An investment of US$ 60-80 billion will be needed in the next five years to keep pace with growing generation capacity.
A brief report by the Institute for Energy Economics and Financial Analysis, authored by Tim Buckley and Kashish Shah has revealed that India’s grid transmission infrastructure needs urgent modernisation to not limit the growth in renewable energy investments.
The report highlighted that during the FY 2018/19, India was unable to capitalise on the momentum of the previous year in which a record 12GW of renewable capacity was added. With the safeguard duty, policy uncertainties etc playing a part in the decline. However, the lack of power evacuation and transmission infrastructure has been a key reason developers remain disinterested in recent auctions.
According to the report, India’s growing renewable energy additions are outgrowing the grid capacity. Transmission network capacity grew at a compounded average growth rate (CAGR) of 12% between FY2013/14 and FY2017/18. With wind power commissioning slowing down over the last two years, in large part due to the current structural limitations in India’s national transmission grid.
“As an accelerated investment in renewable energy capacity needs to be matched with equivalent investment in grid capacity expansion, the challenge now for India’s electricity market is grid integration of large amounts of variable renewable energy while minimising integration cost,” the report stated.
While suggesting that, even though tariff-based competitive bidding for projects has allowed the private sector to actively participate in the expansion of India’s transmission grid in recent years, an investment of US$ 60-80 billion will be needed in the next five years to keep pace with growing generation capacity.
Grid infrastructure is as much an investment opportunity as the renewable energy sector is in India, both of which are critically important for the country’s sustained economic growth and to reduce India’s excessive reliance on fossil fuel imports.
An efficient and robust grid network is crucial in minimising grid curtailments for renewable power and ensuring that renewable assets do not face the financial risk of asset stranding, as is currently occurring in the Indian thermal power sector.
However, with the state of discoms being almost uniformly poor financially, this opportunity is a threat to renewables growth now, till a slution to the the discoms financial mess is discovered and implemented