The country’s growing focus on Make in India and Atmanirbhar Bharat is promoting domestic manufacturing of solar modules, wind turbines, battery and storage systems, and parts of the green hydrogen value chain. To evacuate the increasing renewable capacity, the transmission segment will continue to see greater investments in network expansion and grid strengthening. In the thermal generation segment, the equipment industry has benefited from the uptick in tendering activities for flue gas desulphurisation systems for emission control and retrofit opportunities. Leading equipment manufacturers comment on opportunities and challenges in the equipment market…
What is your assessment of the power sector’s progress during the past year?
Sujoy Ghosh
With an overall year-on-year growth of 7.96 per cent in total generation, the sector has come out of the pandemic-induced decline. The other important development is that renewable energy sources account for 40 per cent of the total capacity, which clearly demonstrates a permanent shift to a decarbonised grid for the country aligned with the overall renewable energy targets that have been set for 2030 and beyond. This will disrupt conventional thinking in terms of how grids are to be planned and managed, and will create opportunities for new technologies in renewable energy generation, storage and grid management.
Ravi Kalra
Despite the setbacks due to the pandemic in the last two years and the current disruptions on account of the geopolitical situation in Europe, the Indian power sector has performed appreciably well in the past one year with an expected growth of 9.8 per cent in total generation as compared to financial year 2020-21. Economic activity has bounced back, so has the demand for power. We are one of the most diversified power sectors in the world with a good energy mix from all sources of generation and an installed capacity of almost 403 GW. Of this, 58.5 per cent is generated from fossil fuels, 39.7 per cent from renewable energy sources and 1.7 per cent from nuclear power. This gives the Indian power sector greater stability, dependability and reliability.
India is on its way to achieving its COP26 commitments of net zero by 2070 and renewable energy capacity of 500 GW by 2030. Developments in most sectors, including solar, hydro and wind power, clearly indicate a great acceleration towards the goal. Foreign direct investment (FDI) inflows to the tune of $15.89 billion in the power sector between April 2020 and March 2022 are proof of the confidence that foreign investors have shown in the Indian power sector. The government’s policy impetus for renewable energy, hydro and pumped storage plants is creating the required ecosystem to achieve the country’s COP26 commitments. Overall, the power industry’s future looks bright. The industry is fuelling the manufacturing sector as well, supported by the government’s production-linked incentive (PLI) scheme announced in the Union Budget 2022.
Vimal Kejriwal
India ranks third among all the electricity-producing countries and second in consuming electricity globally. The country’s generation capacity is likely to touch 619 GW by the end of 2026-27, as compared to 404 GW currently. Post the Covid-related economic slowdown, India has witnessed a pickup in electricity generation, which has increased by around 8 per cent in 2021-22 and 17 per cent in 2022-23 (up to June 2022) as per the Central Electricity Authority. Further, the country has added 7.2 GW of solar capacity in the first half of 2022, an increase of 59 per cent when compared to 4.5 GW installed in the same period last year. Thus, there is a clear need for faster development of high voltage transmission lines and substation infrastructure to keep pace with the generation capacity.
We are glad to see that the government is taking adequate steps to augment the power transmission and distribution infrastructure in the country to meet the growing demand. The power ministry’s plan to add about 17,500 ckt. km of transmission lines and 80,000 MVA of transformation capacity annually for the next few years to strengthen the national grid is a step in the right direction. Owing to this, we are witnessing strong tender pipelines of various transmission line and substation orders being announced by the ministry. Higher capex spending by the government as well as private players is leading to a gradual uptick in the domestic transmission and distribution (T&D) market, which was sluggish for the past couple of years.
Deepesh Nanda
India’s power sector is witnessing a transformation and progress unlike before. This has been strongly motivated by India’s expanding electricity demand that is expected to grow at a compound annual growth rate of 5 per cent during 2018-40, and the simultaneous need to decarbonise electricity generation. The sector has been attracting rich investments from both public and private players. Under the National Infrastructure Pipeline 2019-25, energy sector projects account for the highest share (24 per cent) in the total expected capital expenditure of Rs 111 trillion ($1.4 trillion). Meanwhile, the total FDI inflow in the power sector reached $15.89 billion between April 2000 and March 2022. This is encouraging as the sector prepares itself for India’s energy transition.
