Demand Surge

Equipment manufacturers’ views

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.)

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