India Grid Trust Management Discussions

Global Economy

Over the last few years, despite facing significant challenges, the global economy has demonstrated remarkable resilience, with steady growth and a rapid slowdown in inflation. Some of these challenges include post-pandemic supply-chain disruptions, an energy and food crisis triggered by the Russia-Ukraine war, and a surge in inflation, followed by synchronised monetary policy tightening.

As we look ahead, the global economy is expected to navigate a complex interplay of risks and opportunities. Key advanced economies are projected to maintain moderate growth, supported by robust consumer spending, technological advancements, and infrastructure investments. However, inflationary pressures and tightening monetary policies could temper this growth.

Emerging markets, on the other hand, present a mixed outlook. While some countries benefit from favourable demographic trends and economic reforms, others face hurdles such as political instability and structural weaknesses. Asia, particularly, remains a beacon of growth, with strong performances anticipated from India and Southeast Asian nations due to their expanding middle class and digital innovation.

Global trade is set to recover, albeit with potential headwinds from protectionist policies and supply chain disruptions. The transition to a green economy will also be pivotal, driving investments in renewable energy and sustainable practices.

Overall, while the global economic outlook is cautiously optimistic, it requires agile strategies to navigate uncertainties and leverage emerging opportunities for sustainable growth.

Indian Economy

Indias economy has exhibited exceptional endurance and sustained growth over the past three years, notwithstanding global economic challenges. This robust trajectory is supported by a combination of proactive policy and regulatory measures, coupled with strong domestic consumption, favourable demographic trend, and gradual resurgence of the private sector.

In 2023-24, the Indian economy experienced robust expansion, with a growth rate of 7.6%, surpassing earlier forecasts. During 2024-25 the GDP growth is expected to be at 7.2% - an upward revision from the earlier forecast of 6.8% on account of recovery in consumer spending and increased investments.

While the sectors of infrastructure, manufacturing and digital technologies are expected to witness handsome investment inflows, the governments focus on Make in India and the Production Linked Incentive (PLI) schemes are also anticipated to attract significant foreign and domestic capital, thus bolstering industrial output and job creation scenario.

Furthermore, the services sector, particularly IT and financial services, are expected to continue their role as major contributors to economic growth. Indias ambitious renewable energy targets and emphasis on sustainability will foster growth in green industries, creating new economic opportunities.

Industry Overview

Power Consumption

In 2023, global electricity demand witnessed moderate growth, increasing by 2.2%, slightly lower than the 2.4% growth observed in 2022. This was primarily driven by robust demand in emerging economies such as China, India, and Southeast Asian countries. However, advanced economies experienced a decline in electricity consumption due to a lacklustre macroeconomic environment and high inflation. This led to reduced manufacturing and industrial output.

Looking ahead, global electricity demand is projected to grow at a faster rate, averaging 3.4% annually through 2026. This growth will be driven by an improving economic outlook, which is expected to increase electricity demand in both advanced and emerging economies.

Power Generation

The generating capacity in India experienced significant growth during the fiscal. Across different sources, India added ~ 26 GW of generating capacity during FY 2023-24 versus ~17 GW added during FY 2022-23 - a growth of 54%.

The all-India thermal plant load factor (PLF) for March 2024 stood at 72.4% versus 67.9% during March 2023. This increase was driven by healthy demand growth and limited thermal capacity addition. There were also improvements in coal stock levels at power plants, rising to 15.7 days as of February 26, 2024, from 8.4 days as of September 30, 2023. This can be attributed to increased coal supply and moderation in electricity demand growth. However, the sustainability of this

Indias Power Consumption Surge

During FY 2023-24, India witnessed its peak power demand in September 2023 at 243 GW, a growth of 13% over the peak of 216 GW witnessed in April 2022 during FY 2022-23. Indias energy requirement for the month of March 2024 stood at 139 billion units - a year-on-year growth of over 9%. This growth was driven by higher economic activity coupled with harsh weather conditions (severe heatwave and a prolonged cold wave).

