Goldman Sachs | Image:Goldman Sachs
Goldman Sachs, the global investment banking firm has predicted a major uptick in India’s power transmission sector. Goldman Sachs analysts suggest that the transmission capex cycle in India is set for a significant inflection point. Delays in grid access approvals for new projects and revisions in government capex targets are cited as key factors contributing to this expected surge in transmission infrastructure investment.
According to Goldman Sachs, asset developers with robust balance sheets, strong free cash flows, and low cost of debt are likely to be in a favourable position to capitalise on the upcoming opportunities in the transmission sector. Additionally, equipment manufacturers with technology leadership and domestic manufacturing footprints are expected to benefit early from the revival in capex.
The note outlines five key conclusions, underlining the magnitude of the transmission capex opportunity and its critical role in India’s energy transition:
Capex Requirement
Goldman Sachs estimates that power transmission will account for major share of India’s total energy transition capex requirement, exceeding $500 billion over the period from FY24 to FY50.
Government Support
India’s grid infrastructure is deemed crucial for the viability of new energy projects, with the government providing substantial financial support, including waiving central grid charges for renewables, estimated at around $270 billion.
Cost Reduction
Waiving grid charges has led to a reduction in the levelized cost of renewable energy sources, such as round-the-clock renewable and green hydrogen, by significant margins.
Grid as a Transition Enabler
Viewing India’s grid as a transition enabler rather than just infrastructure asset could maximize renewable energy penetration, leading to long-term benefits that outweigh incremental network costs.
Battery Storage Risks
Declines in battery storage system costs pose a potential risk to the transmission intensity of renewables, requiring a substantial reduction of approximately 60 per cent from current levels.
Goldman Sachs suggests that India could reimagine its grid infrastructure to facilitate the energy transition more effectively. By overbuilding transmission grids and offering free access to renewables, India could unlock new business models and accelerate decarbonisation efforts.
The note also identifies potential risks, including global shortages in high voltage equipment and transformers in the near term, and competition from battery storage in the longer term.
In terms of investment opportunities, Goldman Sachs highlights Power Grid as a top pick among asset developers and Hitachi Energy India among grid equipment manufacturers. However, Schneider Electric Infra is considered less favourable due to recent share price performance.
Source: republicworld.com
