The Indian electricity transmission sector is gearing up to face the challenges posed by the changing power demand and energy mix. In order to meet the future peak load, which is expected to reach 226 GW by 2022 and 267 GW by 2025 (from 184 GW at present), huge investments are required for strengthening and ramping up the country’s transmission infrastructure. The government’s ambitious plan to expand renewable energy to 175 GW by 2022 is a key driver for grid expansion. Private investments will continue to play a significant role in grid expansion as competitive bidding gains momentum. The extraordinary circumstances created by Covid-19 will not alter the country’s medium- to long-term plans with respect to power transmission.
Power Line provides an overview of the recent trends and developments in the power transmission segment…
As of August 2020, the total transmission line length stood at 428,582 ckt. km (220 kV and above) and the AC substation capacity stood at 956,003 MVA. While the line length grew at a CAGR of 6.5 per cent, AC substation capacity has grown at about 11.3 per cent between 2011-12 and 2019-20. In addition, the high voltage direct current (HVDC) substation capacity stood at 25,500 MW. Interregional transmission capacity has also grown significantly over the years and stood at 102,050 MW as of March 2020. Significantly, 27,000 MW of interregional transfer capacity has been added during the past three years. As a result, interregional power transfer increased from 138 BUs in 2016-17 to over 197 BUs 2019-20. The plan is to add another 16,000 MW by 2022 and take interregional transfer capacity to 118,050 MW.
In recent years, the transmission segment has witnessed a significant increase in private participation, with the share of private players in the total line length increasing from 3.3 per cent in 2011-12 to 7.4 per cent in 2019-20, and that in substation capacity increasing from only 0.5 per cent to 4 per cent. However, Power Grid Corporation of India Limited (Powergrid) continues to dominate the country’s transmission sector with 163,222 ckt. km of lines and 409,898 MVA of capacity.
Policy and regulatory developments
In August 2020, the Ministry of Power (MoP) issued a notification extending the waiver of interstate transmission system (ISTS) charges and losses on the supply of power generated from solar and wind power projects until June 30, 2023 (from December 31, 2022 previously). As per the notification, no ISTS charges would be levied for 25 years from the date of commissioning of power plants for supply and sale to entities that have renewable purchase obligations.
In July 2020, the MoP issued guidelines for determining compensation for acquiring right of way (RoW) in urban areas, in addition to compensation towards normal crop and tree damage. This follows the recommendations of the MoP-constituted committee on the matter, after deliberation with the states. Notably, a large number of states have not adopted the related guidelines issued by the MoP in October 2015. This requires urgent attention as transmission project completion deadlines have been compressed to nearly 18 months as against 36 months earlier in order to match the commissioning schedule of renewable energy projects.
In June 2020, the MoP directed Powergrid to set up a wholly owned subsidiary to carry out the statutory functions of the central transmission utility (CTU) as per the Electricity Act, 2003. Previously mooted in 2016, the plan to separate the CTU function from Powergrid did not materialise. As a CTU, its functions included wheeling of power generated by producers, transmission systems and operations planning, and tariff collection from power generators and state utilities using the transmission infrastructure. Powergrid has been receiving criticism for being at an advantage, with prior knowledge of projects due to its involvement in the network planning process.
In another development, in September 2020, the Cabinet Committee on Economic Affairs approved the monetisation plan for Powergrid’s tariff-based competitive bidding (TBCB) projects through the infrastructure investment trust (InvIT) model. This will include the sale of both under-construction projects and those acquired by the company in the future. In the first block, Powergrid is expected to monetise five TBCB assets valued at Rs 71.64 billion.
In May 2020, the Central Electricity Regulatory Commission (CERC) notified the Sharing of Inter-State Transmission Charges and Losses Regulations, 2020. They will supersede the existing regulations (2010) and come into effect from November 2020. The new regulations have reviewed the existing point of connection mechanism for determining transmission charges. The yearly transmission charges, comprising the charges of interstate transmission system (ISTS) licensees and intra-state transmission lines, will now be recovered on a monthly basis under four components – national (renewable energy and HVDC), regional, transformer and AC system.
In June 2020, the CERC issued an advisory to the MOP with recommendations to revise the TBCB guidelines for efficient and economic transmission development. This was done in light of several petitions filed before the commission, seeking the adjudication of disputes by invoking the provisions of the transmission service agreement or standard bidding documents. The commission has suggested modifications in the survey report, project structure, quality, commercial operation date, penalty structure, foreclosure, and performance review of transmission system providers, among other things.
Covid-19 impact and preparedness
Power transmission, categorised as an essential service by the MoP during the Covid-19 lockdown period, continued as per guidelines and protocol in the country. Notably, the transmission system has been maintained with high availability during the crisis. Powergrid ensured extensive use of the national transmission asset management centre and regional transmission asset management centres, along with IT and communication. Significantly, POSOCO successfully managed the unprecedented challenge of maintaining grid stability during the nine-minute event of switching off lights across the country on April 5, 2020. Such an unprecedented ramp-down and build-up of electricity load within such a small window has not been seen anywhere in the world on such a scale.
