India has a dynamic power sector, characterized by presence of diversified power generation sources including conventional sources like coal, natural gas , hydro and nuclear energy, besides renewable energy sources like solar and wind energy. The Indian power sector has witnessed a considerable change and evolution in the last two decades, owing to several policy and regulatory measures.
Further, continuous growth in population and increasing urbanization and industrialization have constantly added to the electricity demand in India with 300 million of existing population yet to receive electricity connections and remaining one billion population having intermittent access to electricity.
Programmes such as rural electrification and ‘Power for All’ have been accelerating power generation capacities and further, helping building effective systems for demand-side management to ensure overall efficiency improvements across generation, transmission and distribution.
In September 2015, the total installed capacity for power generation was 278,734 MW, of which the states contributed 96,455 MW (34.6%), and the central government and private sector contributed 74,171 MW (26.6%) and 108,108 MW (38.8%) respectively.
India’s energy demand is expected to grow by 132% by 2035 and is likely to surpass China in energy demand growth and double the aggregate demand of non-OECD countries.
The primary growth drivers for rapid expansion in India’s energy demand include growth in population, rising per capita energy consumption levels and investments in industrial and infrastructure development.
The demand for electricity in India is driven primarily by growth in the manufacturing sector, heightened residential consumption, growing economy and population, rapid urbanization and various rural electrification programmes.
The total electricity consumption for India during fiscal 2015 was 940 billion kWh and is expected to reach around 2,280 billion kWh by 2021-22 and 4,500 billion kWh by 2031-32.
Towards this objective , the Central Government has taken several initiatives:
Increased focus on renewable energy—with object of achieving green energy solutions and improving the fuel mix for power generation in India, which is largely dependent on coal-based power, in its 2015 budget, the Government announced a targeted clean energy installed capacity of 175 GW by 2022, comprising 100 GW of solar power, 60GW of windpower, 10 GW of energy from biomass, and 5GW from small hydroelectric projects.
Smart Grid Initiatives: The Government plans to invest Rs 136,500 crore in the smart grid infrastructure in India over 2015-2025, signifying the largest long-term smart grid investment in the country.
Additionally, the Government has also announced an investment of UD$ 4 billion in funding smart metering programmes, pursuant to which the implementation of smart metering systems will be undertaken for all consumers serviced by state distribution companies, to be completed by December 2017 for households having high power usage, through to December 2019 for the remaining households.
Implementation of projects over US$ 8 billion is underway across all Indian states to curb energy losses. For instance, the public utility responsible for power distribution to more than 3.5 million consumers across 11 districts in U.P. is implementing smart metering solutions to automate its meter reading and billing process to ensure regular and accurate bills.
Benefits of deployment of smart metering solutions will include; reduction in cost of servicing customers, enabling reduction in AT&C losses and improvement in peak load handling and overall power outage management.
Rural Electrification: The Government announced programmes for rural electrification to support low income and low consumption rural distribution networks such as Deendayal Upadhyay Gram Jyoti Yojana and has allocated Rs 5 billion for this programme, for launching feeder separation system to augment power supply to rural areas and for strengthening sub-transmission and distribution systems.
Financial Revival of State Distribution Companies: the Government has approved of the Ujwal DISCOM Assurance Yojana (UDAY) on November 5, 2015 for financial revival of state-owned power distribution companies, based on four key initiatives; reduction in interest cost of state power distribution companies, principally through phased takeover of their debt by respective state Governments; improving operational efficiencies of state power distribution companies; reduction in cost of power purchase; enforcing financial discipline on state power distribution companies through alignment with finances of respective state governments.
UDAY envisages significant support from respective state Governments, primarily in the form of taking over approximately 75% of the debt owed by state power distribution companies, during fiscals 2016 and 2017 by the respective state governments and reduction in interest rate for the balance 25% of their debt, which may be issued in the form of bonds by the state power distribution companies backed by the guarantee of the respective state governments.
Pursuant to the UDAY scheme, there will be added emphasis on improvements to operational efficiencies including through mandatory use of smart metering solutions, upgradation of transformers and meters, implementing energy efficiency measures like efficient LED bulbs, agricultural pumps, fans and air conditioners, among others.
