issues, while the power demand situation has improved, the poor financial health of discoms and the large number of non-performing assets in the power sector (especially independent power producers) are some of the factors leading to lower order placement. Furthermore, there have been delays in the ordering of FGD systems for coal power plants to comply with the new emission norms. This is expected to pick up in 2019.
The addition of new power plants based on conventional fuel sources was lower in 2018. This is likely to impact the order book of power generation equipment manufacturers. In this context, the government’s plan to warehouse stressed power projects to prevent their distress sale under the Pariwartan scheme is quite timely. The move will also help stem the increase of bad loans in the power sector.
Going forward, it is important to stress the importance of a diversified fuel mix given that the demand for power in India is expected to increase in the future owing to changes in lifestyle and economic growth. Coal will continue to remain the mainstay of the energy sector, while technologies for “firming” renewable power get developed and deployed. The cycling of coal plants, gas, pumped hydro, and battery storage systems will need to play a key role in meeting the peaking and load balancing requirements.
What are the key concerns for equipment and technology solutions providers?
It is extremely important to have certainty and visibility over the next couple of years in terms of volumes so that we can make decisions about technology and investments. Getting into an election year, we hope there is no policy disruption or stalling of momentum.
Sustained economic growth is expected to drive electricity demand and hence there is every reason for us to stay bullish on growth prospects in the power equipment industry. Government schemes like the DDUGJY, IPDS and Saubhagya will bring new beneficiaries into the fold. At the same time, rapid addition of renewable energy capacity is expected to contribute to a healthy order book pipeline in the electrical equipment industry.
There is a case for the export of Indian thermal power generation equipment given that we have a strong manufacturing set-up, which can cater to a wider market base outside the country. This would need active financing from the government, which can help engineering, procurement and construction (EPC) players bid for power projects outside the country. On the wind and solar energy front, it is important to ensure that the volume of offtake is in line with the frequency of the auctions.
How would you describe GE’s experience in the Indian power sector so far?
GE has been in India for over 100 years and has a large footprint. GE continues to be a leading energy player with strong capabilities in engineering, manufacturing, project management and supply of products and solutions for power generation and transmission infrastructure. We have experienced ups and downs owing to some challenges in the power sector, but we will continue to make investments in technology, the supply chain and talent at our manufacturing units.
GE is currently providing integrated power generation packages to its customers in the region. Despite global headwinds, GE continues to grow well in the South Asian region comprising India, Bangladesh and Sri Lanka as key markets; particularly as India and Bangladesh aggressively bring in new reforms to uplift the power sector to achieve energy security and power for all, it presents a huge growth opportunity.
What are some of the highlights of GE’s power business in the past one year?
The past one year has been quite active for us as we have won various orders across the energy value chain in India.
On the generation side, GE continues to focus on key technologies to further improve the efficiency and profitability of coal power plants and help subcritical power plants attain the supercritical level. GE currently has a portfolio of more than 4 GW of ultra supercritical and 5.5 GW of supercritical thermal power projects (TPPs) under execution in India.
By integrating both mechanical and digital industrial platform capabilities, GE is offering advanced ultrasupercritical technology, bringing the coal power plant industry ever closer to meeting the challenge of attaining the efficiency benchmark.
GE has been working closely with major power generators like NTPC to modernise three 200 MW steam turbines with ASP technology at its Ramagundam Super Thermal Power Station, the largest power station in south India. In the plant efficiency space, we have already tasted success with the modernisation of Gujarat State Electricity Corporation Limited’s Ukai thermal power station, which has helped increase the overall power plant efficiency by 5.5 percentage points.
This year, GE announced the successful completion of the first turnkey full flow wet FGD unit at NTPC’s 500 MW super TPP site in Vindhyachal, Madhya Pradesh. GE is also installing its FGD system under Phase I (2×800 MW) of NTPC’s super TPP in Telangana. We have extended our partnership with Bharat Heavy Electricals Limited and have obtained an order for the supply of twin boilers for supercritical TPPs at Patratu in Jharkhand and Udangudi in Tamil Nadu.
GE is executing technologies like H-class to power the upcoming high capacity LNG-based power plants in Bangladesh. The technology has immense value for a market like India. It provides cost-effective conversion of fuel to electricity as well as industry leading operational flexibility.
In the wind power segment, GE is uniquely positioned because of its strong global presence and large installed base. We have designed and developed a new low wind speed turbine in India that suits the country’s low wind speed conditions. It is a 2.5 MW machine, with a 132 metre rotor. Our turbine gives customers as much as 20 per cent increased production in the same wind conditions.
In the T&D segment, 2017 was a milestone year as we successfully commissioned Pole 2 of the Champa-Kurukshetra high voltage direct current link for Power Grid Corporation of India Limited (Powergrid). We also launched the Advanced Distribution Management System (ADMS) in collaboration with Tata Power Delhi Distribution Limited to modernise Delhi’s electric grid. GE commissioned the world’s largest wide area monitoring system for Powergrid to secure India’s Northern Grid and improve energy access. We also launched the GE Reservoir, a comprehensive energy storage platform to meet the industry’s rapidly changing needs, and deliver cleaner and reliable power.