Indias power consumption is poised for further growth, with the government raising its forecast on peak electricity demand to 384 GW by March 2032. This growth is expected to be primarily driven by higher economic activity.

(Source: CEA Dashboard, Apr2024)

improvement remains uncertain, especially with the rise in power demand during summer.

Coal imports by power utilities increased by 3.9% year-on- year in the first nine months of 2023-24, driven by government directives. The average spot power tariffs in the day-ahead market of the Indian Energy Exchange remained high at INR 5.4 per unit in 2023-24. It is expected reach moderation in 2024-25 due to various factors including declining coal prices.

Overall, the power generation in India is witnessing significant growth with rising demand, capacity additions, and government initiatives focused on enhancing efficiency and performance.

All India Installed Capacity (as on March 31, 2024)d Generation Capacity (MW)

Source:

CEA Dashboard, Apr 2024

CEA Monthly Executive Report - March 2024

India Grid Trust

Thermal	2,43,216.87
Nuclear	8,180
Hydro	46,928.17
RES*	1,43,644.51
Total	4,41,969.55

The power generation industry in India is witnessing several emerging trends that are shaping its future:

? Renewable Energy Expansion: The focus on renewable energy is growing rapidly. The Indian government has ambitious plans to add 50 GW of renewable energy capacity annually for the next five years, aiming to achieve a target of 500 GW by 2030.

? Energy Storage Projects: Auctions for energy storage projects are increasing as the country expands its green energy portfolio. The industry is moving towards setting up more real-time control (RTC) renewables plus storage projects.

O Hydro Power for Energy Storage: Hydro power is being recognised as a source of energy storage and flexibility for load balancing and grid stability. Pumped storage projects (PSP) are expected to contribute significantly to new capacity additions, with increasing private interest and investment in the segment.

O Offshore Wind Projects: The governments bidding trajectory includes plans to bid out 37 GW of offshore wind projects by 2029-30. Transmission infrastructure planning has been completed for 5 GW of offshore wind projects off the coasts of Gujarat and Tamil Nadu. Policy amendments and agreements between state governments are facilitating the growth of offshore wind projects.

O Green Hydrogen: Green hydrogen has become a key priority area for the government and industries. There has been a significant development in the Indian market, with the announcement of many projects and collaborations. Incentives and tenders have been announced for green hydrogen production and electrolyser manufacturing, and the government has notified the green hydrogen standard and definition.

Q Biomass Co-firing: Co-firing biomass in thermal power plants is an emerging trend. The Ministry of Power has revised the biomass policy, making it mandatory for TPPs to implement 5% biomass co-firing starting from FY 2024-25, increasing to 7% in FY 2025-26.

O Emission Control Technologies: Power plant operators are increasingly installing emission control technologies such as FGD, SCR, SNCR, and ESPs to curb emissions from thermal power plants. These are crucial for meeting the emission norms, and TPPs now have until December 2026 to comply.

These emerging trends indicate a significant shift towards cleaner and more sustainable power generation practices in India. This is driven by regulatory measures, technological advancements, and a growing focus on renewable energy sources.

Outlook

While Indias power industry continues to rely heavily on coal- fired thermal power plants to meet rising electricity demand, it is undergoing significant diversification and transformation as well. By 2026, coal-fired generation is expected to meet 68% of Indias electricity demand, down from 74% in 2023. This shift is expected to be driven by efforts to increase renewable energy capacity, with close to 19 GW of renewable energy capacity added in FY 2023-24, accounting for nearly 72% of total capacity addition during the year. The rise in solar and wind power capacity, along with the development of large hydro and nuclear power projects, highlights Indias commitment to diversifying its the energy mix.

Indias nuclear power sector is also set for expansion, with plans to triple its nuclear capacity by 2032. More than half of the nuclear power plants in the pipeline globally are in China and India, indicating a significant surge in nuclear power generation.

