Frost & Sullivan has projected that the majority of the investment will be for transmission enhancement products and solutions like superconductors, Flexible Alternating Current Transmission Systems (FACTS), High- Voltage Direct Current (HVDC), automatic recovery systems etc. This area is expected to grow at a CAGR of 5%-6% over the next decade. The next largest investment is expected to be in electric charging infrastructure and customer side systems like batteries, inverters, energy billing systems, smart Grid-to-Vehicle charging (G2V) etc. The electric charging and customer side systems products and solutions are expected to grow at a CAGR of 13.6% through CY 2030. Advanced metering infrastructure, which was the key component across pilot smart grid projects, is expected to grow faster, with a CAGR of 34% through 2025 and CAGR of 20% until 2030. India is expected to install more than 250 million smart meters by 2025. Other products and solutions of smart grids like distributed grid management, wide-area monitoring and control, and ICT integration are expected to grow at a CAGR of 16%, 19%, and 23% respectively.
India has unique challenges compared to other countries in implementing smart grid projects. Key challenges identified by Frost & Sullivan include:
Diverse stakeholder-related challenges: The scope of smart grid projects and associated stakeholders are not uniform, including transmission- and sub-transmission-related smart initiatives driven by PGCIL (Power Grid Corporation of India Limited), smart meter rollouts managed by over 120 distribution companies that are under huge financial stress and other initiatives driven by NSGM (National Smart Grid Mission).
Technology gaps and project implementation challenges: Smart grid projects have higher capital costs due to lack of experience of the bidders, who end up allocating disproportionately high costs toward contingencies. There is a lack of awareness when it comes to the usage of relevant technology solutions.
- Cost and capital-related issues: Commercial terms for many smart grid bids and qualification requirements are complex and difficult to fulfill, even by reputed power sector players.
- Lack of long-term asset management: Long-term maintenance of smart assets is a challenge.
To address the above-mentioned challenges, companies have to position themselves as an end-to-end solution and service provider for smart grid projects through strategic partnerships – and offer integrated solutions and service offerings, including Operation and Maintenance (O&M) support for smart grids. Addressing challenges of utilities in the process of digitalization and having the long-term vision to integrate the smart grid into the smart ecosystem will be the key for companies operating in this space.
As per Frost & Sullivan’s analysis, power utilities will be the single largest target segment for smart grid products/solutions, which require integrated smart grid solutions and service offerings along with O&M support. There is a need for utility 3.0 transformation and platform solutions that cater to specific smart grid needs like energy trading/exchange, smart meter standard interoperability, etc. Another area of focus will be enabling two-way communication between supply and demand and an IT-based Electric Vehicle (EV) operating interoperability platform for industrial, residential, commercial, EV infrastructure, and prosumers.
Currently, suppliers of products and solutions for the smart grid industry are dominated by platform providers – primarily IT solution providers that form a consortium with communication system integrators and equipment suppliers. Key components required to cater to smart grid projects are device/product manufacturing, system integration, software/platform development, and communication technology providers.
There is abundant scope for leading global players and companies from Asia, Europe, and North America that have participated in pilot smart grid projects and grid upgradation projects. International companies are looking for Joint Ventures (JVs) to participate in large-scale smart grid projects to be rolled out in the coming years. Apart from large meter manufacturing companies like Schneider Electric, L&T, Genus Power, HPL India, Itron India, Secure Meters, Landis + Gyr, Elster, etc., large system integrators that constitute key bidders in almost all smart grid projects, including Hitachi, GE, Siemens, HCL Infosystems, Capgemini, Wipro, Cyan, Accenture, CDAC, Cisco, Enzen, Analogics, Synergy, Chemtrols and Fluentgrid, either have JVs or tie-ups with product/solutions or software developers to provide complete solutions for smart grid projects. Apart from the private companies, ECIL (Electronics Corporation of India Limited), a government of India enterprise, is also involved in the implementation of smart grid projects.
Companies catering to public and private utility companies need to provide the complete package of smart grid products and solutions, including wide-area monitoring and control, ICT integration, transmission enhancement, distribution grid management, advanced metering infrastructure, electric vehicle charging infrastructure and cyber and network security solutions. Smart grid solutions for industrial customers require distribution grid management, EV charging infrastructure, customer-side systems, and cyber and network security solutions. Residential and commercial building end-users need only EV charging infrastructure and customer side systems and solutions like smart appliances, routers, in-home displays, building automation systems, energy management systems, etc., as part of smart grid projects. Prosumers are the latest emerging customer segment for smart grids in India, creating huge opportunities in the Indian smart grid space over the next decade.
The smart grid products and solutions market is driven by government initiatives like large-scale smart metering roll-out – and implementation of advanced metering infrastructure; a government target of achieving 175 GW of renewable energy capacity by 2022, which is further expected to grow to 500 GW by 2030; 100 smart city projects supporting smart grid initiatives; and the government’s intention to replace all conventional electricity meters with prepaid smart meters in the next three years, which is a sub-component of the smart grid project.
As per Frost & Sullivan’s analysis, to achieve success in the smart grid industry, companies need to adopt the following strategies:
Identify your target geographies (where to sell) for the near and long terms. In the near term, the focus should be on:
- National grid operator Power Grid Corporation of India Ltd (PGCIL) and National Smart Grid Mission (NSGM)-driven projects.
- Progressive state utilities driving smart grid initiatives (Gujarat, Maharashtra, Telangana, Tamil Nadu, and Karnataka).
- Private distribution utilities like Reliance Infrastructure (Delhi) and Tata Power (Mumbai) and CESC (West Bengal).
In the long term, the focus should be on non-utility business segments like industries, residential and commercial EV charging infrastructure, etc.
Build strategy towards how to sell by adopting a JV strategy to tap into market opportunities with alliances across communication system integrators, software/platform developers, equipment manufacturers, etc.
Look at price and promotion since smart grid projects across utilities are primarily driven by the tendering approach with preference given to L1 bidders. Companies should focus on bidding on public-private partnership projects, undertaking all aspects of build, own, operate, and maintain.
Author
Vinay HP
Senior Consultant (Industrial Practice)
Frost & Sullivan