What will be the key business opportunities for equipment providers in the next few years?
GE continues to align itself with market changes and customer expectations. Modernising India’s thermal power generation assets, improving efficiency and controlling emissions from coal-fired power plants are some of the areas that are likely to emerge as key growth drivers for the equipment industry over the next few years.
In the coal power segment, apart from demand for additional electricity, replacement of older and inefficient thermal units will create opportunities for new power generation units. In terms of deployment of emission control equipment, though the pace is yet to pick up, ordering for FGD systems has begun with NTPC leading the way. It is expected that significant ordering for these sytems would continue for the next few years. DeNOx solutions will also present good opportunities.
The increasing share of renewable power is expected to create new retrofit and upgrade opportunities, that is, the upgrade of low capacity, low efficiency components to flexible components to enable the cycling of coal power plants will help balance the grid. Opportunities for digital solutions to ensure efficiency improvement or better asset utilisation, etc. will also emerge.
Strengthening of the sub-transmission network under the IPDS and deployment of the Power System Development Fund has created new markets for T&D products. We have already executed 800 kV projects and are now focusing on the distribution segment in line with the government’s focus on providing last-mile connectivity.
In wind power, an upcoming area of growth is offshore wind, which is one of the fastest growing segments in renewable energy globally. Offshore wind has moved beyond being Europe-centric to a global renewable source of energy. GE recently announced the most powerful offshore turbine in the world, Haliade-X, a 12 MW turbine with 107 metre long blades. This is the right time for India to leverage offshore wind power.
What are the most promising and relevant new technologies for the Indian market?
In the thermal space, ultra supercritical plants and digitalisation of power plants will continue to remain important. With power generation shifting towards renewables, the Indian grid will demand specialised grid stability products and solutions. The GE Reservoir battery energy storage system is a breakthrough solution in this space, which provides flexible and modular energy storage for AC or DC coupled systems. Advanced technologies like these will enable developers and utilities to efficiently manage the vulnerability and balance of the grid. Our software solutions related to ADMS, distributed energy resource management systems and outage management systems will enable utilities to become proficient in monitoring, controlling and managing the flow of power in their networks.
Another breakthrough technology that we are deploying in the country is digital substations. This solution not only eliminates the additional cost of cabling and copper, but also enables the digital management of substation assets.
A key technology frontier in renewables will be hybrids and distributed energy. Hybrids could mean solar and wind together; solar, wind and storage; or even wind and storage. This innovation can increase the number of hours for which renewable energy can be generated and can also be a powerful enabler for rural electrification. In addition, with a good storage solution, one can capture power when it is not needed and reinject it into the grid when required, allowing one to have despatchable renewable energy.
What will be GE’s key priorities for the next few years?
With the roll-out of initiatives like Make in India and Digital India in the past few years, India’s position as a global investment destination has improved. With its strategic review now complete, GE is moving forward to implement the strategy and structure it laid out in June. Our focus is on improving our operating results, strengthening our balance sheet, accelerating growth across businesses, and increasing shareholder value. India has been and will remain a key growth engine for us and power will be our core focus.
Which areas need more action from the industry and the government?
There has been a strong push from the government for reducing carbon emissions from thermal power plants. With the revised timeline for complying with SOx and NOx norms, the industry needs to fast-track the retrofitting and upgrading of old thermal power plants. At the same time, there is a need for a robust regulatory mechanism to address issues pertaining to the expected tariff increase and the mode of procurement. Upgrading older thermal power plants will not only result in efficiency improvement of at least 5 per cent, but will also help in meeting pollution norms and further lowering the generation cost. Older pithead plants are best suited for renovation and modernisation, and upgrade solutions.
Further, the government’s decision to conduct timely and systematic annual wind auctions with tied-in grid connectivity is a welcome move. However, maintaining contractual sanctity by discoms is imperative to ensure sustained momentum in the sector. There is also a strong case for promoting domestic manufacturing under Make in India as the power transmission industry transitions to gas-insulated switchgear systems.
What is GE’s outlook for the power sector for the next two to three years?
Accounting for only 6 per cent of the global primary energy consumption, India is set to witness a strong growth in its energy demand. Backed by economic reforms that are expected to propel the economy to grow at 7-8 per cent over the next few years, the country will contribute around 25 per cent to the growth in global energy demand by 2040. This assumes significance as India, home to about 18 per cent of the world’s population, will emerge as the single largest contributor to energy growth globally.
The shift or balance between various generation mixes will be crucial to deliver cost-effective and high quality power to consumers. The need for a clean and green environment will force regulators, policymakers, equipment manufacturers, developers and consumers to determine the technology profile of the generation, transmission and allied sectors equally.
Further, India’s ambition to step up renewable capacity must be matched with its capability to manage intermittency. Flexible operation of thermal power plants, both coal and gas based, is likely to create synergy, rather than hostility, between conventional and renewable energy sources. Even stranded gas-based capacity may find a market given that natural gas-based power generation can efficiently and effectively meet the balancing and ramping requirements of the grid for high renewable energy integration.