Let us continue with the US example that provides the most well researched cost of supply figures. If we see the generation component going down from 8.5 c/kWh to say 6 c/kWh that represents a typical LCOE of a mix of solar and wind, but it is accompanied by a 1 c/kWh increase in transmission cost. Put differently, there are two separate cost impacts (a) overall cost will drop by a net 1.5 c/kWh (assuming no changes to distribution cost); (b) but transmission costs will increase from 2 c/kWh to 3 c/kWh or by 50%. Although the levelized cost of transmission in absolute terms increases only by 1 c/kWh, it has significant ramifications especially for developing countries. In a system like India with ~1700 TWh of total generation, this is equivalent to a transmission cost increase of $17 billion _per annum_ .<sup>4</sup> For example, Powergrid India, which is the largest transmission company in the country that owns the high voltage grid (400 kV and above) including all of the interstate transmission lines that are critical to ship power from RE-rich lower load states like Rajasthan to the mega load centers, has an existing total asset base of around $30 billion (in FY21) which gives some indication of the sheer increase in investments that will be needed. As an example, if half of the $17b pa cost needs to be incurred by Powergrid, it represents a 28% increase in its capital base in a year. In order for India to reach its 500 GW target (which is more than the existing generation capacity), Powergrid will need to grow from its current $30 billion capital base to over $100 billion by 2030. As the decarbonization process will continue over a period of two, three or four decades – this pace will need to be sustained potentially over 3-4 decades. Transmission investment numbers are likely be in the order of multiple billions per year – a volume of investment that is unprecedented.

This begs the first question as to where would these dollars come from? Even for a massive entity like the Powergrid that has strong financials, sustaining a double-digit growth rate on its capital base over even a single decade is a significant challenge. The question over capital availability looms larger for the state transmission companies for the other half of the investment. Transmission, notwithstanding all the efforts to attract private investment, obstinately remains in the domain of public financing. To put this in perspective, the cumulative total private in transmission _across all developing countries_ was reported as $11 billion in 2015 (ESMAP, 2015). Reliance on public financing is a common story, and yet with the exception of Africa and probably the odd exception like Türkiye, the recent focus of the MDBs have been more on cutting edge renewables, storage, hydrogen, etc., rather than grid strengthening projects. This trend is beginning to change, as we discuss later in this section, and may be a part of the solution to scale up transmission.

Pivoting to a different example of an emerging market, it is clear that in countries like Indonesia RE at grand scale cannot happen without high-capacity AC/DC lines including inter-island cables being laid out first for islands like Sumatra to support the major load centers in the Java-Bali system. IEA’s Net Zero by 2050 roadmap (IEA, 2021) shows the extent of grid expansion needed globally to meet net zero which will require over 4 million km of transmission lines and over 4 TW of substation capacity to be built _each year_ over this decade and the number will increase to over 6 million km and 6 TW, over the next decade (Figure 2). This will need to be accompanied by rapid digitalization of the networks that stand at less than 20% and will need to be tripled according to IEA. It is hard to put a cost estimate on the global effort. However, if we attach a notional 0.5 million per km on average,<sup>5</sup> it amounts to $2 trillion to $3 trillion per year over the next three decades. Again, this is going to be a fraction of what is needed for the generation component but marks a phenomenal increase over the current state of play in network investments.

> 4 Analysis by one of the state regulators among others over the past few years has pointed to a cost impost of Rs

> 1.2/kWh (or 1.5 c/kWh) from renewables mostly linked to transmission (Singh, 2020).

> 5 This represents a mid-tier 400-500 kV new line all-in cost estimate using US DOE statistics.

6