India’s transmission segment has undergone a significant transformation over the years, transitioning from a fragmented network to a well integrated and interconnected grid. The segment has taken significant strides in expanding the physical infrastructure of the grid and consolidating it into one of the largest synchronous grids globally. Looking ahead, as India aims to meet 50 per cent of its generation capacity from non-fossil fuel sources by 2030, and given the rising significance of electricity in the nation’s energy mix, substantial investments will be imperative in both the inter-state and intrastate transmission networks.
As of February 2024, the total transmission line length (at 220 kV and above levels) stands at 482,032 ckt. km, total alternating current (AC) substation capacity at 1,239 GVA and high-voltage direct current (HVDC) system substation capacity at 33,500 MW. Between 2016-17 and 2022-23, the line length has grown at a CAGR of 4.2 per cent, while AC and HVDC substation capacities have grown at 8 per cent and 9.4 per cent respectively. In absolute terms, about 103,490 ckt. km of lines, 425,587 MVA of AC substation capacity and 14,000 MW of HVDC substation capacity have been added during this period. The interregional transfer capacity has also grown considerably over the years, from approximately 75,050 MW in 2016-17 to 112,250 MW in 2022-23, recording a CAGR of 6.9 per cent. As of February 2024, the interregional transfer capacity in the country stands at 116,540 MW.
Key policy and regulatory updates
Draft National Electricity Plan (NEP) (Volume II: Transmission): The Central Electricity Authority has released the draft National Electricity Plan (Volume II) for transmission and sought stakeholder comments by 26 March 2024. The tentative transmission line and capacity addition as per the draft NEP is estimated at 105,000 ckt. km and 595,000 MVA during 2027-32. The estimated requirement of the transmission system for the period 2027-32 will be finalised based on the location of generating stations to be added during the period, as well as the location of new load centres. The plan outlines a substantial investment of Rs 4.75 trillion by 2027 for developing its transmission infrastructure, including lines, substations and reactive compensation at 220 kV and above voltage levels. This includes 170 transmission schemes with a total estimated cost exceeding Rs 3.13 trillion for inter-state transmission systems (ISTS) and around Rs 1.61 trillion for intra-state systems.
Draft Transmission License Regulations, 2023: In November 2023, the Central Electricity Regulatory Commission (CERC) issued the Draft Transmission Licence Regulations, 2023, seeking stakeholder comments. As per the CERC, some of the bulk consumers have approached it, seeking to permit such bulk consumers to set up a dedicated transmission line connecting such bulk consumers to the ISTS point of connection. With several transmission projects under competitive bidding, the CERC also notes that some modifications may be required in such transmission projects to accommodate the transmission plans of Central Transmission Utility of India Limited. The CERC has proposed to formalise the arrangement of granting a licence and amending it for projects awarded under the regulated tariff mechanism route.
An entity can obtain a fresh transmission licence on winning a bid under the tariff-based competitive bidding (TBCB) mode. Further, if TBCB projects are bid on a project basis instead of a special purpose vehicle basis, and an existing transmission licensee wins such a bid, the transmission licensee may approach the CERC to amend its licence to include additional elements won for implementation under TBCB. It is also proposed to allow a bulk consumer to construct its connecting transmission line through any existing transmission licensee or to obtain a licence to execute the said line by itself. Further, the process of obtaining a licence for connecting the transmission line of a bulk consumer has been shortened, keeping in view that such a line is at the cost of a bulk consumer.
Draft (Terms and Conditions of Tariff) Regulations, 2024: The current tariff period is expected to end on March 31, 2024. In January 2024, the CERC issued the Draft (Terms and Conditions of Tariff) Regulations, 2024, for the period from April 1, 2024, to March 31, 2029. As per the draft, the return on equity (RoE) for existing projects will be computed at a base rate of 15.5 per cent for transmission systems, including communication systems. For new projects achieving commercial operation date on or after April 1, 2024, RoE will be computed at a base rate of 15 per cent.
Operations and maintenance (O&M) expenses for transmission licensees whose transmission assets are located solely in the Northeast region, Uttarakhand, Himachal Pradesh, Jammu & Kashmir and Ladakh will be worked out by multiplying the normative O&M expenses prescribed above by 1.5. The O&M expenses for the Unified Load Despatch and Communication scheme will be calculated at 2 per cent of the original project cost associated with the communication system. On the occurrence of any change in law event affecting O&M expenses, the transmission licensee will be allowed to factor in the impact during the tariff truing up process. Such an impact will be allowed only if the overall impact of the change in law event in a year exceeds 5 per cent of the normative O&M expenses for the year.
Electricity (Amendment) Rules, 2024: The Ministry of Power (MoP) issued the Electricity (Amendment) Rules, 2024, under the aegis of the Electricity Act, 2003. These rules came into force on January 11, 2024. They introduce amendments to the existing Electricity Rules of 2005. These amendments aim to address two key challenges: promoting the development of dedicated transmission lines and facilitating open access to the electricity grid. The rules now allow consumers with specified energy load and energy storage systems to establish, operate and maintain their dedicated transmission lines themselves without the requirement of a licence.
