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Mr. Pratik Agarwal, Group CEO, Sterlite Power

05 Nov 2018

Achieving 24X7 Affordable Power for all

What could be challenges that could hamper the 24x7 power for all dream?
Three elements need to be in place for realization of the 24x7 Power For All vision. These are: • Cost-effective generation, • Efficient and reliable transmission network, • Robust distribution setup While generation has come up well, reliable and cost-efficient delivery of power is the critical element that must be addressed. Transmission faces the challenges of ageing infrastructure and of timely commissioning matching with the commissioning schedule of renewable power. Also, critical is the cost- efficient delivery of energy to consumers. These challenges have been best addressed in the sector so far through competitive bidding under a positive policy environment and regulatory framework. This regime must be consistently followed to ensure reliable access to power in the country. The distribution segment is slowly progressing owing to positive policy push through UDAY and Saubhagya. These steps would improve the financial position of Discoms while improving the energy inclusiveness in the country.
What according to you are the areas where changes need to be made to achieve the power for all dreams?
The vision of Power for All is a laudable objective of the Government of India, and the industry is geared to meet this objective. The vision of Power for All will have no meaning if the two are not met: Accessibility and Affordability of power. Transmission plays a key role in ensuring both. The Government, over the years, has continued to focus on developing and strengthening the distribution network under various programmes like IPDS and DDUJGY. So is the case with inter-state transmission network, where we operate as a single national gird with no inter-regional congestion. The same can’t be said with confidence for intra-state transmission system for many states. Intra-state transmission development is under cost-plus regime by the State Transmission Utilities, with most states playing catch up with growth in power demand. There is evidence that the tariff discovered for intra-state projects through tariff based competitive bidding is 30-40% lower than the regulated tariffs. The Tariff Policy 2016 also requires that intra-state transmission projects are developed by the State Government through competitive route for projects costing above a threshold limit. The concern is that this needs to be initiated both by the State Government and State Regulators. While few states like Jharkhand, MP and UP have gone ahead with announcing competitive bids for developing InSTS, none of the SERCs have notified the threshold limits for transmission projects.
Is the country geared to handle evacuation of 225 GW of renewables by 2022?
At the end of the 11th Five-Year Plan (31.3.2012), the total installed capacity of the country stood at 200 GW. It took us 62 years, from the 1st plan onwards, to add 200 GW power generation capacity. We have added 70 GW of renewable energy capacity in 25 years, and we are on track to meet the target through close collaboration between the governments, regulators and private players. The government has to plan evacuation in the right way. Renewables have brought with them a very unique set of challenges for transmission planning and development. Up until recently, the transmission planning and development was happening in tandem with thermal and hydro generation projects. One had the luxury of certainty, since one knew in advance what capacity was coming up and where it needed to be evacuated. The planning and development timelines for a generation project matched with that of the transmission project and hence these were developed in a coordinated fashion. Renewables, especially solar projects are short-duration projects with construction timelines as short as six months and they come up anywhere in the country. Transmission planning was already struggling to keep up pace with the renewable capacity addition and once the spare capacities at sub-stations got exhausted, the pace of RE capacity addition has taken a hit as seen in the recent cancellation and undersubscription of bids called by SECI. The MNRE proposal to reduce timelines for RE projects to 15 months for solar park projects and 18 months for non-solar park project would further pressure the system if something radical is not undertaken with respect to the development of transmission infrastructure. Firstly, RE associated transmission system needs to be developed through competitive route only. The bid award process, which presently is a two-stage process of RFQ followed by RFP, takes more than a year to close, needs to move to a single-stage process like the RfS employed for bidding out Solar and Wind projects by SECI. I believe that the award process can be completed in 60 days if the single-stage route is employed. Secondly, approval activities that cause delay or are redundant should be removed to make the process simplified and faster. There needs to be a sense of urgency in approving authorities especially for RE transmission projects. The existing processes can very well be optimised without jeopardising the sanctity of process and the interest of stakeholders. Thirdly, give transmission developers the freedom to innovate with design and construction technology to develop the RE transmission system commensurate with RE project timelines. Innovation in award process and development phase is the key for addressing the challenges of RE projects.
Do you think adequate power infrastructure exists in States?
The adequacy of infrastructure is linked to the financial status of the entity owning it. At the state level, the Discoms are financially stressed, with the Average Billing Rate lower than the Average Cost to Serve rate. As a result, they are unable to invest in strengthening their distribution networks, with the result that most of the transformers and lines are overloaded and prone to frequent failures. This is the scenario today, wherein we are yet to reach the level of transmission adequacy that ensures 24x7 power to all. The current system will collapse when we reach that level of transmission. State transmission network development is linked to the demand requirement of the Discoms it serves. Unlike in the interstate level, the visibility and transparency in system planning by the STUs is limited. It is very difficult for a non-state entity to know the status of the transmission system, which is overloaded and in which segments are constrained. Moreover, traditionally the focus of both the Central and the State Governments has always been more on addressing the Discom infrastructure challenges than that of state transmission network. With most of the RE generation capacity getting connected to STU, the sufficiency of intra-transmission network is not known. To work on these issues, states need to make use of enabling tariff policy which mandates states to opt for the competitive bidding route of procurement of transmission. Some states like Jharkhand, UP and MP have already shown the way in which the transmission systems can be procured efficiently.
