Power transmission sector grappling with supply side constraints, says industry body

New Delhi, May 23 (PTI) India's power transmission sector is grappling with supply side constraints that is causing a significant delay in completion of ongoing projects, industry officials said.

The situation is particularly alarming in the case of High Voltage Direct Current (HVDC) equipment, which is critical for long distance evacuation of renewable energy to align with India's renewable energy 2030 goals.

This problem, they said, has been accentuated due to the restrictions imposed on suppliers from countries sharing land borders with India from participating in public procurement. Further, under works contracts, including turnkey contracts, contractors are not allowed to sub-contract to any contractor from a country that shares a land border with India.

The Electric Power Transmission Association has written to the Power Ministry seeking a level-playing field in procurement policy to address the disparity in imports of HVDC transmission equipment from neighbouring countries.

While renewable energy developers are exempt from restriction on subcontracting with companies from neighbouring countries, transmission projects under TBCB (tariff based competitive bidding) framework are subject to these restrictions, it said.

The association added that since HVDC projects are vital for the development of renewable energy, transmission projects under the TBCB framework should also be governed by the same procurement regulations as renewable energy projects.

Industry officials said only two domestic OEMs (original equipment manufacturers) provide LCC (the conventional line-commutated AC-to-DC converter) technology, while global vendors are fully booked for the next few years. This restricted market is pushing project costs upward and extending execution timelines.

Also, the monopolistic environment has resulted in higher-than-levelised tariffs (up to 17 per cent) with project timelines from the stage of RFP (request for proposal) to commissioning stretching to as long as 6 years.

According to industry officials, while the order is binding on ministries, autonomous bodies, public sector enterprises, and projects under PPP (public-private partnership) model, the restrictions have also been extended to players that are building transmission infrastructure under BOOT (Build-Own-Operate-Transfer) model with 100 per cent private investment and no government support.

"Despite tariff based competitive bidding (TBCB) projects not being PPPs, the transmission service providers cannot procure or subcontract from countries sharing land borders with India, thereby severely limiting supplier choices," said an industry official.

Further, restrictions are being treated differently by two ministries operating within the power value chain. While transmission companies under power ministry face full restrictions, the Ministry of New and Renewable Energy issued a clarification in October 2022 that SECI's procurement of power qualifies as public procurement, but the contracts will not be classified as 'works contracts' and so subcontracting does not apply.

As a result, this allows renewable energy (RE) park developers to import key components - including from China - facilitating faster infrastructure deployment.

"RE projects are being built in 12-18 months and they are ready to generate power, whereas transmission projects are taking 3-4 years while the execution time frame is even longer in the case of HVDC projects. This mismatch between generation and transmission is hurting the overall power sector and delaying addition of capacity," said an official with a leading transmission company.

The regulations are especially hurting HVDC projects since the technology and equipment is available only in a handful of countries, including China. However, the OEMs in Europe and US have their capacities booked until 2030 because of rapid renewable energy integration in the west.

On the other hand, imports from China are ruled out since it shares land border with India. Central Electricity Regulatory Commission has also acknowledged that constraints in HVDC component supply are significantly impacting project costs, thereby justifying the higher L1 bids relative to levelised norms.

According to industry officials, the recently concluded bids for two HVDC projects with an implementation timeframe of 54 months shows that it required 19 months to only conclude the bids.

Electric Power Transmission Association said addressing the disparities is essential to ensure the synchronized development of generation and transmission infrastructure. It wants transmission companies to be exempted from the restrictions until December 2030 so that procurement and subcontracting of critical HVDC components from global vendors can happen in a seamless manner.

"A systemic gap has emerged between generation readiness and transmission infrastructure timelines, particularly for HVDC-dependent RE zones like Rajasthan and Khavda in Gujarat. The timely execution of HVDC systems is a critical path for achieving India's renewable energy targets," said G P Upadhyaya, Director General of EPTA.

The exemption will also provide a level-playing field for private transmission developers, reducing costs, and ensuring the timely execution of projects in line with India's renewable energy goals. PTI ANZ HVA