Why India’s plan to wheel power to the Gulf may have the economics backwards

Chasing the sun: India is proposing to lay a 1.6k km long subsea power transmission cable connecting to the UAE at an estimated cost of INR 400 bn (USD 4.7 bn), Business Standard reports citing Power Minister Manohar Lal Khattar. New Delhi aspires to become a power exporter, wheeling its 23 GW “unsigned capacity” to the power-hungry Gulf. An expert tells us that the commercial and operational logic points the other way.

“There is a difference between having capacity on paper and having reliable exportable power at the exact time it is needed…The question is not just whether India has surplus power in aggregate, but whether it has firm, dispatchable surplus that can be supplied without affecting domestic reliability,” Vibhuti Garg, director at the Institute for Energy Economics and Financial Analysis (IEEFA), tells EnterpriseAM. IEEFA is a US-based think tank that works on the energy transition and Garg is an energy economist.

The Gulf already has some of the cheapest solar power on the planet and is building domestic renewable capacity at scale — buying Indian power and paying for a long-subsea-cable transmission premium on top would have to beat that, Garg argues. “If it is only about bulk power, then it has to compete with very low-cost solar in the UAE. The transmission cost of a long subsea cable will add to the delivered costs,” she says.

The real opportunity lies in exploiting the time difference between the two countries, Garg argues. India’s solar output collapses into its evening demand peak, when the sun is still up over the Arabian Peninsula. “That can create an opportunity for power to flow into India during peak hours. Similarly, India could export power during periods when it has surplus renewable generation.”

The project’s economics could improve if it is designed as a two-way interconnector rather than one-way export line, as envisioned by the Indian government. “The economic case depends on what product the cable is meant to provide. If it is just electricity, the economics may be difficult. If it is firm clean power, grid balancing, energy security and strategic diversification, then the value proposition becomes broader,” Garg says.

Possible to engineer?

High-voltage direct current (HVDC) technology is already used for long-distance power transmission and is the likely option for a subsea link. But the India-UAE route would still need marine surveys, landing-point selection, onshore grid connections, grid-impact assessment, repair planning and outage management. “So I would say the engineering is plausible, but it is not simple,” Garg says.

Etihad Water and Electricity, the state utility serving the Northern Emirates, has commissioned a techno-economic study for the undersea interconnector. The study should define route, capacity and — the real tell — whether the commercial model is built around one-way exports or two-way balancing. Building undersea transmission lines will take several years after the project is deemed commercially viable.

Besides the technical know-how, the project also needs clarity on who buys the power, how tariffs are set, who owns the cable, how outage risk is handled and whether revenues are backed by contracts. “The important thing is that projects like this need to move from promises to execution…whether it happens within the next decade will depend on how quickly these issues are resolved,” she says.

A purely merchant model may be difficult because the capital cost is high, Garg argues. “Some form of long-term offtake, utility-backed arrangement, sovereign support or concessional finance may be needed to make it bankable.”