The rule covers companies/entities with loads over 25 MW and 10 MW on the inter-state and intra-state transmission networks respectively. The new Rule 21 exempts these entities from obtaining a licence, provided they comply with relevant regulations, technical standards and guidelines. By allowing such a facility, a new category of bulk consumers will emerge, benefiting from more affordable electricity and enhanced grid reliability. This facility was already available to generating companies and captive generating stations.
Growth drivers
The expansion of transmission networks is driven by the increasing capacity of renewable energy. To ensure adequate infrastructure for renewable projects, the transmission system is planned in advance, aligned with the shorter gestation period of wind and solar projects. The CEA’s plan outlines transmission for major renewable zones, with some parts commissioned and others in progress. With the government targeting 500 GW of renewable energy by 2030, significant expansion of transmission systems is under way, supported by the Green Energy Corridor (GEC) project. The evolving energy mix, including the rise of prosumers and decentralised energy generation, adds complexity to grid management, emphasising the importance of green grids and GECs.
Additionally, the focus on creating a regional power grid is meant to optimise resources in South Asia and stabilise India’s grid amidst growing renewables. Cross-border interconnections, such as those with Bangladesh and Nepal, are being enhanced to accommodate increased transmission capacity, while plans for an overhead link with Sri Lanka are under way. Offshore wind transmission is also a key focus, with India targeting 37 GW by 2030. Infrastructure development for the hydrogen economy is proactive, with plans to prioritise additional transmission systems as renewable energy production expands. The MoP aims to complete 27,000 ckt. km of ISTS lines by 2024-25 under the PM Gati Shakti National Master Plan, facilitating power evacuation from generation projects.
Private sector participation
The National Tariff Policy, notified by the MoP in January 2006, opened the power transmission segment for private sector participation through the TBCB route. Of the 128 projects awarded so far, 65 projects have been commissioned as of February 2024, with another 59 projects under construction. The remaining four projects have been stalled or scrapped by the regulators. Apart from this, the project pipeline remains strong with an additional 30 projects under active bidding by central nodal agencies like PFC Consulting Limited and REC Power Development and Consultancy Limited. The key private players in the transmission segment include Sterlite Power Transmission Limited, Adani Energy Solutions Limited, India Grid Trust, ReNew Transmission Ventures Private Limited and Apraava Energy Private Limited.
In line with the revised Tariff Policy, 2016, some states have also initiated competitive bidding for the award of intra-state transmission schemes. As of now, Uttar Pradesh, Madhya Pradesh and Maharashtra have commenced the implementation of transmission projects through the TBCB route. Among these, 10 intra-state transmission schemes across the three states, awarded through the TBCB route, have been completed, and seven intra-state transmission projects in Uttar Pradesh, Odisha, West Bengal (Damodar Valley Corporation [DVC]), and Jharkhand (DVC) are under implementation. Other states such as Rajasthan are also planning to implement intra-state transmission projects through the TBCB route.
Issues and challenges
The power transmission segment in India faces a multitude of issues and challenges. The sector continues to grapple with right of way and land acquisition hurdles, which are leading to project delays and cost escalations. Land acquisition for transmission corridors is a complex and time-consuming process, often encountering resistance from local communities and environmental concerns. Additionally, the inadequate and outdated infrastructure often leads to transmission losses, reducing the overall efficiency of the grid. These losses result from factors such as technical inefficiencies, theft and subpar maintenance, contributing to financial burdens for utilities. Further, cybersecurity threats pose a growing risk to the segment. As the grid becomes more digitalised, it becomes susceptible to cyberattacks, which could disrupt power supply and compromise grid security. Addressing these challenges is vital to ensure a reliable and efficient transmission network, crucial for India’s transition to clean energy sources.
Future plans
As per the CEA’s draft National Electricity Plan (Volume II: Transmission), a total capex worth Rs 4,758.04 billion in the power transmission sector has been envisaged during the five-year period from 2022-23 to 2026-27. Out of this, Rs 3,139.50 billion (or 66 per cent) would go towards the ISTS network, while the remaining Rs 1,618.54 billion (or 34 per cent) would go towards the intra-state transmission system.
In terms of physical infrastructure, a total of 123,577 ckt. km of transmission lines and 722,940 MVA of transformation capacity have been targeted for addition in the 2022-23 to 2026-27 period. The transformation capacity includes 12,000 MW of transfer capacity to be achieved with HVDC-bipole transmission infrastructure.
The transmission line targets are 53,132 ckt. km for ISTS and 70,445 ckm for the intrastate system. Since ISTS lines are high-voltage – 400 kV, 765 kV and even 800 kV (HVDC) – they can achieve much higher transfer capacity even with significantly lower circuit length. The transformation capacity envisaged for ISTS is 438,675 MVA, compared to the much smaller 284,265 MVA for the intrastate transmission system.
Overall, ambitious plans underscore the sector’s future trajectory, with substantial capital investments earmarked for expanding transmission infrastructure and enhancing interconnectivity. These endeavours aim to bolster the nation’s energy resilience, facilitate renewable energy integration and propel India towards a sustainable energy future.