FREE ELECTRICITY THROUGH ROOFTOP SOLARISATION

O 10 Million households to receive free electricity up to 300 units/month O Savings of INR 15,000 to INR 18,000 per year, with the opportunity to sell excess power to distribution companies

VIABILITY GAP FUNDING FOR OFFSHORE WIND PROJECTS

O Approved funding for offshore wind projects with a capacity of 1,000 MW

O Accelerating the construction of offshore wind projects to meet the net-zero commitment by 2070

COAL GASIFICATION AND LIQUEFACTION CAPACITY

O Set up 100 MT capacity by 2030

O Reduce imports of natural gas, methanol, and ammonia

BUDGETARY ALLOCATIONS

O Ministry of Power: INR 205.02 Billion for FY 2024-25 O Ministry of New and Renewable Energy: INR 128.50 Billion for FY 2024-25

Growth of Renewables

Indias renewable energy sector has seen tremendous growth, positioning the country as a global leader in clean energy. With over 175 GW of installed renewable capacity, India is rapidly advancing towards its target of 500 GW by 2030. Solar and wind energy are the primary drivers, supported by favourable government policies, investment incentives, and technological innovations. Initiatives like the National Solar Mission and wind energy auctions have accelerated capacity addition. This growth not only enhances energy security but also aligns with Indias commitment to reduce carbon emissions and achieve net zero by 2070, promoting sustainable and inclusive economic development.

Over the last few years, with technological innovations coupled with government support, the per unit cost of generation for renewables has come off significantly, thus making them increasingly competitive with fossil fuels. This, coupled with Indias growing economy and expanding population, has led to an accelerating demand for renewable energy as a sustainable and clean alternative to conventional fossil fuels.

(Source: imarc, India Renewable Energy Market Report)

O Ambitious Targets:India aims to achieve 500 GW of clean energy by 2030, reducing carbon intensity by less than 45%. The country also targets achieving 50% cumulative electric power installed from renewables, ultimately aiming for net-zero carbon emissions by 2070.

O Cost-Competitiveness: Renewable energy costs are increasingly competitive with fossil fuels. Solar PV and onshore wind are among the cheapest in the world.

O Energy Security: Recent global events have highlighted the importance of energy security. Indias shift to clean energy reduces dependence on imported fossil fuels, ensuring future energy security.

O Policy Impetus: Government policies and programmes support green energy, offering subsidies for segments like rooftop solar and solar pumps. the 2023 budget has allocated INR 350 Billion for energy transition and zero emissions by 2070, with support from regulatory interventions.

O Enormous Potential: Indias solar power potential is vast, with 749 GWp capacity, providing ample room for development. The countrys wind energy potential exceeds 200 GW, with untapped opportunities. India also has the potential to become a green hydrogen hub.

Outlook

The Central Electricity Authoritys National Electricity Plan (NEP) provides a comprehensive roadmap for Indias power sector. It outlines the projected installed power capacity and share of different energy sources. By the end of FY 2031-32, India aims to achieve a total installed power capacity of 900,422 MW.

Renewables are expected to play a significant role, constituting approximately 56% of the total capacity. Solar PV is projected to lead the renewable energy segment with an installed capacity of 364,566 MW, accounting for 40% of the total power capacity. Wind power is expected to have the second-largest share among renewables, with 121,895 MW of installed capacity. Biomass and small hydro come second with 15,500 MW and 5,450 MW, respectively.

This highlights Indias commitment to expanding its renewable energy capacity and reducing its reliance on fossil fuels. The NEPs projections indicate a major shift towards cleaner and more sustainable energy sources. This aligns with the countrys goals of achieving energy security, reducing carbon emissions, and promoting sustainable development.

Q Growing Market Ecosystem: Indias renewable energy market attracts global investors, with large players entering the sector. Public sector companies are also transitioning to green energy, and consumers are increasingly adopting green energy solutions.