These measures are expected to reduce the average AT&C loss from around 22% to 15% and eliminate the gap between ARR and the ACS by fiscal 2019, according to the Frost & Sullivan Report, Feb 2016.
Promoting public private partnerships in the distribution system: The Central Government has been encouraging private companies to operate in the power distribution system in India, such as private power distribution utilities in Kolkata, Mumbai, Surat and Ahmedabad which have improved efficiency and customer services in this area.
The franchisee model for power distribution has worked well for both consumers and the Government, helping in reducing transmission and distribution losses. For instance, the Bhiwandi project by Torrent Power in Maharashtra reduced these losses from 48% in 2007 to 19% in the recent past. Further, the franchise model for power distribution attracts investment as it is not exposed to regulatory uncertainty.
Transmission and distribution losses coupled with deteriorating financial condition of state power distribution companies and political pressure to keep tariffs low have resulted in high AT&C losses in the Indian power sector, varying across states.
However, with modernization drives promoted by the Government, state power distribution companies will have the ability to invest in automation, smart metering solutions and upgradation of line networks, transformers etc, all of which are expected to contribute towards reducing such losses.
The Indian electrical equipment industry is immensely diversified, comprising manufacturing capabilities for high technology equipment on one hand, to low technology electrical components. It contributes 9.9% in value to the entire Indian manufacturing sector, translating to 1.4% of India’s GDP.
The Indian electrical equipment industry is estimated to grow at CAGR of 8 to 12% during 2016-2020, varying across electrical equipment such as switchgears, energy meters and wire and cable which are expected to witness faster growth. Compared to generation equipment, which is targeted to reach a size of Rs 125,000 crore and the T&D equipment segment is targeted to reach a size of Rs 375,000 crore by 2022.
Some key demand drivers for growth in electrical equipment industry include:
Establishment of Smart Cities and Real Estate Growth; The Government plans to spend over Rs 3 lakh crore to recast 100 cities, improving existing infrastructure , which will translate in increased demand for electrical equipment in India.
Affordable Housing: the growing focus on affordable housing market by the private sector and the Government has resulted in several initiatives to promote the segment including National Urban Housing and Habitat Policy, Jawaharlal National Urban Renewal Mission and Rajiv Awas Yojana.
The Smart Cities initiative also includes ‘Housing for All’ which plans building two crore homes for the economically-weaker sections in India by 2022, which will not only boost construction and cement industry, but also put major thrust on electrical equipment industry in India.
Open Market favouring a competitive landscape: The power sector has been de-licenced, which helps entry of major global participants in India, and will increase amount of investments in the power sector that will facilitate EE industry to grow exponentially.
Capacity Addition and Investments in Power sector: India’s power generation installed capacity is estimated to reach 350 GW in 2022 from 234 GW in 2014 and the added capacity will fuel demand for electrical equipment with Government plans on curbing imports. Government initiative like Make in India will help the sector to become a key participant in the global industry.
Planned Power generation capacity additions will further boost domestic transmission and distribution equipment industry with an expected capital expenditure of Rs 200,000 crore in the transmission sector and estimated Rs 300,000 in distribution sector capacity additions/reforms corresponding to 12th FYP.
Modernization drives and new technology adoption: India is witnessing a series of modernization drives as part of its ageing electricity grid infrastructure including substation metering schemes, rural electrification programmes, street lighting and smart metering that have increased demand for modern electrical equipment.
Smart meters, fore-resistant wires and cables, LED lighting and gas-insulated switchgear are technology adoptions that have witnessed tremendous growth in recent years, offering domestic and international companies new market avenues for growth.
Indian Electrical Equipment Industry Mission Plan 2012-2022; sets the guidelines for making India the choice for production of electrical equipment, thereby making way for domestic production of electrical equipment and reach an output of US$100 billion by balancing exports and imports.
Some of the focus areas as part pof the mission plan include achieving industry competitiveness, technology upgradation, skill development, promoting growth in exports, including export to emerging markets and enabling conversion of latent demand.
The Central Government has been encouraging private companies to operate in the power distribution system in India, such as private power distribution utilities in Kolkata, Mumbai, Surat and Ahmedabad which have improved efficiency and customer services in this area.
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