New Delhi: Stressing that India needs to plug supply chain gaps in the power transmission sector for faster deployment of transmission network for reaching the target of 500 GW Renewable Energy (RE) capacity by 2030, Power Secretary Pankaj Agarwal said that a Production-Linked Incentive (PLI) scheme may address the problem. Speaking on the sidelines of the Central Electricity Authority’s (CEA) ‘Brainstorming Session on the Indian Power Sector Scenario 2047’ on Monday, the Secretary told reporters, “I have asked the industry to think about whether we need a PLI scheme to plug the supply chain gaps in the transmission sector and localise the supply chain for transmission equipment. Whether that can help or some other kind of policy driver would be required.”
“World over, (power) transmission is a major issue. The IEA (International Energy Agency) outlook report says that 1,650 GW of renewable energy capacity is waiting to be connected to the transmission system across the world,” said Agarwal. The IEA released its Renewables 2024 report on Monday. The report says, “Total wind, solar PV and hydropower capacity in advanced development stages waiting for grid connections increased from around 1,500 GW in 2023 to 1,650 GW by July 2024.”
Speaking at the inaugural session of the event, the Power Secretary cited an internal estimate and said that the cost of developing power transmission infrastructure is expected to grow at a compounded annual growth rate (CAGR) of 14.5 percent over the next five years. He told the industry, “We need to appreciate the cost of electricity supplied to the industry and the consumers at large, and to optimise that cost, I think we have to optimise the cost of the entire value chain,” he said.
The power transmission sector across the world is facing supply chain constraints due to an increase in demand for transmission equipment as renewable energy deployment speeds up. “Over the past few years, transformers have emerged as a significant bottleneck to utility supply chains as demand outpaces available supply, with only 20 percent of US demand being met by domestic supply. The shortage is not isolated to the US, but the impacts are more evident due to the lack of local supply chains,” said a report by Wood Mackenzie.
“This scarcity has triggered substantial upward price pressures across the transformer market, with prices rising between 40 percent and 60 percent since January 2022, depending on the specification. In parallel, lead times for power transformers have escalated significantly from around 78 weeks in Q1 2022 to 127 weeks by Q4 2023,” said the report.
In India, too, the demand for transmission equipment is rising with renewable energy expanding rapidly. In fact, RE developers in India often complain about how green power projects get commissioned before the transmission network. Since India imports most of its transmission equipment, it is impacted by global supply chain constraints.
Renewable energy projects in India typically have a gestation period of two years, while transmission network takes 4-4.5 years to come up. Apart from supply chain issues, the transmission network in India also face constraints due to Right of Way (RoW) issues, the Power Secretary said.
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