Broadly, the lockdown significantly reduced industrial and commercial activities, and these segments saw a considerable decline in electricity demand (over 25 per cent). This had a significant impact on the liquidity of Indian power utilities. The central government announced a Rs 900 billion liquidity infusion package to help distribution companies clear their outstanding dues to transmission and generation firms. Powergrid has been assisting states wherever required and has offered a rebate of Rs 10.75 billion to discoms. To ensure liquidity, Maharashtra State Electricity Transmission Company Limited (Mahatransco) deferred/curtailed certain expenditure and loan instalments until June 2020 to restrict the cash outlay. Further, it sought short-term loans to meet working capital needs. It plans to take up future projects on a need basis, mainly to relieve transmission congestion and improve system reliability, and only after securing the required capital expenditure (capex). Some utilities like Gujarat Electricity Transmission Corporation Limited have not altered the planned capex for 2020-21, but anticipate a slight shift in the award of tenders.
By June 2020, Powergrid resumed work progressively at many sites with the available manpower. In some places, the company has been facing challenges due to restrictions on the movement of labour and the severity of the pandemic. It is in the process of remobilising its workforce. Almost all transmission utilities are working on the digitalisation of operations in all departments. The state utilities are making arrangements for remote inspection and maintenance. For immediate fault detection and faster rectification, Mahatransco has started using drones to carry out inspection and maintenance assessment of power lines in the state.
Green energy corridors and REMCs
For the integration of 175 GW of renewable energy by 2022, Powergrid, along with the associated state utilities, is developing green energy corridors (GECs) to connect new solar and wind capacity. Under GEC I, for which Powergrid received long-term access applications for 12 GW of capacity, over 9,700 ckt. km and 19,000 MVA of substation capacity is to be added at the intra-state level and 3,100 ckt. km and 17,000 MVA (across six substations) at the interstate level. Most of the schemes under GEC I have been commissioned at the interstate level. At the intra-state level, 64 per cent, or 6,258 ckt. km, was commissioned up to December 2019. The completion deadline for this phase has been extended to December 2020 from March 2020.
In early 2020, Powergrid commissioned 11 renewable energy management centres (REMCs) under GEC I, allowing centralised forecasting and monitoring of renewable energy generation, which is crucial for its integration into the grid. The REMCs are equipped with artificial intelligence-based renewable energy forecasting and scheduling tools, which provide better visualisation and situational awareness to grid operators. They coordinate with the respective SLDCs and are integrated with SCADA for the despatch of renewable generation. Currently, 55 GW of solar and wind power capacity is being monitored through these 11 REMCs. These are co-located with the NLDC, the SLDCs in Tamil Nadu, Karnataka, Andhra Pradesh, Maharashtra, Madhya Pradesh, Gujarat and Rajasthan, and the RLDCs in Bengaluru, Mumbai and New Delhi.
Under GEC II, transmission schemes for evacuation from 34 ultra mega solar power parks (UMSPPs) with a total capacity of 20 GW have been planned. Of this, evacuation systems for 13 solar parks (9.2 GW) have been identified through the ISTS. Powergrid is responsible for the implementation of the transmission system for eight solar parks (7 GW), including 1,870 ckt. km of lines and five substations of 13,500 MVA. So far, implementation has been completed by Powergrid for three solar parks (4,250 MW) while it is still in progress at four other UMSPPs.
Under GEC III, estimated at Rs 416.88 billion, the central government has approved transmission schemes for renewable energy zones with a potential capacity of 66.5 GW to be achieved by December 2022. This will be implemented in three phases. Phase I will involve a renewable energy capacity of 12.4 GW at an investment of Rs 109.7 billion, Phase II involves a capacity of 26.1 GW at an investment of Rs 183.67 billion while Phase III will take care of the remaining 28 GW renewable energy capacity at an investment of Rs 124.14 billion. The three phases are scheduled to be completed by March 2021, December 2021 and December 2022 respectively. Further, a renewable energy potential of 65.5 GW has been identified across eight states for commissioning between 2022 and 2025. The associated transmission system will involve an investment of Rs 640.43 billion.
For preparing the grid for the future, transmission planning includes studies considering different scenarios for renewable generation evacuation; reactive power management at an all-India level; synchronous condensers; new renewable energy pooling stations; ensuring adequate short circuit ratio at the renewables interconnection point and N-1 of interconnecting transformers (ICTs) at renewable energy pooling stations.
To fast-track the development of the country’s transmission network, TBCB was introduced in 2006. As of August 2020, 50 transmission projects (excluding cancelled and under-litigation projects) were awarded under TBCB. Of these, 28 have been commissioned while the remaining are under construction. Further, of the awarded projects, 35 were secured by private players and 15 went to Powergrid. The TBCB projects form about 5.4 per cent of Powergrid’s total asset value.