? Boost to Domestic Manufacturing: The government aims to position India as an export hub for green hydrogen and electrolysers, promoting low-carbon products like green steel and green ammonia. PLI schemes have been launched for solar, battery, and upcoming electrolyser manufacturing.

O Wave of M&A Activity: Mergers and acquisitions (M&As) are common in Indias renewable energy sector, indicating maturity and high investor interest. This trend fosters knowledge and risk sharing among companies.

? R&D Initiatives: The government supports research in the sector, with a budget earmarked for R&D in hydrogen. Innovations in battery manufacturing, cell material, and solar components are advancing rapidly, driving growth and efficiency in renewable energy technologies.

Energy storage plays a crucial role in countering the intermittent nature of renewable sources of energy, thereby contributing to a more flexible and reliable grid system. Hence Energy Storage Systems (ESS) are becoming increasingly vital for the broader adoption of renewable energy. These systems can enhance power quality, address peak demand, increase the stability of transmission and distribution grids, and enhance the overall flexibility of the system. Renewable energy developers and utilities are currently key adopters of energy storage, with many projects being announced in this space.

The growth of ESS is being driven by several factors, including green mobility initiatives, supportive government policies, climate commitments, consumer electronics demand, and efforts to decarbonise the power grid. Pumped storage projects (PSP) and battery energy storage systems (BESS) are currently the most popular energy storage technologies. While PSP is more mature, there has been a surge in project announcements for BESS, either as standalone systems or integrated with renewables.

Furthermore, with the advancement the battery technologies, the tariffs discovered in tenders for FDRE, RTC, Solar + BESS, and standalone ESS are comparable to, if not lower than, traditional fossil fuel-based power generation. In addition to falling costs of batteries, this is also on account of higher utilisation rate and sustained cash flow over a longer duration, enabling developers to quote lower tariffs.

The current installed capacity of PSP in India is 4.7 GW, and this is expected to increase to 26.7 GW by FY 2031-32. NITI Aayog projects Indias battery storage capacity to reach 600 GWh by the end of 2030.

O National Framework for Promoting ESS: The Ministry of Power (MoP) announced the National Framework for Promoting Energy Storage Systems in September 2023.

It aims to encourage the deployment of ESS, reduce reliance on fossil fuels, and ensure a steady supply of round-the-clock renewable energy.

O Viability Gap Funding (VGF) for BESS: The Cabinet approved a VGF scheme in September 2023 to develop BESS. It aims to develop 4,000 MWh of BESS projects by FY 2030-31, with budgetary support totalling a maximum of 40% of the capital cost in the form of VGF.

O Energy Storage Obligation (ESO): India has added an ESO to its renewable energy purchase scheme, starting at 1% FY 2023-24 and increasing to 4% by FY 2029-30.

? Union Budget 2023-24 Provisions: The budget includes provisions for VGF support for BESS with a capacity of 4,000 MWh, and the formulation of a detailed framework for PSPs.

O Guidelines for Procurement and Utilisation of BESS:

The MoP has notified guidelines for the procurement and utilisation of BESS as part of generation, transmission, and distribution assets, along with ancillary services.

Q Inclusion of PSP under Renewables: Large pumped hydro energy storage systems over 25 MW are included in the Renewable Purchase Obligation (RPO). This includes a complete waiver of ISTS charges linked to the date of award.

Q Guidelines for Competitive Bidding of Renewable Energy with Energy Storage: The MoP has issued guidelines to ensure a consistent and predictable supply of renewable energy to distribution firms. It addresses the intermittent nature of renewable energy and underutilisation of the transmission system.

Indias transmission segment has undergone a significant transformation over the last two decades. Since the launch of the Electricity Act in 2003, the sector has seen higher inflow of private capital thanks to the various policies and frameworks set-up by the ministry of power. Landmark regulatory changes like de-licensing of the transmission, Public-Private Partnership model, Tariff Based Competitive Bidding (TBCB), establishment of regulatory bodies, and comprehensively structured concession agreements, among others, have increased the attractiveness of the transmission sector and as a result the private sector participation has seen a rapid growth.

