The Institute for Energy Economics and Financial Analysis (IEEFA) in its latest report said India needs to increase competition in the development of intra-state transmission infrastructure for a speedy deployment of renewable energy.
Vibhuti Garg, energy economist at IEEFA and author of the report said “As the share of increasingly low cost but variable renewable energy grows, development of transmission systems must keep pace to meet demand and ensure efficient, reliable delivery of power to consumers.”
Intra-state transmission networks would be key for evacuation of power as the country transitions to a sustainable energy economy and yet the intra-state transmission is the weakest link in the grid. Most of India’s renewable energy generation capacity is connected to state transmission utilities, she added.
Garg said “The introduction of competition can help to drive down construction costs, introduce new technologies and new ways of thinking and promote timely completion of projects.”
She further said that more competition would not only benefit the private players but also increase focus by the state-owned utilities on the benefits to consumers who wear this cost.
According to the report, the private sector can also bring in increased capital at low cost for building transmission networks, leveraging record low global interest rates that are seeking low-risk, long-dated infrastructure returns.
“It would also free up state governments’ limited resources, which could be allocated to other social sectors like health or education for development,” it said.
Analysis of bid data revealed that Power Grid Corporation of India had achieved lower costs and higher return on equity from competitively awarded projects, compared to cost-plus projects, the report added.
Competitive bidding has also led to discovery of lower electricity tariffs. According to Garg, projects secured without competition are not only likely to prove more expensive but are also more often delayed beyond the commissioning timelines.
She added ,“These delays, on account of various issues such as right of way, land acquisition and granting of forest clearances, result in capital cost overruns. Some cost overruns have been approved by State Electricity Regulatory Commissions, but others are being contested at various courts for settlement.”
IEEFA in its report said that India’s renewable energy developers were building capacity faster than the transmission grid could keep up. While inadequate grid availability was a growing concern for developers in renewable-rich states, this was slowing down the commissioning of new projects.
“Tamil Nadu, Karnataka, Gujarat and Rajasthan can look forward to moving from net electricity import states to net exporters of low cost, zero pollution, zero emissions electricity, but only with adequate transmission planning given the massive scale of renewable energy investment in planning,” it added.
For optimal utilisation of the transmission network, distributed hybrid projects should be encouraged, which would also drive the transmission tariff down, as the costs would be spread across larger flows of unit of energy thereby reducing costs, the report said.