The challenges of climate change and uncontrolled emissions have strongly influenced operations in the power sector in recent times. There is urgency in enabling technologies that recover the damages of climate change and reaffirm the sector’s commitment to decarbonisation. The government too echoes this concern as we have seen in the National Hydrogen Mission and the subsequent Green Hydrogen Policy. There is a definite change in the mindset and approach to energy, and that has, perhaps, been a great progress made by India’s power sector in the past year.
What are the biggest issues and challenges for the sector?
Sujoy Ghosh
The financial health of the state-owned distribution entities and their debt burden remains the single biggest challenge for this sector. Structural reforms as proposed in the Electricity Amendment Bill of 2022 need to be adopted by the states to enable a market-driven distribution business, which offers consumers a choice and incentivises fiscal discipline with the service providers.
Ravi Kalra
The integration of renewable energy into the grid to ensure uninterrupted, stable and reliable power is the singular and most critical challenge being faced by generators and discoms all over the world. This is more an evolution process rather than a deficiency/challenge. The transitory nature of wind and solar can only be overcome with the right mix of storage in the current environment and energy conversion to green hydrogen in the future. It is time for the governments and grid operators to come together to address the regulatory structures and revenue mechanisms.
The Ministry of Power’s November 2021 notification, on the Scheme for Flexibility in Generation and Scheduling of Thermal/Hydro Power Stations through bundling with renewable energy and storage power, tries to address these concerns to some extent. However, in the revised scheme, the responsibility of arranging balancing power requirement will now be on the generators and not on the discoms. This flexibility may provide the power generators an opportunity to optimally utilise generation from renewable energy sources. It may also facilitate further renewable energy capacity addition. The waiver of interstate transmission system (ISTS) charges is one key incentive of this scheme. The policy appears to be supporting the industry well, which is reflected in recent news in the media about cooperation agreements and MoUs being signed among generators and distribution companies.
Hydropower units are uniquely capable of addressing many grid flexibility needs such as regulation, black start, inertial support and reactive power support. Ancillary services and support to the grid offered by hydropower plants need to be recognised and incentivised. An increase in electric vehicle (EV) uses, its charging patterns and addition of battery storage will make grid management more complex. Developing integrated generation schemes and distributed energy resources that safeguard from erratic weather and natural calamities by combining the strength of solar, wind, pumped storage and other renewable sources is key to energy reliability and security for the future.
There are a large number of issues for stakeholders of the power industry waiting to be rightly addressed. Some of the key areas of concern that need specific measures from regulatory bodies and the power industry pertain to digitalisation, asset and data management, cybersecurity, renovation, modernisation and uprating of ageing assets, revamping of the distribution sector, improvement of discoms health, round-the-clock electricity, consumer rights, energy efficiency, green financing, matching manufacturing and capacity additions, and human capital. Most of these are already being addressed in one or the other forums or at operational levels. The speed of execution and results will determine India’s success in achieving the COP26 targets by 2030 and moving towards net zero.
One of the most key challenges in the power sector today is the issue of free power exercised by many state governments. While the government’s social obligations towards the poor of the country cannot be denied, bringing a scheme on the lines of direct benefit transfer (like in other sectors) will help a great deal in bringing some balance. Discoms need to pay to the generators regularly to ensure continued fresh investments in the sector.
Deepesh Nanda
The biggest challenge for the power sector today is letting go of old habits, practices and structures and embracing newer, more efficient solutions at the base of its operations. While investments are increasing, we need more incentives to streamline funding and create a competitive market that encourages calculated risks.
Now, with more renewables being added to the power mix, there is an urgency to revisit our power grids and make them more resilient to newer forms of electricity. The intermittency of renewables also demands support from a stable source like gas power to maintain baseload and prevent unplanned outages. Along with transmission, distribution and accessibility of electricity is a concern, especially given our geographical expanse. The curtailment of renewable energy is another challenge. Curtailment occurs when there is a reduction in the output of a generator. There is, thus, an immediate need to meet the flexibility requirements of power system operations, providing an adequate and reliable supply of electricity. Moving ahead, we must engage with smart grids and more stable storage options to overcome the challenge of renewable energy curtailment.
What are the market opportunities that you foresee in the power equipment industry in the next one to two years?
Sujoy Ghosh
Given the push for Atmanirbhar Bharat, coupled with the goals for a decarbonised electricity grid, the short-term opportunities are clearly in the clean-tech domain. Specifically, India is witnessing a significant investment in the manufacturing of solar photovoltaic (PV) modules, grid-scale battery and storage systems and parts of the green hydrogen value chain. There are also opportunities in the larger manufacturing ecosystem, that is, the capital equipment required for the manufacturing of solar modules and batteries, as well as the component ecosystem, which comprises glass/encapsulate materials/frames/ LV electrical components, etc.
