Cables and conductors are vital components of transmission and distribution (T&D) networks. Over the past few years, the cables and conductors market has witnessed healthy growth backed by a rapid expansion of T&D lines to cater to the growth in generation capacity and power demand.
The aggregate transmission line length at 220 kV and above voltage stood at 423,000 ckt. km as of January 2020, as per the Central Electricity Authority. The overall line length increased from 291,336 ckt. km during 2013-14 to 413,407 ckt. km during 2018-19, recording a compound annual growth rate (CAGR) of 7.25 per cent. The state sector has a major share (54 per cent) in the aggregate line length, followed by the central (38 per cent) and private (7 per cent) sectors. In terms of voltage, nearly 86 per cent of the aggregate transmission line length is at 400 kV and 220 kV voltage levels. Next come 765 kV lines with a share of 10.4 per cent in the total line length. The remaining share of 2.2 per cent and 1.4 per cent is accounted by ± 500 kV HVDC and ± 800 kV HVDC lines in the total line length respectively.
In the distribution segment, the total line length grew at a CAGR of 4.11 per cent to reach 11.12 million ckt. km as of March 2019, as per Power Line Research. The majority of the line length (at around 57 per cent) is at the LT level, followed by 39 per cent at the 11 kV level and the remaining at the 33 kV level.
Market trends
The size of the cables and conductors market stood at Rs 665 billion as of March 2019, of which 84 per cent is accounted for by the cables segment and the rest by the conductors segment, as per the Indian Electrical and Electronics Manufacturers’ Association (IEEMA). Although the cables and conductors industry grew at a healthy CAGR of 12.7 per cent between 2013-14 and 2018-19, it witnessed a decline during 2019-20. During the April-December 2019 period, the market size of the cables segment witnessed a decline of 15.4 per cent and that of the conductors segment registered a decline of 17.6 per cent.
This is mainly because of delay in the finalisation of equipment orders owing to liquidity crunch as financial institutions have restricted funding due to the growth of non-performing assets. The capex of major transcos has also seen a reduction. A case in point is Powergrid, which has reduced its capex from Rs 258 billion in 2018-19 to Rs 150 billion in 2019-20. As of December 2019, the utility had incurred a capex of Rs 105 billion. Further, global trade tensions, slowdown in industrial activity, and low demand from the real estate sector not has affected order inflows of equipment companies. Volatile commodity prices of key raw materials such as copper and aluminium have adversely impacted the cables and conductors segment. However, the medium- and long-term fundamentals remain strong given the central government’s focus on expanding T&D.
Growth drivers
The T&D segment is the primary end user of the cables and conductors industry. Other end-use segments include real estate, railways (including metro) and urban infrastructure.
The transmission segment is set to grow over the coming years mainly driven by the need to evacuate large-scale renewable energy generation. With a target to set up 175 GW of renewables by 2022 and 450 GW by 2030, transmission systems will require significant expansion and strengthening. This, in turn, will offer considerable investment opportunities to players in the cables and conductors industry.
In addition, the government is focusing on creating a regional power grid to utilise resources in the South Asian region in an optimal manner as well as help stabilise the Indian grid in the wake of increasing share of renewables. To realise the vision of a South Asian grid, there is a need to build new transmission networks and strengthen existing ones. For instance, there are plans to develop an overhead electricity link with Sri Lanka, after the earlier proposal to set up an undersea power transmission link to supply power to the island nation turned out to be prohibitively expensive. The proposed transmission line will extend from Madurai in India to Anuradhapura in Sri Lanka, with a planned capacity of up to 1,000 MW. A new transmission line worth Rs 4 billion has also been approved between India and Nepal (from Gorakhpur to Butwal). A transmission line for evacuating power from the upcoming 900 MW Arun III hydropower project in Nepal is being developed by the SJVN Arun-3 Power Development Company. Another key growth area for the cables and conductors industry is in railway electrification. Indian Railways (IR) has collaborated with the Central Organisation for Railway Electrification (CORE), Powergrid, RITES Limited and the Indian Railway Construction Company (IRCON) for electrifying its broad gauge network. The electric route km (rkm) has gone up from 26,067 rkm in 2014-15 to 38,578 rkm in 2018-19. As of March 1, 2020, 39,064 rkm of broad gauge rail lines have been commissioned on electric traction while 23,827 rkm is yet to be electrified. IR plans to electrify the remaining broad gauge route in the next four years at an estimated cost of Rs 300 billion. It plans to electrify 62,891 rkm of broad gauge lines across all zones by 2024.
In the distribution segment, a new scheme, tentatively titled the Atal Distribution System Improvement Yojana (ADITYA), is expected to be launched soon with a proposed outlay of Rs 3 trillion. Of the total outlay, a major share of Rs 2.3 trillion is earmarked for infrastructure upgrade. This will translate into higher demand for cables and conductors in the distribution segment. As per reports, the scheme is expected to be implemented in three phases till 2024.
In addition, export opportunities for the cables and conductors industry are expected to stay strong especially in Africa, Latin America and the Middle East. The export value of cables and conductors stood at Rs 48.8 billion during April-December 2019, an increase of 30 per cent over the corresponding period of the previous year.
The setting up of charging infrastructure for electric vehicles (EVs) is another emerging opportunity. Besides, areas such as smart grids and smart cities, digitalisation, energy storage and telecom are expected to provide new business opportunities to manufacturers of cables and conductors.
Technology trends
On the technology front, various advancements have been made by manufacturers of cables and conductors to enable utilities to augment their capacities while minimisingRoW requirements and increasing power transfer capability. Of late, due to its lower costs and light weight, aluminium has completely replaced copper as a conductor input. New high performance conductors (HPCs) are being deployed for carrying higher currents. These conductors have higher temperature resistance as compared to the conventional aluminium conductor steel reinforced (ACSR) conductors. These include aluminium conductor steel supported (ACSS), all aluminium alloy conductors (AAAC), thermal resistant aluminium conductors steel reinforced (TACSR), aluminium conductor alloy reinforced (ACAR), aluminium conductor steel reinforced (ACSR) and aluminium conductor carbon fibre reinforced (ACFR) cables.
Further, a more advanced version of HPCs is the high temperature low sag (HTLS) conductor which can operate at a much higher temperature range than the conventional ACSR conductor, and has low thermal expansion and sag. HTLS conductors typically consist of aluminium wires helically stranded over a reinforcing core. They can be invar type, gap type, or the synthetic core-based type. Two of the most commonly used HTLS conductors are super thermal alloy conductor invar reinforced (STACIR) and aluminium conductor composite core (ACCC). Utilities choose HTLS conductors based on their specific requirements. A major application of HTLS conductors has been in reconductoring the existing lines to increase power transfer capacity. This has been done by a number of utilities, including those in Kerala and West Bengal, thus enabling them to meet a higher load demand without laying new lines and achieve higher reliability.
The way forward
The long-term outlook for the cables and conductors industry is positive given the long pipeline of upcoming projects. As per projects database on the Tarang web portal (accessed on March 13, 2020), over 86,000 ckt. km of transmission lines are under development and are likely to be commissioned over the next four to five years. The government’s push to the infrastructure sector augurs well for the industry. The government recently released a five-year roadmap for investments in infrastructure projects under the National Infrastructure Pipeline. The total capex projected for all infrastructure sectors during 2019-25 is a massive Rs 102 trillion. Notably, the sector with the highest projected investments is energy, constituting 24 per cent share at Rs 24.54 trillion.
Net, net, the cables and conductors industry must gear up for increasing demand in the coming years.