Neeraj Nanda, President-South Asia (T&D, Solar), KEC International speaks to INFRASTRUCTURE TODAY in length about the potentials in India's transmission sector. He also advices DISCOMs to enhance their willingness and preparedness to adopt and drive renewable energy.
What are the factors driving the growth in India's transmission sector? In the coming years, what would be the market size and business potential for players in the power transmission sector?
I anticipate a significant growth in India's transmission and distribution (T&D) sector in the coming 2-3 years. The government has embarked towards the objective of 24x7 Power for All, with special emphasis on rural electrification. Under Deen Dayal Upadhyay Gram Jyoti Yojana (DDUGJY), all villages in India have now access to electricity, as recently declared by the Prime Minister. Further, towards the focus on last-mile connectivity, the Saubhagya scheme is in place (outlay of over Rs 160 billion), to electrify about 40 million un-electrified households. The Integrated Power Development Scheme (IPDS) has already been implemented for strengthening the networks in urban areas. An enhanced push is being seen on renewable energy (RE), with the government setting a target to augment renewable energy capacity to 175 GW by 2022. The government has laid an ambitious plan to add 100 GW of solar power by 2022. Also, allowing 100 per cent FDI in the power sector has boosted its inflows in the sector.
Presently, India has about 344 GW of installed generation capacity; 3.9 lakh ckm installed transmission line length and 8.2 lakh MVA of substation transformation capacity. With all these growth enablers, coupled with Make in India and Smart Cities drive and high industrial expansion outlook, I think the T&D sector is expected to unfold a tremendous business potential for players in the power transmission sector.
How do you plan to leverage the opportunities provided by the government in T&D space?
We at KEC are determined to continue being an active partner in the nation's building effort. We always try to bring in advanced project management techniques and adequate execution expertise to build the most challenging projects, amidst extreme terrains and work conditions. We have been at the forefront in EPC space and in implementing new or innovative technologies and construction techniques. Through leveraging technology, innovation and digitisation, we always make efforts to deliver our projects on schedule or ahead of schedule with a high level of quality and safety, and provide the customers with a superior experience for each of our project delivery.
We have implemented the concept of using Unmanned Aerial Vehicles (UAV), commonly known as drones, for conductor stringing activities in our transmission projects, cutting down the time durations multifold. Technologies like LiDAR are being used for surveying and cloud enabled softwares for mapping geographical contours, which help attain high level of line-route optimisation (in transmission line projects) and radically improves the productivity as compared to the conventional methods. We are actively working on Building Information Modelling (BIM) to virtually design and simulate or visualise projects in 3D and reduce re-work by detecting possible clash points upfront. With having widely used gin poles, sag bridges, boom cranes, hydraulic power winch machines, we have leveraged mechanisation at its best to help us significantly improve construction work productivities and safety standards. We use advanced project management tools to micro-plan and effectively monitor the projects and achieve a high degree of resource or cost optimisation. Mobile apps are used to remotely monitor the physical progress of the projects. We also make use of innovative tower designs or monopoles to reduce the tower base, thereby reducing the requirement for land and the right of way.
I believe, with this edge on technology and at innovation front, we are well-poised to take on challenging business opportunities upcoming in the EPC space and deliver them successfully with utmost customer delight. However, I think that to further encourage implementation of such new initiatives, the government must also proactively make the required changes and updations to applicable regulatory policies and guidelines from time to time.
The state government has not been able to seamlessly integrate renewable energy into the grid which could impede major developments in the sector. What are your views on this?
Renewables energy, fundamentally being an intermittent source of generation, carries certain challenges related to grid stability. Generally, when the penetration of RE reaches significant levels, the capacity of the grid to manage needs to be addressed and balanced in order to avoid challenges to the reliability and affordability of electricity. Although the solar rooftops contributes towards a natural balancing of the grid but the volume of the same till now has not been adequate. Till we have an evolved emergence of storage elements and grid balancing measures, the challenges may likely continue. Apart from the variability of RE resources, other integration issues include their integration cost, forecasting tools and methodology, etc. which needs to be addressed. A structured roadmap to support an increase in the share for renewable energy without destabilising the grid needs to be put in place.
Also, I think that the DISCOMs need to enhance their willingness and preparedness to adopt and drive renewable energy. The growth of solar, especially rooftops has remained muted. The DISCOMs should move towards rewarding bankable energy through net-metering initiatives. The formation of the Renewable Purchase Obligation (RPO) Compliance Cell within the MNRE is a significant step towards ensuring the timely adoption and implementation of RE within the states. The cell is expected to actively co-ordinate between the states, CERC and SERC to ensure RPO compliance. However, actual results on the ground may take a little longer to materialise.
Volatility in terms of equipment prices and regulatory uncertainties have also impacted the renewable market. States and DISCOMs have faced challenges to gauge the right tariff leading to tender cancellations post reverse auction, postponement and tariff negotiations. All these events have had a negative domino effect on the investor's confidence leading to a slowdown in renewables, which I believe can be addressed through effective implementation of right policies and regulations at Centre and state level.
