As per the report by Goldman Sachs, Power Grid Corporation of India will be the prime beneficiary of this massive grid expansion, which will account for 30 percent of India’s overall energy transition costs projected for 2024-2050.
Apr 24, 2024
India, which is currently the third largest primary energy consumer in the world, will require an investment of USD 500 billion to expand its power transmission grid by 2050. This was revealed in a recent report released by leading global investment banking, securities and investment management firm Goldman Sachs.
The report termed state-run Power Grid Corporation of India (PGCIL) as the prime beneficiary of this massive grid expansion, with over USD 500 billion in projected total addressable market from 2024 to 2050.
It said the outlay, which accounted for 30 percent of the country’s overall projected energy transition costs, was crucial for India to achieve its ambitious goals of transitioning to renewable energy sources and becoming a global leader in low-cost clean energy.
The report further said that India’s large and highly integrated national grid was a key enabler for harnessing renewable generation from the most optimal locations across the country, adding that the government’s policy of providing free access to the Central grid acted as an indirect USD 270 billion subsidy, boosting the viability of renewable energy projects.
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It said creating a surplus transmission infrastructure and keeping it free for renewables made economic sense, as the gains from this energy transition would be able to more than offset the incremental network costs.
As per the investment firm, the strong financial position of PGCIL, its low borrowing costs and robust free cash flow positioned it favourably to capture a significant share of this opportunity.
Moreover, the eligibility of the country’s largest electric power transmission company for direct nomination on large, complex, multi-regional projects could drive further growth as India focused on enhancing cross-border grid interconnections, it added.
The Central public sector undertaking had the potential to alone fund 30 percent of India’s planned transmission capex by 2032, while maintaining its current dividend payout levels, noted the investment bank.
It further saw the opportunity for industrial players like Hitachi Energy India and Schneider Electric in capitalising on the country’s transition.
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As per the report, Hitachi was well-positioned as a leading manufacturer of high-voltage equipment, with significant domestic production capabilities. It estimated Hitachi to tap into a USD 50 billion addressable market from India’s USD 105 billion transmission capex plan for 2024-2032.
It said the Government of India’s revamped distribution reform scheme was expected to drive USD 37 billion in investments over the next five years, with Schneider Electric Infra potentially involved in over 50 percent of the total outlay.
The report further said that as the country accelerated its clean energy transition, the massive scale of grid expansion required would create immense opportunities across the energy value chain – from transmission giants like PGCIL to equipment manufacturers, firmly cementing the country’s leadership in new energy economics.
