New green energy corridors witness 50% reduction in project costs

The latest bidding for power transmission projects to connect renewable energy with the national grid saw leading private companies bring down project costs by about 40-50 per cent. Adani Transmission, Sterlite Power, L&T, and Tata Power were in the race for Rs 1,500 crore worth of projects.

This is estimated to bring down the cost of renewable power by 25 paise a unit (kilowatt hour). State-owned Power Grid Corporation also participated in these tenders and won two projects. A new entrant, India’s leading clean energy company, ReNew Power, also bid for the transmission projects. However, it didn’t win any. Company executives said diversifying into transmission is a natural progression for ReNew; it already has an extensive network of generation projects.

Of the five green energy corridors (GEC) offered, Adani Transmission got two, PowerGrid two, and Sterlite Power bagged one. These corridors are in the western Indian states, which host the maximum renewable energy projects.

GEC is an alternative transmission system for renewable energy projects. The first phase of GEC was constructed by PowerGrid; the second phase is now being awarded through competitive bidding.

Senior industry executives said on average, 41 per cent reduction was achieved in the project cost, with the highest reduction of up to 51 per cent from these bids. “These states would have paid Rs 1,200 crore for these transmission lines for a period of 35 years. But now with reduced bids, they would end up paying Rs 700 crore,” said the executive.

Apart from GEC, four projects were offered as part of the transmission expansion and strengthening across the country. Two projects in Uttar Pradesh totalling Rs 350 crore were tendered, of which one was won by Adani, the other by PowerGrid. The average cost reduction was 45 per cent in these two projects. Another corridor connecting Karnataka and Kerala was won by Sterlite Power, by quoting 21 per cent lower tariff.

Both these projects involve construction of a 765 kilovolt (kV) line and 400 kV sub-station to support increasing power demand in the region. Given that the two state-level projects witnessed such high levels of interest, two more such system-strengthening ones will be bid out soon, said a government official. “The success of competitively bid projects at the state-level has spurred two more projects worth Rs 2,000 crore to be bid out in the coming six months,” he said.

Power transmission projects till recently were awarded at the national level connecting two or more regions. However, with saturation in the national grid and rising power demand at the state-level, the government is tilting focus towards system strengthening inside states. The other focus is connecting renewable-rich regions, as India plans to install 175 gigawatt of solar and wind power projects by 2022.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel