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Power-to-people link seen costing India US$10b a year

Wednesday, January 4, 2017 - 11:35

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The country lacks sufficient transmission infrastructure to link its increasing generation capacity to areas of burgeoning consumption, said Pratik Agarwal, chief executive officer at Sterlite Power Transmission Ltd. The central government may spend about US$6 billion annually, with the rest coming from the nation's states, he said.

[MUMBAI] India will spend US$10 billion annually on new power transmission lines to satisfy growing demand in under-served areas, according to the country's largest private power-grid operator.

The country lacks sufficient transmission infrastructure to link its increasing generation capacity to areas of burgeoning consumption, said Pratik Agarwal, chief executive officer at Sterlite Power Transmission Ltd. The central government may spend about US$6 billion annually, with the rest coming from the nation's states, he said.

"India should see far bigger growth of electricity consumption than it has seen for the last three to four years," Mr Agarwal said. "If you want to make a dent in the energy industry, it is no longer about generation, it's about delivery."

Demand for transmission infrastructure is being driven by Prime Minister Narendra Modi's goal of supplying affordable, continuous power to the whole country by 2019. India's peak electricity demand is expected to rise by more than 53 per cent to 235 gigawatts during the six years to March 2022, according to the country's Central Electricity Authority.

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The government's rural electrification plans will drive demand for investment across the electricity value chain, according to Mr Agarwal. Linking millions of people in villages to the grid will require more power lines to bring electricity from different parts of the country, he said.

"We need to spend a huge amount of money on transmission," said Anuj Upadhyay, an analyst at Emkay Global Financial Services Ltd. "In spite of having so much generation capacity, the flow of power is still not happening in many areas because of transmission constraints."

Mr Agarwal's estimates for transmission spending outpace recent forecasts by the government. The Central Electricity Authority expects 2.6 trillion rupees (S$55.2 billion) to be spent in the five years to March 2022 to add 100,000 circuit kilometres (62,137 miles) of transmission lines and 200,000 mega volt ampere of transformation capacity, according to a draft National Electricity Plan released last week.

Sterlite Power has 10 inter-state power transmission projects with a total network of 29 power transmission lines of about 6,767 circuit kilometres and seven substations. Four of these projects are operational.

The company is looking to raise about 26.5 billion rupees by listing two of its operational transmission projects through an infrastructure investment trust named India Grid Trust. Funds from this would be primarily used to repay loans. The trust will also have a first right to acquire the remaining eight projects of Sterlite.

The government's increasing focus on renewable power is another factor that will drive transmission demand, said Mr Agarwal. The intermittent nature of renewable power will require grids to be smarter, he said.

"Grids around the world are designed for stable flow of energy." Mr Agarwal said. "Renewable is exactly the opposite. Most people in the world haven't budgeted for this."

India plans to invest 10.3 trillion rupees to add nearly 188 gigawatts of generation capacity in the five years through March 2022, most of which will be renewable.

In the year ended March, India's per capita consumption increased 6.4 per cent from a year earlier to 1,075 kilowatt hours, according to the Central Electricity Authority.

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