In seven years, HVDC market size is going to be $12-15 billion: GE Vernova

India needs to progress in procurement. It must review its procurement process, says Bindele

Renewable-energy projects are being delayed not because of equipment but owing to factors like getting land, say Johan Bindele, VP & CEO - Grid Systems Integration, GE Vernova, and Sandeep Zanzaria, MD and CEO of GE Vernova T&D India, in an interview with S Dinakar. Edited excerpts.

 

Where does India stand in your global transmission portfolio?

 

Bindele: GE Vernova is organised into three different segments: For the electrification segment, India is among the top five for us in terms of market size (besides the United States, some European countries like Germany and the United Kingdom). It is a country where we have the biggest manufacturing footprint in the world. In India we have five factories, the highest in the world. Today if you look at the (for transmission & distribution in India), 30 per cent is export and 70 per cent is domestic.

 

What kind of investment plans do you have? How much have you invested?

 

Zanzaria: We have been regularly putting in capex. In 2009, when 765 Kv (kilo volt) was introduced we built new capacities; when we went in for the HVDC order, then the transformer plant capacity was also expanded to deliver the HVDC transformers. Recently we declared an investment of ₹1.4 billion in our factories in Chennai and Noida; for debottlenecking capacity, maintenance and other things we put in another ₹1.1 billion--so ₹2.5 billion is currently the capex under deployment.

 

Bindele: We cannot give long-term numbers, but there is a clear intention to continue to invest in India and we see significant growth in India. We also see the Indian government putting in place reforms and changes. India will need significant investment in its grid because you cannot go to 500 gigawatt of renewable energy without that.

 

What is the current size of the HVDC market globally and in India?

 

Bindele: We estimate the global market at $30 billion-40 billion.

 

Zanzaria: Depending upon the maturity of the project, because these are large projects, it’ll be $1 billion-3 billion every year in India.

 

Bindele: The market we are referring to is for GE Vernova’s scope of work. It does not include transmission lines, cables, and towers because we don’t supply them.

 

Is there any update on the incentives for HVDC equipment production, proposed in this year’s Budget. Will there be a production-linked incentive (PLI) scheme?

 

Zanzaria: We’re talking to the government based on whatever capex we have announced. For transmission, there are no PLI plans.

 

I believe HVDC technology will play an important role in India’s electricity market. What is the size of this HVDC market in India now? Where do you see it going in terms of value?

 

Zanzaria: We expect that in six-seven years close to about 10 HVDC projects will be awarded, and each HVDC project is going to be $1billion-1.5 billion. That way in seven years, it’s going to be $12 billion-15 billion.

 

Bindele: We estimate the growth of the core transmission market between 7 per cent and 9 per cent per annum.

 

Do you make HVDC equipment, which I believe are imported?

 

Zanzaria: There are two to three items that form the heart of HVDC. One is transformers. We already have a transformer factory in Vadodara. The others are Thyristor Valves and controls. A few months ago, we declared a capex programme for Pallavaram and Noida. So, the controls for the upcoming HVDC projects will be in India.

 

Bindele: There are still a few key critical components that we will continue to import to India for HVDC. But the final assembly will be in India.

 

What are these critical components?

 

Bindele: Mostly electronic components for the control system, which are mostly chips, capacitors and resistors, are coming from Taiwan and European countries.

 

Transmission delays are hurting renewable projects in India and globally. Is it a case of HVDC/high-voltage equipment shortages?

 

Zanzaria: What we have seen is a solar project is commissioned faster but a transmission one takes longer because it takes more time to build transmission lines. There was a mismatch. But now after the NEP (National Electricity Plan), the government has taken a decision that irrespective of the project’s power purchase agreement (PPA), transmission schemes are awarded. So in a way, this mismatch is now reducing to a great extent.

 

One of the big challenges in India is the right of way for transmission lines delaying the commissioning of power projects. But if you look on the equipment side, we don't see delayed deliveries. The projects are not getting delayed because of need of equipment, but for other factors like getting land.

 

Developers of transmission projects say there is shortage of transmission equipment in the country and the lead times are slow for some of the equipment, resulting in delay.

 

Zanzaria: Five years ago, transformer delivery used to take a year. But because of the energy transition globally, we don’t have much control on the supply chain, which is stretched. In Europe, it is more than three years but in India you can get a transformer in 18-24 months. If developers place the orders in time, delivery is not a constraint.

 

Bindele: The lead time has increased, mostly due to supply-chain constraints because all the original equipment manufacturers have the same supply chain for some critical components. For instance, if you speak about bushing, there are only two or three suppliers in the world. So there is a kind of a bottleneck there.

 

Do India and the United States (US) face similar issues while adding transmission capacity?

 

Bindele: If you want to compare India and the US, permitting is a concern in both countries. However, US customers and developers are much faster in procuring equipment.

 

India needs to progress in procurement. It must review its procurement process. Customers in the US or Europe buy equipment based on a framework agreement. HVDC projects should be based on a project-framework agreement, where we have a commitment, visibility, etc/

 

This subject of lead time will disappear if we have this bulk approach.

 

You mean in Europe and the US procurement is done under some kind of a framework agreement where a series of projects are under one agreement?

 

Bindele: Germany has purchased 15 projects in one go. They placed this big framework agreement with three OEMs, including us, purchasing 15 projects in one go with different delivery times. The National Grid in the UK has done the same thing, and so have been developers in the US. This gives us the visibility to be able to anticipate our supply chain, which then gives us a much better lead time.

 

Is the global demand for HVDC transmission equipment affecting deliveries in India?

 

Bindele: Not for us in particular, but for our supply chain, for high-voltage and HVDC. There are some critical components, whether it is for India, Europe, and the US. And there is competition. For lower voltage equipment, you have a larger supplier base, when you go to 765Kv, HVDC, the number of suppliers is very small.