India Faces Potential $500 Billion Capex Requirement In Power Transmission by FY50: Report – EQ
In Short : India is confronted with a potential capital expenditure (capex) requirement of $500 billion in power transmission by FY50, as per a recent report. This underscores the immense investment needed to upgrade and expand the country’s power transmission infrastructure to meet growing energy demands.
In Detail : New Delhi : India will need to invest over USD 500 billion in expanding its power transmission grid by 2050, according to estimates from Goldman Sachs.
This huge outlay, accounting for 30 per cent of the country’s overall projected energy transition costs, is crucial for achieving India’s ambitious goals of transitioning to renewable energy sources and becoming a global leader in low-cost clean energy.
As highlighted in a recent Goldman Sachs report, India’s large and highly integrated national grid is a key enabler for harnessing renewable generation from the most optimal locations across the country.
The government’s policy of providing free access to the central grid acts as an indirect USD 270 billion subsidy, boosting the viability of renewable energy projects.
“Creating surplus transmission infrastructure and keeping it free for renewables makes economic sense, as the gains from this energy transition should more than offset the incremental network costs,” the report states.
Goldman Sachs identifies 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 – a staggering one-third of India’s total energy transition investment requirements.
PGCIL’s strong financial position, low borrowing costs, and robust free cash flow position it favorably to capture a significant share of this opportunity.
Moreover, the report notes that PGCIL’s eligibility for direct nomination on large, complex, multi-regional projects could drive further growth as India focuses on enhancing cross-border grid interconnections.
Goldman Sachs’ analysis suggests that PGCIL alone could fund 30 per cent of India’s planned transmission capex by 2032 while maintaining its current dividend payout levels.
The investment bank also sees opportunities for industrial players like Hitachi Energy India and Schneider Electric in capitalising on India’s transition.
Hitachi is well-positioned as a leading manufacturer of high-voltage equipment, with significant domestic production capabilities. Goldman Sachs estimates Hitachi could tap into a USD 50 billion addressable market from India’s USD 105 billion transmission capex plan for 2024-2032.
Meanwhile, the government’s revamped distribution reform scheme is expected to drive USD 37 billion in investments over the next five years, with Schneider Electric Infra potentially involved in over 50 per cent of the total outlay.
As India accelerates its clean energy transition, the massive scale of grid expansion required will 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.
