India is on track to become the world’s third largest economy in the years to come. India's rapid economic growth and burgeoning population have ushered in a significant demand for energy, prompting the country to undergo a transformative shift in its power sector. In this journey of growth, energy is the key fuel to keep the juggernaut rolling.
Currently, while India ranks third in total power consumption globally it is significantly lagging in per capita consumption. Needless to say, this will drive substantial growth of power consumption as on one hand, the new growth has ushered in a steady demand of power and on the other hand, more and more Indians have increasingly started getting access to more reliable power and continue to demand this in all spheres of life.
The demand for energy with every passing day will continue to permeate not only through the industrial demand centers but also in the new domestic consumer segment, where the new Indian consumer has a relatively high energy reliant lifestyle today.
- The Renewables Revolution
India's power sector gains momentum from a robust power supply and demand dynamic. Drivers for heightened future power demand include the government's push for greater manufacturing sector contribution to GDP, electric vehicle (EV) adoption, railway electrification, and a dedicated focus on achieving energy independence by reducing imports.
India's sustainability commitment boosts this momentum, evident in its ambitious target of achieving 500 GW renewable capacity by 2030 and affirming the transition from fossil fuels. Abundant solar and wind resources make India an attractive destination for renewable energy investment.
Renewables now constitute around 31 percent of total generation capacity (July 2023), up from 20 percent five years ago. During this period, 60GW of renewable capacity was added, accounting for over three-fourth of incremental capacity. Solar photovoltaic module manufacturing and production linked incentives have propelled India as the fourth largest and an appealing global renewable energy market.
India aims for 900 GW of installed capacity by 2032. A projected Rs 34 trillion investment in the next decade will fuel this push, elevating non-fossil capacity from 42 percent to around 70 percent.
- Transformative Transmission Infrastructure
The addition of renewable-powered generation centres accelerated India's transmission network enhancement, targeting improved efficiency and managing the renewable energy generation intermittency. Green Energy Corridors and Renewable Energy Management Centres facilitate the integration of large-scale renewable energy capacity.
The current transmission network encompasses 4.7 lakh circuit km of transmission lines and 11.25 lakh MVA (mega volt amperes) of transformation capacity. Increased power generation mandates augmented transmission infrastructure.
Around Rs 1.5 trillion investment is anticipated. The government's Smart Grid Mission and "carriage-content separation" initiative improve grid efficiency and discoms’ financial condition, stimulating innovation and fair competition.
Implementing these reforms presents an opportunity within the larger global carbon-free generation scheme, crucial for India's growth ambition.
- Government Initiatives & Policy Support
Efficiently adding capacity requires support from the government and through various schemes and reforms. These are proceeding surely in the right direction. Government policies and regulatory reforms have successfully attracted investments in power, transmission, renewables, and infrastructure.
Schemes like UDAY improve discoms' financial health, thus enhancing the investment climate for power generation and transmission. Real-Time Market platforms and Green Energy Corridor projects reinforce transmission and renewables sectors.
Government-backed SOPs emphasise efficiency and loss mitigation. To reduce discoms' selling prices (Rs 8 per unit) as against procurement of renewable power (Rs 3 per unit), efficient connection, 24/7 reliability, and technology adoption are essential. Systematic investment and industry participation synchronise reform and investment, fostering a favourable business environment.
- Innovative Financing Models
India's innovative financing models entice developers and investors. Public-Private Partnerships (PPPs), Infrastructure Investment Trusts (InvITs), and Green Bonds fund large-scale projects. Recognising infrastructure's capital needs, the government introduced InvITs, democratising infrastructure ownership and diversifying investors.
InvITs enable unlocking developmental capital after project operation, fostering long-term investment. Around 16 registered InvITs with an estimated US$ 54.5 billion of assets under management (AUM) demonstrate the success of the InvITs programme.
IndiGrid, the pioneering power transmission InvIT, has an AUM of US$ 3 billion. The National Infrastructure Pipeline (NIP) and National Monetisation Pipeline (NMP) guides Rs 111 trillion in investments, emphasising asset monetisation.
I strongly believe that while these plans have been laid out, the key is in consistency and transparency of these reforms. For any asset monetisation programme to be successful, it is important that it is conducted through a fair and transparent bid process allowing all the interested stakeholders to participate for optimal price discovery through a market driven process.
The Power Sector’s Importance
Envision, if you will, the current trajectory of India's power sector – a realm in the midst of a progressive metamorphosis. It's not just about producing electricity; it's about driving progress, not only in industry but in consumption across all spheres of life.
Think of it as the beating heart of a young independent nation's journey which must literally sprint given its global position and national ambitions. As we look ahead, the power sector must be the catalyst for making this transformation happen faster.
It's not only about supplying power; it's about creating a powerful ecosystem of creation, consumption and efficiency throughout the power supply chain which will result in a formidable positive force propelling us towards a more promising tomorrow.
Harsh Shah is the CEO of IndiGrid. Views are personal, and do not represent the stand of this publication.
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