As compared to the other segments in the power chain, do you think power transmission sector possess low risk and a steady cash flow?
According to a leading market research agency, amongst all infrastructure sectors, the power transmission sector in India is the most attractive to invest in currently, followed by roads and highways and renewable energy. And, this surely gets substantiated by the government's thrust through a host of initiatives.
on which I have already talked about earlier.
The power transmission sector continues to enhance, transform and undergo radical changes. In FY18, the sector witnessed a 5.3 per cent growth in installed capacity with an addition of 17,170 MW, along with an addition of 23,119 ckm of transmission lines (growing 6 per cent from last year) and 86,193 MVA of substation capacity (growing 12 per cent from last year). The Indian Government envisages an addition of about Rs 1 lakh ckm of transmission lines and Rs 2.9 lakh MVA of transformation capacity between 2017-2022, necessitating huge investments estimated to the tune of over Rs 2.5 trillion.
The industry is also witnessing paradigm shifts, such as migrating to higher transmission voltages of up to 1200 kV, new technologies for bulk transmission, development of high capacity power transmission corridors, greater emphasis on new designs, solutions and modern construction technologies, enhanced public-private collaboration, all of which are making business and investment in the sector a lot more lucrative. As discussed, the transmission projects, once operational, typically remains healthy and present a fairly large, low-risk investment opportunity to investors. That’s the advantage of transmission assets, unlike private thermal generation assets, where risk profiles are not so strong owing to the fuel supply variations, plant availability and counterparty risks.
Just like solar auctions, power transmission sector is also witnessing the same auction pattern of incapable players bidding aggressively for projects. How bad will this pattern affect the sector at large?
It has been observed that some of the players have been bidding aggressively for transmission projects under the TBCB route. While it is possible that they may have low overheads, but at times they may bid irrationally or over-estimate their efficiencies or under-estimate their costs. Such bidders may incur losses and face difficulty in repaying the debts. Transmission, being a much more stable element in the value chain with much more predictability in cash flows, this scenario should ideally not emerge, unlike generation, especially renewables.
Transmission service providers should duly factor-in the project risks that may hamper the execution of the projects such as land acquisition / RoW and government clearances. Post construction risks, for example, incidents of transmission towers collapse, which we have witnessed within the sector in recent past, need to be adequately factored in while bidding. Irrational aggressive bidding presses back to the project finances and inturn to the quality of project construction. Hence, it is important to relook at the framework for bidder assessment or qualification criteria and focus more on the industry players, including EPC companies, who are credible and really bring value with quality and long-term sustainability. As I mentioned earlier, for transmission assets, post commissioning, the demand and price risks are minimal, and only O&M costs mostly have an impact on the cash flows, which generally tend to be quite insignificant and predictable. So, the scenario is different as compared to solar power projects which require higher Debt Service Coverage Ratio (DSCR) as seasonal PLFs may lead to uncertain output. However, as highlighted, if the focus is not shifted towards the quality of bidder assessment, the transmission assets may also tend towards converting to non-performing assets, just like the scenarios which we have witnessed in generation, especially renewables.
How has the transmission sector helped in tackling the loss of electrical energy?
Although T&D losses in India have been gradually declining over the years (from 34 per cent in 2005 to 21 per cent presently), they are still one of the highest amongst emerging economies and remain a serious cause of concern. At all India level, energy loss in T&D for FY16 was estimated at about 240 billion units. That’s very huge. The government is putting in effort to control these losses through various initiatives under the UDAY scheme. The scheme was launched in November 2015 with a target of reducing the losses to 15 per cent by March 2019, however, the improvement in T&D losses seen during last two years has not been upto the expectations. While most of the states initially showed an improvement, however, in 2018, many states have shown an increase in losses as compared to 2017. Infact, several states still continue to show losses beyond 30 per cent.
The government is working towards addressing the AT&C losses through initiatives under schemes like Smart Grid Mission/EESL’s Smart Meter programme and UDAY. However, the pace of progress of these reforms needs a thrust. With having IoT in place, the technical losses can be optimised while the billing and collection accuracy or efficiency of DISCOMs has the potential of seeing substantial improvement. The billing efficiency can be enhanced by removing contributors like defective metres or test-kits, issues in billing software/backend data entries, metre reading delays and error by metre readers. Similarly, the collection efficiency can be boosted with action in areas such as timely delivery of bills, providing adequate collection facilities, having an effective grievance redressal mechanism and encouraging collections through non-cash modes. The smart grid shall also support in detecting faults, wastages and power theft or pilferage, which happens to be a big contributor to the AT&C losses. Use of cables or covered conductor can be made in areas with severe power theft concerns. Focus is also needed on equipment and hardware side, wherein issues like overloaded and unbalanced transformers and feeders and worn-out conductors or inadequate conductor sizes, etc. need to be addressed, which all add-up to technical losses.
- RAHUL KAMAT