India took giant strides in enhancing its renewable energy (RE) capacity in 2022, adding 14.21 gigawatts (GW) till October, and is now the world’s fourth largest in terms of installed capacity. Furthermore, RE capacity of 76.37 GW is under implementation, a major part of which is expected to go on stream in 2023. Another 37.16 GW is under various stages of bidding.

However, as RE capacity surged past 172 GW, transmission of power and grid stability remains a challenge. The year 2023 will be crucial on how the government develops transmission infrastructure, a critical link in India’s clean energy transition.

A key initiative in this direction is Green Energy Open Access rules, which remove barriers in the availability and utilisation of RE. The rules reduce Open Access limit to 100 kW, paving the way for small consumers to purchase RE with no limit for captive consumers.

Transmission

Pratik Agarwal, Sterlite Power MD, aptly points out: “You have bulk of high-quality solar in western India and bulk of high-quality wind in the south. That power has to travel to Delhi Bombay, Pune, Bangalore and Chennai. Therefore, the amount of transmission you need to add is the single biggest challenge.”

The Power Ministry has prepared a comprehensive plan for transmission system to integrate over 500GW of RE capacity by 2030. The system will provide visibility to RE developers on potential generation sites and scale of investment opportunity. It also offers growth opportunities in transmission at an investment of ₹2.44-lakh crore.

Also, as part of the Central Transmission Utility of India’s (CTUIL) ISTS rolling plan, around ₹46,800 crore is expected to be invested in the transmission sector till March 2024. Grid stability is another crucial element in the sector due to rising ramp-up requirements during peak hours, thereby making it difficult to keep grid frequency within the requisite band under the grid code.

Consequently, 2023 will see enhanced focus on power storage, as the variability of power supply and demand increases. The government is also working on a production linked incentive (PLI) scheme for grid-level storage.

Analysts and market players agree that transmission is yet to catch up with RE capacity additions, and will be a key issue in 2023 and beyond. More so as India’s power demand continues to rise.

An NTPC official said: “Power demand is expected to grow in 2023, driven by rising industrialisation, domestic consumption, along with electrification of mobility. National electricity demand is expected to grow 7 per cent in FY23 (ending March 2023).”

Manufacturing

Gautam Mohanka, Gautam Solar MD, emphasises that allocation of ₹19,500 crore for solar PV modules, under the PLI scheme, pushes for faster transition to RE, and is projected to save around ₹1.37-lakh crore in imports.

One major concern is storage, said Mohanka, adding the government recently introduced a transmission plan, under which it has chalked out plans to ensure round-the-clock power by installing 515 GW battery storage by 2030, an indication that RE infrastructure is expected to grow in 2023.

However, rising prices of key commodities in 2022 put pressure on returns, and will be a key factor to track in 2023.

Crisil Ratings Director, Ankit Hakhu, said: “Uptick in commodity prices (especially solar modules) and rupee depreciation led to increased capital costs for developers, and has impacted project and equity returns on their under-construction projects. These projects were bid out largely in CY2021 and FY21 and are currently under implementation, hence, the rise in project costs was not completely anticipated.”

Besides, Amplus Solar SVP Ritu Lal pointed out that basic customs duty and the almost simultaneous imposition of Approved List of Models and Manufacturers pose serious challenges to both cost and energy generation efficiency.

Discom dues

Implementation of late payment surcharge (LPS) has effectively aided in recovering the outstanding dues of Discoms. The total outstanding dues of around ₹26,546 crore were settled till November 21, while 13 States with outstanding dues of ₹1.38-lakh crore have chosen the EMI option and paid instalment of ₹9,528 crore in two EMIs. Further, 20 States have reported no outstanding dues as of May 2022.

Another key monitorable in 2023 is the passage of the Electricity Amendment Bill, introduced in Lok Sabha in August, and referred to a standing committee following widespread protests. If passed by Parliament, it will allow the entry of private players in distribution and enable consumers to choose from a multiple set of service providers.

Published on December 28, 2022