Fast-paced renewable energy growth to draw substantial investments in Indian transmission infrastructure

The Indian transmission infrastructure is likely to grow by over 25% between 2020 and 2025, mainly driven by the rapid growth in the renewable capacity which has seen limited expansion due to lack of infrastructure, says GlobalData, a leading data and analytics company.

According to GlobalData’s estimates, the Indian power transmission infrastructure would need an investment of about INR 2-2.5 trillion (US$27bn-US$34bn) over the period from 2020 to 2025 to accommodate the power evacuation infrastructure for modernizing aging infrastructure and new expansion to accommodate the power from new capacity build-up target.

The Indian renewable landscape is rapidly changing and is growing at a consistent pace. The steep reduction in the renewable generation costs, conducive policy environment and availability of investment avenues have resulted in doubling the share of the Indian renewable capacity in the capacity mix to 23.4% at the end of March 2020 from 11.8% at end-March 2015.

GlobalData estimates that Indian renewable sector is likely to add approximately 90GW (including small hydro) of renewable capacity by the end of 2025, and even this conservative estimate may seem unrealistic due to lack of power evacuation facilities. However, an expansion in the transmission infrastructure can open doors for additional renewable capacity that may reduce some of the hurdles limiting the renewable capacity expansion.

Ankit Mathur, Practice Head of Power at GlobalData, comments: “The government had announced multiple infrastructure projects under Green Energy Corridor (GEC) to utilize the growing capacity of renewable energy. However, due to COVID-19 pandemic, the infrastructure projects are facing significant delays and the India-China standoff has further aggravated the hurdles for solar PV expansion as China accounts for more than 80% of the solar equipment import.”

Recently, the growth of investors in the private sector has brought increased competition for new tenders, helping to bring down the overall capital costs of the projects. Increasing competition from private companies, such as Sterlite and Adani Transmission backed with strong balance sheet and previous exposure to global capital markets, are now challenging the monopoly of the sector leader(s).

Mathur concludes: “There is a rising possibility of under-utilization of variable renewable power in the absence of an improved transmission network, which can also be a barrier for the country to achieve its renewable targets and climate commitments. The intermittency of wind and solar energy is often criticized, however, an increase in transmission and distribution networks along with the development of interconnectivity amongst grids will not only help overcome the issue but also translate into greater network stability. In addition, the introduction of tariff-based competitive bidding for the selection of transmission developers will ensure project profitability and thus accelerates investments by the private sector.”