The government has introduced an online system for seeking forest clearance that has been very beneficial in securing this critical clearance. To streamline state level clearances for transmission projects, the appointment of a nodal officer at the state level could be very helpful. Similarly, having a Project Monitoring Committee at Power Ministry level for a regular progress update and addressing Inter-Ministerial coordination issues could fast-track project implementation, says Ved Mani Tiwari, CEO – Global Infrastructure, Sterlite Power, a leading global developer of electric power transmission infrastructure and electric utilities solutions provider. In conversation with Manu Tayal, Associate Editor, Saur Energy International, Tiwari shared his views on various topics which the energy sector is currently dealing with along with his company’s achievements, future plans etc. Here’re the excerpts from that exclusive interview published in the Saur Energy International Magazine’s October 2019 edition:
Q. What have been Sterlite Power’s major milestones till now?
Sterlite Power is driven by its core purpose of “empowering humanity by addressing the toughest challenges of energy delivery” as we believe that electricity access transforms societies and delivers a long-lasting social impact. We are a leading global developer of power transmission infrastructure operating in India and Brazil. Sterlite Power leads with innovative technologies such as LIDAR, Heli-cranes, Digital and AI, Drones to overcome energy delivery challenges.
From being awarded India’s first 765 kV power transmission project in 2011 under competitive bidding framework, the company today has a portfolio of 24 projects across India and Brazil. Our first project to be commissioned in Brazil evacuates wind energy from the north-eastern region to the national grid. We have also won one of the largest Green Energy Corridor (GEC) packages among the 7 for which auctions were held in India during July 2019.
Here are some of the key milestones for the Global Infrastructure business:
- First private transmission player to win and commission first ever 765 kV D/C line in India.
- Became first private transmission developer to win an award from the Ministry of Power for early commissioning of 765/400 kV Dhule substation (2015).
- Commissioned NRSS-29 in Kashmir 2 months ahead of schedule. The Northern Region Strengthening Scheme 29 (NRSS 29) was one of the most challenging and one of the largest private-sector transmission projects in the country, dedicated to the nation by Prime Minister of India, Narendra Modi, last year. It also represents one of the major private investments in the State of Jammu & Kashmir.
- First-ever InVIT in power sector (IndiGrid) for asset flip and capital recycling.
- Entered Brazil in 2017 and within 2 years we have grown our portfolio to 10 projects.
- We delivered Arcoverde – our first project in Brazil – 28 months ahead of schedule.
- As of FY 2019, we had a total portfolio of 24 assets across India and Brazil, spanning 13315 CKM (circuit kilometres) and 23,885 MVA capacity.
- Maintaining the highest standard of Quality, Health and Safety have led to Sterlite Power being the first in Transmission sector to be given ISO 45001:2018 certification. We have also won the 1st International ROSPA Gold Award in Safety.
- We have recently won a Global Sustainability award from Energy & Environment Foundation for our sustainable practices towards the community and environment.
Q. How suitable is the regulatory framework for power transmission business in India?
Under the competitive framework in transmission, the developers (both public and private) compete to secure the rights to build, own, finance, construct and operate the project for the contract period of 35 years under the BOOM framework.
The developers quote annual tariffs for 35 years and the one quoting the lowest levelised tariff wins the project. The competitive framework has played out very well in the sector so far and has led to about 40 percent tariff reduction compared to its normative tariff if the asset had been created under the non-competitive route.
The developers are required to maintain the availability of at least 98 percent to get paid throughout the contract duration, which ensures high-quality asset development.
The overall policy landscape is very conducive providing for a robust payment security mechanism and promoting transparency through a competitive award of projects. This has led to the sector attracting billions of dollars from global investors, that could easily meet the investment requirements for transmission in India.
The government must be complimented for this competitive framework that captures maximum value for the consumer through competition. We envisage an overall market size of more than Rs 5 lakh crore in transmission over the next 10 years to create a vibrant State, National & Interregional SAARC grid.
