What are the key market trends in the Indian Transformer sector? What are the growth drivers for this sector?
The transformer market is mainly divided into two categories – power transformers and distribution transformers. The major market driver for power transformers is the government’s push to add 175GW of renewable energy to the grid by 2022. In addition, the government’s mandate to provide 24×7 reliable power to all, and thrust on infrastructure such as railway electrification, metro rail projects also imply growth for the transformer sector. Other influences include the increase in investment due to the 100% FDI in the power and renewable energy segment, investment in high power transmission corridors, and the green energy corridors of the integrated power development scheme, which will provide a boost to the sector.
In the transmission and distribution sector, we are seeing the need for grid reliability backed by power quality, energy efficiency, digitalization and smart metering. Power quality is critical and new technologies such as Flexible Alternating Current Transmission Systems (FACTS) and Wide Area Monitoring System (WAMS) are critical in this area.
What kind of opportunities do you see for the Indian transformer sector with the government’s particular focus on giving a new facelift to the country’s infrastructure like roll out of 100 smart cities, commitment to provide 24*7 electricity to all, announcement of railway electrification projects, new metro projects, dedicated freight and cargo corridors project etc? So, what have been the recent technological innovations in the Indian energy meter industry?
The government’s initiatives provide a positive outlook for the sub-transmission and the distribution sector. The Smart Cities initiative will generate opportunities for Dry Type Distribution Transformers. The 24X7 electricity to all program which will mainly be implemented in the suburban and rural areas will boost the requirement of oil-filled distribution transformers. The electrification of railways as well as new metro projects are already generating a demand for trackside and traction transformers (both locomotive and electric multiple units). The dedicated freight and cargo corridors project, in addition to the normal distribution transformers, is creating demand for special transformers – used for special applications such as furnace transformers.
In the energy meter industry, we are witnessing a digital transformation with both consumers and utilities shifting from conventional metering to smart metering systems. This shift is being driven by the creation of smart cities and by utilities opting for smart grids. To give you an idea of the rapid change taking place, a report by Berg Insight states that smart grid penetration is expected to increase from 25% to 75% in Asia-Pacific by 2030.
What are the hurdles that the Indian transformer industry is facing? What kind of support would you expect from the government?
The major challenges have been the slow pace of projects and the weak financials of DISCOMs. Another area of concern are the falling tariffs within the renewable energy sector which is affecting the cost of transformers. Further, with the introduction of GST there will be uncertainties with regard to tax.
What are the threats that the Indian transformers sector face due to cheap import of Chinese equipment? According to you, what precautions does the sector need to take in order to curb import of these equipment?
The import of electrical equipment has increased the number of players in the Indian market, resulting in a more dynamic and competitive environment. However, to ensure grid reliability it is paramount that sub-stations use equipment that meets the highest standards of quality and safety, which has long-term benefits for utilities.
India is close to implementing smart meters. What will be its implications on general consumers? How will this move benefit the Indian power sector?
For utilities, using smart meters will improve efficiency by limiting transmission and distribution losses. Real time as well as historical consumption data can be analyzed and relevant solutions implemented. Such data will also help restrict the theft of electricity.
Consumers will be able to control their consumption with time of day metering, they could also analyze their consumption patterns use that data to plan their power expenditure.
The government has up-scaled the target of renewable energy capacity to 175 GW by the year 2022 which includes 100 GW from solar, 60 GW from wind, 10 GW from bio-power and 5 GW from small hydro-power. Going ahead, what potential will it generate for the segment?
To meet the goal of 100GW of solar power generation and other renewable targets, there is extensive investment in these projects, which are being implemented. Currently, there are approximately 10-12 GW of solar projects being tendered every year, and in addition another sector is that is picking up is Wind Energy. The increase in these projects leads to increased demand for power and generator transformers.
What will be the impact of implementation of GST on the Indian transformer sector?
Under the new tax regime, as with any new system being rolled out, there will be short term hiccups and this will take a few quarters for the industry to stabilize. However, the extent of business efficiency is estimated to be higher once GST is in place. There might be some delays in case of engineering procurement and construction (EPC) projects, where the EPCs do not have a statutory variation clause with the end user.
What is your outlook for the sector?
For the power generation sector, the focus on renewables, drive towards urbanization and thrust on development of transport systems are positive indicators for growth in the transformer sector. For the transmission sector the shift towards digitization and power quality is what will drive growth. The successful implementation the UDAY scheme and smart metering will be key factors in driving the transmission and distribution sector.