Among the private sector projects, 20 projects worth at least Rs 210 billion have been commissioned and 15 projects worth at least Rs 215 billion are under construction. With 15 projects, Sterlite Grid is leading the private sector, followed by Adani Transmission Limited (ATL) with a portfolio of 12 projects. In fact, Sterlite Grid added the latest project to its portfolio in June 2020.
Currently, REC Transmission Projects Company Limited and PFC Consulting Limited, the two bid process coordinators for TBCB projects, are in the process of tendering seven projects each. In addition, in May 2020, the reconstituted National Committee on Transmission notified 35 approved transmission projects worth Rs 271.8 billion. Of these, projects worth Rs 234 billion associated with renewable energy projects in western (24 GW), southern (8.5 GW) and northern (8.1 GW) regions will be offered through TBCB, while over Rs 38 billion worth of projects will be developed by Powergrid through the regulated tariff mechanism.
Despite the success of TBCB at the interstate level, only a handful of intra-state transmission projects have been developed by private players. States such as Maharashtra, Madhya Pradesh, Uttar Pradesh, Assam, Bihar and Jharkhand have adopted the TBCB route to award projects.
Private sector activity
Consolidation in the private transmission space continued during the year. In July 2020, ATL signed definitive agreements with Kalpataru Power Transmission Limited for the acquisition of Alipurduar Transmission for a value of Rs 12.86 billion. This acquisition, which is subject to regulatory approval, will help it achieve its target of setting up 20,000 ckt. km of transmission lines by 2022. With the latest acquisition, ATL’s cumulative network crosses 15,400 ckt. km, of which 12,200 ckt. km are operational assets and 3,200 ckt. km is under implementation. Earlier, is and Tata Projects had reportedly been in talks with Essel Infraprojects Limited for the acquisition of its under-construction 765 kV Warora-Kurnool transmission line. In 2018, Essel Infraprojects sold two of its transmission assets to the Edelweiss Infrastructure Yield Plus fund and gave it the right to acquire two more of its assets including the Warora-Kurnool line. Edelweiss is no longer interested in buying the assets. The project has been impacted by severe time delays as the project’s scheduled commissioning is past its November 2019 deadline.
Sterlite Power Transmission Limited (SPTL) has been liquidating its operational transmission assets through the country’s leading InvIT, the India Grid Trust (IndiGrid), set up in 2016. In August 2020, IndiGrid completed its acquisition of Gurgaon-Palwal Transmission Limited (GPTL) from SPTL, at an investment of Rs 10.8 billion. This acquisition has led to a 9 per cent increase in the number of of assets under management (AUM) for IndiGrid, which amounts to Rs 13.3 billion in total. IndiGrid’s asset portfolio now comprises 10 power transmission projects with a total network of 25 power transmission lines and seven substations, extending over 6,080 ckt. km and 10,735 MVA across 15 Indian states.
Strengthening cross-border links
During 2019-20, three new cross-border links have been planned. These are the 400 kV Butwal (Nepal)-Gorakhpur (India) link, the Madurai (new) (India)-New Habarana (Sri Lanka) HVDC line with two 500 MW HVDC terminals in two phases, and the 765 kV Katihar (India)-Parbotipur (Bangladesh)-Bornagar (India) double circuit (D/C) line. These new interconnections are in addition to those already under implementation – the 400 kV Jigmeling (Bhutan)-Alipurduar (India) D/C (quad) transmission line (for the evacuation of power from various hydro projects); the 400 kV Baharampur (India)–Bheramara (Bangladesh) second D/C line; and upgradation of the Surajmaninagar (India)-Comilla (Bangladesh) D/C line at 400 kV along with 500 MW HVDC back-to-back at Comilla. The plan is to increase the cross-border capacity with Bhutan, Bangladesh, Nepal and Myanmar from the current 3,830 MW to 6,450 MW in the medium term.
Challenges and outlook
Several challenges need to be resolved to ensure that the grid expansion plans are on track. Due to the lack of harmonisation of policies and regulations across states, developers face issues in project development, particularly in securing RoW and obtaining environmental and forest clearances. While developers have taken steps to overcome RoW challenges by deploying advanced design and technology options for towers and transmission lines, advanced technological options cannot be deployed across all projects. Empowering system operators and regulators, particularly at the state level, to ensure the effective implementation of relevant policies and regulations is essential. Sporadic policy decisions at the state level, like those taken by the Andhra Pradesh government to withdraw connectivity approvals given to several wind projects in the state and renegotiate power purchase agreements, send wrong signals to investors.
The centre’s proposal to divest the CTU function from Powergrid is a positive step and shows the seriousness of the government in providing a level playing field to private investors. The robustness of the transmission grid has been demonstrated during the Covid-19 lockdown. It is necessary to continue efforts to augment the transmission infrastructure and improve grid flexibility and resilience in order to support the shift in generation mix and distribution loads.