Ravi Kalra
Energy will remain at the centre of sustainable economic development. Capacity augmentation is the need of the hour and the government can support the industry further through PLI schemes beyond solar and tax incentives, which will also help investors and consumers by making energy more affordable. Overall, solar, wind and hydro power technologies are immediate answers to the near- and long-term energy goals. Digital solutions for improving energy efficiency, asset management, distribution and power grid management, refurbishment and modernisation, grid-scale battery storage and pumped storage offer key business opportunities for established power equipment suppliers and start-ups.
Voith Hydro is well poised to support India’s Atmanirbhar Bharat campaign through its hydropower technologies and large manufacturing facilities in India, catering to mini/small hydro, large hydro, pump hydro, modernisation and refurbishment, and operations and maintenance solutions.
Vimal Kejriwal
KEC International’s T&D business has a diverse footprint in over 70 countries across Asia (South Asia, Middle East, South East Asia, Central Asia), Africa, the Americas, Oceania and Europe. In India, with the central government continuing to award a significant chunk of new projects through the tariff-based competitive bidding (TBCB) route, we are witnessing an increase in the participation of private players, which bodes well for the growth of the transmission sector in the country. We are also seeing several opportunities coming in from state utilities such as those of Karnataka, Rajasthan, West Bengal, Tamil Nadu, Gujarat and Bihar.
The government’s focus on increasing the capacity of green energy corridor projects and implementing high voltage direct current (HVDC) lines in regions such as Leh-Ladakh, and setting up ultra-mega solar power parks and solar and wind energy zones in renewable energy-rich states is also expected to stimulate demand for T&D networks across the country. We are seeing a surge in tendering activities for laying of underground power cables to improve the reliability of power supply and conserve the biodiversity around project sites. Further, the government’s focus on promoting green hydrogen is expected to spur the demand for renewable energy generation and development of associated power transmission infrastructure. These developments are expected to give rise to significant opportunities for T&D engineering, procurement and construction (EPC) players such as KEC, which works closely with Power Grid Corporation of India Limited, state utilities and private players in the power transmission and distribution and renewables space.
Globally, we are seeing increased traction across regions, especially in the Middle East and the Americas. With enhanced capex spends towards infrastructure development in the Gulf Cooperation Council countries due to favourable oil prices, we are once again witnessing an uptick in tendering activities for laying of new transmission lines and substations in the region. Similarly in the Americas, countries such as the US, Canada, Brazil and Mexico have announced comprehensive plans to upgrade the existing power infrastructure and integrate new renewable and distributed energy resources in the grids. Apart from this, we foresee opportunities in SAARC and Africa, especially in countries such as Bangladesh, Kenya and Tanzania. Further, we expect an influx of investments in the power sector in and around the Commonwealth of Independent States region owing to the Russia-Ukraine war, leading to the announcement of new transmission line and substation projects.
With a strong EPC presence, supported by eight manufacturing facilities in India, the UAE, Brazil and Mexico that manufacture a range of towers, poles, hardware, structures and cables, as well as deep engineering and execution capabilities, KEC is well placed to capitalise on the upcoming EPC and tower supply opportunities in these regions.
Deepesh Nanda
The next one to two years will be critical for the power industry given the rapid scale of innovations that are expected to boost the overall development of the sector. As India makes the leap to a decarbonised tomorrow, we will see heavy investments and incentives in the renewable energy manufacturing sector co-mprising solar modules, wind turbines, wind blades, etc.
Gas power has a crucial role to play in bridging the gap between conventional and clean energy sources. For this, in the coming years, an important focus will be on reviving stalled gas power plants to support baseload power generation as the concentration of renewable energy increases. Flexible gas-based power generation that is compliant with emission norms, and has quick start-up ability, deeper turndown levels and faster ramp rates, is a key enabler to integrate more renewables into the national grid and meet the seasonal and peak power demand.
Power grids today are witnessing a swift transition with necessary upgrades and modernisation to withstand the challenges of intermittency and latency that complement power from renewable sources. Digital solutions are playing a key role in stabilising the grid and maintaining parity in power demand and supply, even during lean periods. Overall, in the next few years, developing and investing in technologies and equipment that can speed up the process of decarbonisation will be critical.
(Note: The views expressed by Ravi Kalra are his personal views and do not represent the viewpoints of the organisation.)