February 6, 2020 (IEEFA India) — India must modernise and upgrade its electricity transmission and distribution grid as a matter of urgency or it stands to fall well short of its great potential in meeting its ambitious renewable energy targets, finds a report from the Institute for Energy Economics and Financial Analysis (IEEFA).
Entitled Increasing competition in India’s transmission sector, it concludes that India must restrict its cost-plus pricing of electricity supply tariffs to limited projects of national importance and adopt open, competitive bidding.
Transmission is a major hurdle and is materially slowing the adoption of renewable energy
“The complexities of India’s grid mean that transmission is a major hurdle and is materially slowing the adoption of renewable energy,” says IEEFA energy economist and author of the report, Vibhuti Garg.
India has an ambitious target of 175 gigawatts of variable renewable energy by 2022, rising to 450 gigawatts by 2030, and progress in recent years has been excellent, with India more than doubling the installation of renewable energy capacity in the last four years.
Transmission, however, is considered a potentially serious bottleneck for speeding up the deployment and dispatch of renewable energy.
“COMPETITION IN THE TRANSMISSION SECTOR CAN HELP to achieve the twin objectives of increasing renewable energy generation, without these assets becoming stranded,” says Garg.
While the private sector has gained recent market share in total transmission line capacity, the monopolistic dominance of the Power Grid Corporation of India remains in effect, she added.
“Even in competitively awarded projects, Power Grid Corporation of India has won a third of the bids, establishing itself as a competitor to be reckoned with,” says Garg. “This disproves the claim that public sector enterprises are not competitive and need to be safeguarded or protected from pure competition.”
Growing participation of private sector investors has brought increased competition
“Growing participation of private sector investors has brought increased competition in new tenders, helping drive down the cost to consumers. This competition has also increased India’s access to global debt and equity capital,” she added.
THE PHENOMENAL SHARE MARKET SUCCESS OF ADANI TRANSMISSION LTD since its initial public offering in 2015 shows how the right regulatory and policy framework can attract capital to support India’s electricity system transformation. This is an important goal for India and provides a globally relevant model for other countries driving towards a lower cost, more sustainable domestic electricity generation system, according to the report.
Low-cost renewable energy has great potential as a traded commodity across states
“Low-cost renewable energy has great potential as a traded commodity not only across India’s states, but also with neighbouring countries such as Bhutan, Nepal, Bangladesh, and even Sri Lanka and Myanmar over time.”
Time is running out. India must begin planning to develop its transmission infrastructure at an even faster pace, the report concludes.
Author: Vibhuti Garg ([email protected]) is an IEEFA energy economist.
Media contact: Kate Finlayson ([email protected]) +61 418 254 237
About IEEFA: The Institute for Energy Economics and Financial Analysis (IEEFA) conducts global research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy. (www.ieefa.org)