Should the country focus on inter-state projects or intrastate projects?
Power generated is consumed by the states, where the demand centres are. Transmission is the chain which links demand with supply and a chain is as strong as its weakest link. Hence, both inter-state transmission and intra-state transmission are equally important.
Do you think the sector has reached stagnant level with renewable tariff being stipulated at 2.44 rupees? Will this impact the transmission sector?
Transmission sector is agnostic to the price of the energy. Transmission is a 24x7 asset providing non-discriminate access to users to access the transmission system and transmit power that they have contracted. We are still in the early stages of RE deployment in the country and have significant capacities yet to be tendered out. We are sure that RE will make energy available to consumers at prices much lower than what we are seeing today and this will give a significant push to transmission.
Does India have sufficient T&D infrastructure to evacuate and balance diverse generation on the grid including thermal, hydro, nuclear and RE?
If India grows at 7.5%, per capita power consumption will triple or quadruple in next 10 years. Installed power capacity will grow from 300 GW to roughly 700-800 GW during this period. Renewables will grow from present 70 GW to 200 GW in 3-4years. The last time we did something like this, it took 25 years. Various schemes will revive distribution sector (including privatization). Although Transmission is infrastructure of infrastructure, there are no big-bang announcements being made in this segment of the power sector. The transmission vision of the country has to match the vision that we have for renewable energy and power for all. The ambitious Rs. 5 lakh crore Bharatmala programme in the road sector is a good example of a programme that is not driven purely by demand, but by larger economic and social considerations. A similar ambitious programme in the transmission sector is currently underway in Brazil. The transmission sector is being viewed as an engine for economic growth in Brazil, with planned investments of more than $ 20 billion in the next 3 years. The impact of power generation on the transmission grid In India is expected to change significantly with a greater share of renewable energy generation. The grid will be put to real test when we have significant RE generation coming in during the day and going out in the evening. The grid needs fast-response balancing infrastructure in the form of energy storage systems to provide support till thermal generation ramps up and supports the load. The weak links and overloaded segments of the grid would need to be identified and strengthened to enable un-constrained flow of power from region-to-region, state-to-state and within states. The grid failure in July 2012 affected nearly half of India’s population, making it one of the largest outages by number of people affected. We cannot afford a similar situation in a digitally-connected India. Hence, it is important that investments are done not only for meeting or spurring demand, but also for ensuring better quality and higher reliability of power. In this context, planning for contingency lines along important corridors also becomes critical. In this context, some of the challenges that would have to be overcome include: 1.State-grid is the weakest link. There is no point investing upstream if downstream remains weak. State grid is already a central agenda whether we accept or not. 2.Speed of execution (environmental, incentives): Typical forest clearance time taken in transmission projects is 18 months. There are no incentives in place for early commissioning. Bidders must get a “window” for COD and large bonus for finishing early. Today’s bid documents are discouraging early commissioning. 3.Transmission project execution takes 3-4 years: solar projects can come up in 6 months to 12 months whereas transmission project execution takes 50-60 months on average (including standard delays). This puts even more emphasis on planning early.
Sterlite has crossed considerable milestones in Brazil. What are your views on other Indian developers in the transmission segment turning global?
We understand that other developers are also carrying out necessary due diligence, and we would like to see even higher participation by other Indian developers in international markets.
What is your outlook for the power sector in the next few years?
India is one of the fastest growing economies of the world and would continue to grow above the world average for the next few decades. Power will fuel this growth. The demand for electricity would grow with a large unelectrified population getting connected, and economic activities proliferating in smaller towns and villages. Hence, the country faces an energy trilemma – energy equity, energy security and commitment to sustainability. The government is addressing these through various programmes including availability of quality power for all, emphasis on stable & secure grid and massive expansion of renewable energy. Development of efficient, economical and integrated transmission will be an imperative for success of these initiatives. It is therefore essential to relook the planning philosophy, attract adequate investments and encourage competition in the transmission sector. Sterlite Power will continue to partner with the Government in its mission to provide 24x7 power to all citizens of the nation.
Please throw some light on the key growth drivers for demand in the T&D segment in the next few years.
Transmission system linked to RE would be the key driver for growth. The transmission demand is expected to come for RE projects in resource-rich states, development of large offshore wind farms and of large solar projects in cold deserts of Lahual-Spiti and Leh-Ladakh. Intrastate transmission system strengthening with new project development and uprating/upgrading of existing transmission assets would be another key driver. Development of inter-regional transmission links with Nepal, Bhutan, Bangladesh and Sri-Lanka would open up in the next few years and will eventually spread to connect the ASEAN region. I find the concept of global super grids very powerful. The concept is not only emerging rapidly, but also gaining acceptability. This would lead to a scenario where the generation of power could be in any geography and its market elsewhere.