Government has been very supportive and proactive to clear any challenges or impediments to ensure that the overall renewable mission target of installing 175 GW by 2022 is achieved.
Linear projects like transmission have little leeway in negotiating forest, wildlife, defence, airport, coastal zone etc. and are therefore heavily dependent on active government support and streamlined process definitions. The execution timelines of 15 months for transmission projects catering to renewable energy projects further amplifies this challenge and complexity.
The government has introduced an online system for seeking forest clearance that has been very beneficial in securing this critical clearance. To streamline state level clearances for transmission projects, the appointment of a nodal officer at the state level could be very helpful. Similarly, having a Project Monitoring Committee at Power Ministry level for a regular progress update and addressing Inter-Ministerial coordination issues could fast-track project implementation.
Q. Is the power transmission sector in India an attractive opportunity today for investors?
Most of the generation capacity being created in India today is that of renewable energy-based sources. The gestation period of these RE projects is no more than 24 months requiring transmission to be built at a matching pace.
To meet the renewable mission target of installing 175 GW by 2022, a comprehensive transmission scheme (Green Energy Corridor – GEC) to evacuate 66.5 GW across seven RE resource-rich states of India has been envisaged by the government at a cost of about Rs 50,000 crore. To fast-track the Regulatory approval of these transmission schemes, GOI has also accorded these identified schemes as Projects of National Importance.
We reckon more than Rs 30,000 crore worth of projects to be available to developers for competitive bidding over the next 12 months. These are large opportunities that would need to be completed in an aggressive time-frame of 18-24 months.
Various states like UP, MP, Jharkhand and Maharashtra have adopted competitive bidding to fund and implement transmission system in the last 12 months while others are deliberating. States by themselves could easily unlock a transmission market of more than Rs 15,000 crore each year for investments.
We also feel there is a large requirement of grid integrated battery energy storage systems (BESS) to balance out grid intermittency and demand management caused by the fast integration of RE energy sources into the grid. Considering the steep price declines being witnessed in battery prices globally, it would best to select developers to set-up these grid-integrated storage parks under an availability-based, fixed-annuity, tolling-revenue model akin to the competitive framework prevalent in transmission.
We are currently working with the state government and utilities to help them identify immediate opportunities where storage could be economically beneficial and also develop the business model framework. The developer interest in the sector has been immense despite the aggressive execution timelines for the GEC transmission projects. Each of the GEC bids has seen a healthy competition from 7 to 9 large power sector players. Even in the competitive bids happening at the state level, the competition has been equally robust. The tariff reductions witnessed are about 35-40 percent in comparison to a cost-plus tariff of the projects.
Thus, there is a strong appetite for transmission projects in the developer and investor community due to the government enabled competitive framework and payment security mechanism. As you may be aware, private equity giant KKR and sovereign fund GIC have together invested more than Rs 2,000 crore this year to co-sponsor India’s first power sector InvIT, IndiGrid, alongside Sterlite.
Q. Do you feel the PPP (Public-Private Partnership) model will help meet the CapEx required for grid investments?
Indian economy is set to grow at about 7-8 percent each year over the next ten years. Energy is a critical input to fuel this growth momentum. The government has consciously committed to having renewable energy sources to meet this growing energy appetite.
Transmission plays a critical role to connect the RE sources to the load centres. We reckon the investments requirements in transmission sector to the tune of around Rs 5 lakh crore in the next 10 years to create a vibrant State, National & Interregional SAARC grid. These investments would largely cater to enabling renewable generation evacuation into the grid, energy access to consumers, inter-regional energy exchange and managing peaks and intermittencies through storage.
As mentioned earlier, the consistency of policy and regulations, a robust payment security mechanism and a transparent well-established competitive bidding framework have caught the interest of global investors. In the last 10 years, around 57 projects with an investment of more than Rs 80,000 crore have been awarded under the competitive bidding framework, out of which 23 projects have already achieved commissioning. A steady rise in the number of bidders from 3 to 7 in the last 1-2 years demonstrates the increasing interest in the transmission sector. The competition has also led to about 35-40 percent transmission tariff reduction compared to a normative costplus tariff of these transmission assets.
