The transmission segment has grown significantly over the past few years led by a conducive policy framework and active private sector participation besides concerted efforts of the Power Grid Corporation of India Limited (Powergrid). As of March 2017, the country’s total transmission line length stood at 367,851 ckt. km (at the 220 kV voltage level and including high voltage direct current [HVDC]) vis-à-vis 257,482 ckt. km in 2011-12, recording a compound annual growth rate (CAGR) of 7.3 per cent. Of the total line length, the highest share (55 per cent) was accounted for by the state sector, followed by the central sector (38 per cent) and the private sector (7 per cent). In terms of voltage, transmission lines at 220 kV and 400 kV accounted for the highest shares of 44 per cent and 43 per cent, respectively, while the rest was contributed by lines at 765 kV (8 per cent), 500 kV HVDC (3 per cent) and ±800 kV HVDC (2 per cent)
Meanwhile, the transformation capacity at the 220 kV and above voltage level (excluding HVDC) stood at 721,265 MVA in 2016-17 as against 399,801 MVA in 2011-12, a CAGR of 12.5 per cent. In addition, HVDC transformation capacity increased from 9,750 MW to 19,500 MW, while the interregional transmission capacity increased from 27,750 MW to 75,050 MW during the same period.
Capacity addition
The transmission line length addition in 2016-17 stood at 26,300 ckt. km, of which over 10,000 ckt. km was added at the 400 kV level. The central sector led by Powergrid added the maximum line length (11,669 ckt. km) during the year. Meanwhile, about 77,317 MVA of transformation capacity (excluding HVDC) was added during the year, of which the maximum addition (31,340 MVA) took place at the 400 MVA level. The state sector accounted for the majority share in capacity contributing over 40,000 MVA during the year. HVDC capacity addition stood at 4,500 MW at the ±800 kV level.
Key recent projects
The transmission sector is moving towards higher voltage levels and critical ±800 kV HVDC projects were commissioned in 2015-16 and 2016-17 by Powergrid. These include the 3,506 ckt. km Biswanath Chariyali (Assam)-Agra (Uttar Pradesh) bipole line – the country’s first HVDC line to be commissioned (September 2015). In March 2017, Powergrid completed trial operations of the 1,500 MW Pole I of the ±800 kV Champa-Kurukshetra HVDC transmission system and began commercial operations. The system is part of the ±800 kV, 3,000 MW Western Region-Northern Region HVDC Interconnector Transmission System for independent power producer (IPP) projects in Chhattisgarh. Along with commercial operations of Pole I, the 2,576 ckt. km Champa-Kurukshetra HVDC transmission line was also commissioned at a total cost of about Rs 63 billion. Further, the 1,500 MW capacity Pole II is expected to be commissioned by June 2017. This transmission system will be further upgraded to 6,000 MW capacity with the addition of the second HVDC bipole of 3,000 MW, at an additional cost of about Rs 52 billion. It is expected to be completed by December 2018.
Policy and regulatory developments
The power sector’s policy and regulatory measures have consistently supported the transmission segment’s growth. In the past year and a half, the Central Electricity Regulatory Commission (CERC) notified key regulations, which were long awaited by the industry. The most prominent among these, the Ancillary Services Operation Regulation was notified by the CERC in August 2015. The objective of the regulation is to provide a framework for ancillary services in the country, restore frequencies to within prescribed levels and relieve transmission congestion. Further, the CERC notified the detailed procedure for the implementation of the regulation in November 2016.
On January 20, 2016, the cabinet approved the amendments to the National Tariff Policy, 2006 with the aim of aligning it with the current state of the power sector. The amended policy stated that all transmission projects be awarded through the tariff-based competitive bidding (TBCB) route to ensure greater transparency in project award. Besides, the policy stressed upon the creation of adequate transmission capacity to enable increased access to low-cost power. Further, wind and solar plants have been exempted from paying interstate transmission system (ISTS) charges and sharing ISTS losses. Accordingly, no interstate transmission charges will be levied and no share of losses will be attributable to wind energy projects commissioned till March 31, 2019 and solar energy projects commissioned till June 30, 2017. The waiver will be valid for a period of 25 years from the date of commissioning of these projects.
Moreover, in August 2016, the central government launched the “e-Trans” web portal to introduce electronic bidding and electronic reverse auction for TBCB of transmission projects. Prior to this, the auction process was manual. The move is aimed at increasing transparency in the selection of bidders and ensuring better price discovery. The web portal is hosted on the website of MSTC E-commerce.
Further, the Ministry of Power (MoP) also released the Guidelines on Cross-border Trade of Electricity in December 2016, thus providing a policy framework to accelerate power exchange across the South Asian region.
M&A deals
Key merger and acquisition (M&A) deals were forged in the transmission segment in the past year, with Adani Transmission Limited (ATL) leading the acquisition of transmission assets. In October 2016, ATL completed the acquisition of a 74 per cent stake in Maru Transmission Services Company Limited and a 49 per cent stake in Aravali Transmission Services Limited, both of which were owned by GMR Energy. In December 2016, ATL executed a share purchase agreement with Reliance Infrastructure Limited for 100 per cent acquisition of the Western Region System Strengthening Scheme transmission assets of about 3,100 ckt. km. The enterprise value of the transaction is Rs 10 billion.
Renewable energy integration
The central government has notified plans to increase the renewable energy capacity to 175 GW by 2022 from the current level of about 57 GW. To ensure grid integration of such a huge capacity, the sector is implementing the Green Energy Corridors (GEC) project to enable the flow of renewable energy into the national grid network. The programme has been divided into two phases, GEC I and GEC II. GEC I is designed to support 33 GW of solar and wind power while GEC II will help evacuate 20,000 MW of solar capacity through interstate and intra-state transmission systems.
TBCB update
As of March 2017, a total of 36 interstate transmission projects have been awarded through TBCB. Of these, the maximum number (11) have been bagged by Sterlite Power Transmission Limited. It is followed by Powergrid which has secured nine projects (one of its projects was scrapped later). Essel Infraprojects and ATL are other key players with five and four projects in hand respectively.
Future outlook
As per the Central Electricity Authority’s (CEA) draft National Electricity Plan Transmission 2016, the total transmission line length is expected to increase to 470,515 ckt. km by 2021-22. Line length at 765 kV is expected to register the fastest growth given the emphasis on high voltage technologies. Meanwhile, total substation capacity is expected to reach over 979,637 MVA by 2022, while HVDC capacity is expected to reach 30,000 MW. The CEA projects an investment of Rs 2,600 billion during the Thirteenth Plan (2017-22) in the transmission segment, including an estimated Rs 300 billion in transmission systems below 220 kV voltage levels.
On the policy and regulatory front, the MoP is likely to revise the bidding guidelines for ISTS projects. A key recommendation of the committee undertaking the revision is to award ISTS projects on a build-own-operate-transfer basis instead of a build-own-operate-maintain basis. In addition, an overhaul of the transmission planning process is under way to align planning with the changing scenario in the sector such as the development of a power market, the integration of renewables and increased congestion. To this end, the CERC notified the draft transmission planning regulations in April 2017.
Going forward, the transmission segment is expected to keep growing at a fast pace to meet the requirement of additional power transfer, especially from renewables, to demand centres.