Today Indias transmission network from a fragmented stage, has metamorphosed into a well-integrated and interconnected grid. This is crucial to enable the rapid economic development the country is eyeing over the next few decades as well as to meet the target of achieve 50% of generation capacity from non-fossil fuel sources by 2030.

Expansion of Physical Infrastructure

As of March 2024, Indias total transmission line length (at 220 kV and above levels) stood at 4,85,544 ckt. km, with total AC substations capacity at 1,239 GVA and HVDC system substations capacity at 33,500 MW. Between FY 2016-17 and FY 2022-23, the line length registered a CAGR of 4.2%, while AC and HVDC substations capacities grew at 8% and 9.4%, respectively. Interregional transfer capacity also grew considerably, from approximately 75,050 MW in FY 2016-17 to 112,250 MW in FY 2022-23, at a CAGR of 6.9%.

Policy and Regulatory Updates

O National Electricity Plan (NEP) (Volume II Transmission):

The plan outlines an investment of INR 4.75 Trillion by 2027 for developing transmission infrastructure, including lines, substations, and reactive compensation at 220 kV and above voltage levels. It includes 170 transmission schemes with a total estimated cost exceeding INR 3.13 Trillion for inter-state transmission systems (ISTS) and around INR 1.61 Trillion for intra-state systems.

O Transmission License Regulations, 2023: The draft regulations propose allowing bulk consumers to set up dedicated transmission lines connecting them to the ISTS point of connection without a license. Modifications may be required in transmission projects under competitive bidding to accommodate the plans of Central Transmission Utility of India Limited.

O (Terms and Conditions of Tariff) Regulations, 2024:

The draft regulations propose a RoE of 15.5% for existing transmission projects and 15% for new projects. They also address O&M expenses for transmission assets located in specific regions and allow for the impact of change in law events during the tariff truing-up process.

O Electricity (Amendment) Rules, 2024: These rules allow consumers with specified energy load and energy storage systems to establish, operate, and maintain dedicated transmission lines themselves without a license.

Planned Transmission Lines and Transformation Capacity Under ISTS and Intra-State

Particulars		Planned Addition during 2022-27	At the End of 2026-27	Total (at the end of 2026-27
Transmission lines (ckms)	ISTS	53,132	259,165	580,293
	Intra-state	70,445	321,128
Transformation capacity (MVA)	ISTS	438,675	913,803	1,827,390
	Intra-state	284,265	913,587

Voltage-wise Growth in Transmission Line Length (circuit km)

As of April 2024, the distribution of transmission line length by voltage shows that the highest proportion is at the 220 kV level (42.79%), followed by 400 kV (42.00%), 765 kV (11.29%), ? 800 kV HVDC (1.99%), and ? 500 kV HVDC (1.94%).

Year	? 800 kV HVDC	? 500 kV HVDC	? 320 kV HVDC	765 kV	400 kV	230/ 220 kV
FY 2017-18	6,124	9,432	-	35,059	171,600	168,755
FY 2018-19	6,124	9,432	-	41,809	180,746	175,296
FY 2019-20	6,124	9,432	-	44,853	184,521	180,141
FY 2020-21	9,656	9,432	288	46,090	189,910	191,365
FY 2021-22	9,656	9,432	330	48,743	195,318	193,762
FY 2022-23	9,655	9,432	288	52,678	197,750	201,538
FY 2023-24	9,655	9,432	288	54,797	20,3890	207,661

(Source: CEA Dashboard, April 2024)

Growth in Transformer Capacity

Indias alternating current (AC) transformation capacity has seen consistent growth over the years, reaching 1,217.58 GVA across the 220-765 kV levels by March 2024. From FY 2018-19 to FY 2023-24, the AC transformation capacity achieved a CAGR of 6.8%. Additionally, the high voltage direct current (HVDC) transformation capacity currently stands at 33,500 MW. Of this, the majority, 54%, is at the ? 800 kV level, 40% is at the ? 500 kV level, and the remaining 6% is at the ? 320 kV level. Between FY 2018-19 and FY 2023-24, the HVDC transformation capacity recorded a CAGR of 8.3%.

