Power lines cannot lag behind generation, and that's an opportunity for private players to come in
The Indian transmission sector will witness an investment of over R1.8 trillion during the 12th Five-Year Plan ending in fiscal 2017, says a report by CARE Ratings.. “As a rule of thumb, for every rupee invested in power generation, a rupee should be invested in the transmission and distribution (T&D) sector”, the CARE analysts wrote. “However, historically there has been an under-investment in the T&D sector, resulting in the transmission system lagging generation capacity addition. As a result, PGCIL has to play a catch up game in the 12th Plan.”
The country’s transmission capacity is 31.8GW as of October 2013 and it is expected to touch about 66GW by FY17.
Investment in the sector will be pushed by Power Grid Corporation (PGCIL)’s capital expenditure plan of R1.20 trillion during FY13 to FY17 and capex plan of state transmission companies of R600 billion, besides power distribution plans of R3.06 trillion.
The transmission sector is heating up as increased power generation has to translate into the consumer receiving electricity, which is difficult considering the poor transmission infrastructure.
According to CARE, 18 projects (10 inter-state and 8 intra-state) are being implemented independently by the private sector, and another six projects are being implemented by the private sector through the joint venture route with PGCIL and the state transmission utilities.
In addition, 13 inter-state and several intra-state projects are in the process of being awarded to the private sector for development and these projects, or about 12,700 km of lines, are slated for completion during the 12th Plan, the report said.
Companies will now be vying for 15 interstate transmission lines, spanning 4,600 km and worth R232 billion, pitched for by the Centre in February 2014. The contracts would be awarded through competitive bidding.
Private players are now waking up to the opportunities in the sector. On October 8, Adani Power demerged its transmission business to form another wholly-owned subsidiary, Adani Transmission (India). Sources say the Gautam Adani-led group is planning to list the company on the bourses next year.
Other players in the sector include Torrent Power, Reliance Power Transmission Ltd and Kalpataru Power Transmission Ltd.
Transmission sector is also going to get a boost from the proposal of “green energy corridor,”—an infrastructure to transmit the power from renewable energy producers to power distribution companies. However, CARE research cautioned that a likely slowdown in capacity addition in renewable energy could drag down inter-state capacity additions by PGCIL.
A key hurdle faced by transmission companies in India is securing right of way, especially for lines passing through forest land. Another problem is scarcity of land to set up substations.
Operational efficiency is yet another hurdle, with outdated systems dotting the nation. “Power system is required to be operated at the rated capacity with security, reliability and high availability. This can only be achieved through reliability based on-line condition monitoring, repair and maintenance in advance and making forced outage as zero”, CARE analysts wrote.