The strong appetite shown by investors for transmission assets should reassure the Central Government that the requisite ISTS transmission network in the country could be built using private investments rather than crowding out public funding. The money saved could be channelized in improving the health of the distribution segment and other priority sectors where attracting private investments is a constraint at this juncture.
PPP model also unlocks execution efficiencies through the use of innovative technologies to reduce project cost and its timelines. With innovative models like InvITs, private players can also provide more liquidity in a debt-heavy infrastructure business.
Q. Power transmission infra is as big a challenge in India’s power generation ecosystem. Do you believe India’s power infrastructure can sustain the goal of 175 GW renewable power by 2022 and 500 GW by 2030?
Power transmission infra is a bigger challenge as compared to power generation in the development phase as the transmission is a linear project and crisscrosses innumerable districts, habitats and regions. We, at Sterlite, have been very successful in managing these challenges and yet maintain our assets with a reliability level of 99.8 percent.
We also strongly believe that India’s power infrastructure will continue to grow at a rapid pace despite its existing challenges. The current government has rightly realised the importance of the power sector in achieving its goal of becoming a 5 trillion-dollar economy by 2024.
The policies and regulations notified by the government have been consistent in this regard. Initiatives like last-mile household electrification exercise, push towards industrial growth through Make-in-India, new industrial corridors and penetration of electric vehicles are expected to add significantly to the electricity demand, thus requiring a sizeable installed capacity of generation.
With the policy push tilted towards renewable energy, 500 GW capacity addition by 2030 looks realistic. Setting up ultra-mega solar parks in Leh to the tune of 23 GW targeted by the government and exploring off-shore wind energy are the right steps in this direction.
This diversification of our energy basket towards renewables is also imperative in our crude-import substitution and saving precious foreign exchange reserves.
Q. Do you believe storage will be the solution to the challenge of dependable power from renewables? What will be your key suggestions to the government to boost battery manufacturing in India?
We believe energy storage is crucial to meeting India’s renewable energy goals. The need for energy storage stems from the fact that the existing power grid faces increasing instability caused majorly by two main reasons. Firstly, the increasing volatility on the supply side due to intermittent nature of renewables; and secondly by the rising unpredictability on the demand side as evidenced by high Deviation Settlement Mechanism (DSM) cost borne by distribution companies. The business case for energy storage comes from the basic need for balancing generation with demand.
Utility-scale battery storage systems are being deployed at a scale faster than most power sector stakeholders realize. The battery prices have fallen by 70 percent over the last 6 years and are expected to further halve over the next 10 years. India’s first grid-scale battery-based energy storage system was launched in February’19. We believe that the battery framework could turbocharge the storage market and could supply grid stabilization, upgrade reliability & ensure analytical provision for millions of power consumers all over India.
The government has already made great paces in boosting the battery-based storage across India. Government’s thrust on renewable power, as well as e-mobility, will lead to a massive opportunity for battery storage solutions. The Govt has an opportunity to set an ambitious goal for India’s battery storage opportunity to stimulate domestic manufacturing and application ecosystem. A robust policy and regulatory framework need to be rolled-out as a first step in this area, in consultation with the stakeholders.
Q. Tell us about Sterlite Power’s expansion plans for global infra business?
Sterlite Power is already invested in the growing transmission markets in India and Brazil and looks to expand to other markets in transmission as well as grid-connected energy storage. Today we have a portfolio of 24 assets. We will continue to lead with innovation and the highest level of Quality, Safety and Environmental standards.
We are actively engaging with our neighbouring South Asian countries urging them to emulate the success achieved in transmission cost and timelines in India and Brazil in their territories. We are also actively evaluating concession opportunities in transmission and grid-connected storage opportunities in large economies for expanding our footprint further.
We are actively pursuing Indian large and growing power transmission market and assist the government in achieving its goal of 40 percent electricity generation from non-fossil fuel sources by the year 2030.