Major Players in Indias Transmission Portfolio

Players	Transmission Line Length (ckms)	Transformation Capacity (MVA)
India Grid Trust	8,692	22,550
Adani Transmission	20,422	54,661
Sterlite Power (India)	3,400	3,800
PGCIL	1,77,699	5,27,446
PGCIL InvIT	3,699	6,630

Key Transmission Projects in India

Transmission Project	SPV	Successful Bidder	Month of Award	Levelised Tariff (INR Million)
Transmission system for evacuation of power from REZ in Dhule (2 GW)	Dhule Power Transmission Limited	IndiGrid	January 2024	528.27
Western region expansion programme XXXIII (WRES-XXXIII) Part-C	Ishanagar Power Transmission Limited	IndiGrid	January 2024	625.88
Transmission system associated with solar energy zones In Bidar (2500 MW)	Bidar Transmission Limited	Powergrid	January 2024	2368.0
Transmission system for evacuation of power from REZ in Rajasthan (20GW) under Phase-III Part D - Phase I	Sikar Khetri Transmission Limited	Powergrid	January 2024	2147.30
Transmission system for evacuation of power from RE projects in Rajgarh (1000 MW) SEZ in Madhya Pradesh-Phase II	Pachora Power Transmission Limited	G R Infraprojects Limited	January 2024	419.74
Transmission system for evacuation of 7 GW of RE power from Khavda RE park under Phase III, Part A	Halvad Transmission Limited	Adani Energy	December 2023	2,710.54
Transmission system for evacuation of power from Rajasthan REZ Ph-IV (Part-1) (Bikaner Complex): Part-A	Bikaner III Neemrana Transmission Ltd	Powergrid	December 2023	2,732.69
Transmission system for evacuation of power from Rajasthan REZ Ph-IV (Part-1: Bikaner Complex) Part-B	Neemrana II Kotputli Transmission Limited	Sterlite Power	December 2023	1,694.65
Transmission system for evacuation of power from Rajasthan REZ Ph-IV (Part-1: Bikaner Complex) Part-C	Bikaner III Neemrana II Transmission Limited	Tata Power	December 2023	1,626.59
Transmission system for evacuation of power from Rajasthan REZ Ph-IV (Part-1) (Bikaner Complex): Part-D	Neemrana II Bareilly Transmission Limited	Powergrid	December 2023	1,945.62
Transmission system for evacuation of additional 7 GW of RE power from Khavda RE park under Phase III, Part B	Vataman Transmission Limited	Powergrid	December 2023	4,018.5
Transmission scheme for Integration of REZ (Phase-II) in Koppal-II (Phase-A & B) and Gadag II (Phase-A) in Karnataka	Koppal II Gadag II Transmission Limited	Powergrid	December 2023	3,153.46
Construction of 400/220kV, 2*500 MVA GIS Substations Metro Depot (Greater Noida) and 400/220kV, 2*500 MVA GIS Substation Jalpura with associated lines (Intrastate project)	Jalpura Khurja Power Transmission Limited	Tata Power	December 2023	915.40

Future Plans

A total capex worth INR 4,758.04 Billion in the power transmission sector has been envisaged during the five-year period from FY 2022-23 to FY 2026-27. There are ambitious future plans for the sector, with substantial capital investments earmarked for expanding transmission infrastructure and enhancing interconnectivity. This will help bolster the countrys energy resilience and facilitate renewable energy integration.

Successful implementation of several government initiatives is likely to shape the sector transformation landscape and ensure Indias energy security.