Power Watch India - - FRONT PAGE - By Gau­rav Sharma

Clean power is the new buzz­word in the In­dian power sec­tor. Keep­ing in mind In­dia’s global com­mit­ment to­wards cli­mate change obli­ga­tions and in­crease of re­new­ables in the to­tal energy mix of the coun­try’s in­stalled ca­pac­ity, sev­eral projects in so­lar and wind sec­tors have been planned over the course of the next seven years. Con­trary to this, the share of hy­dropower in the coun­try’s energy mix is fall­ing pre­cip­i­tously due to the rather slow pace of ca­pac­ity ad­di­tion.

The sus­tain­able growth of the na­tion is de­pen­dent on ex­ploita­tion of avail­able energy re­sources to its fullest and in par­tic­u­lar hy­dropower, as a clean, green and re­new­able source of energy, which is an emer­gent re­quire­ment of any de­vel­op­ing na­tion, es­pe­cially for one such as In­dia. The share of hy­dro’s in­stalled ca­pac­ity in the to­tal in­stalled ca­pac­ity, cur­rently at around 15%, has been on a down­ward tra­jec­tory for long and the gov­ern­ment’s tar­get of adding 10,800 MW of hy­dro power ca­pac­ity in the XII Plan may fall short by about 30 per cent. Cur­rently, around 11,400 MW of projects are reel­ing un­der time and cost over­runs. Poor ge­ol­ogy, de­lays from con­trac­tors, lo­cal re­sis­tance and ad­verse weather con­di­tions af­fect­ing lo­gis­tics and oper­a­tions are be­ing cited as the main rea­sons for de­lays.

The ab­sence of long-term com­pet­i­tive fi­nance com­pounds all other prob­lems, which largely are the long ges­ta­tion pe­riod, high cost of ac­cess in­fra­struc­ture to be built, and po­ten­tial time and cost over­run due to un­ex­pected ge­o­log­i­cal faults. Up to the mid-1960s, the share of hy­dropower as a pro­por­tion of In­dia’s over­all in­stalled elec­tric­ity gen­er­a­tion ca­pac­ity was 46 per cent, which meant that nearly one in two units pow­er­ing

the coun­try’s elec­tric­ity grid was a hy­dro unit. Half a cen­tury later, de­spite the ad­vance­ment in civil en­gi­neer­ing tech­nol­ogy and in­creas­ing pres­sure on gov­ern­ments to re­duce the coun­try’s car­bon foot­print by har­ness­ing clean energy sources, hy­dropower’s share has plum­meted to just around 15 per cent, a record low.

Un­tapped Po­ten­tial

In­dia ranks fifth in the world in terms of us­able po­ten­tial. How­ever, less than 34% has been de­vel­oped or taken up for de­vel­op­ment. Thus hy­dropower is one of the po­ten­tial sources for meet­ing the grow­ing energy needs of the coun­try. A ju­di­cial mix of hy­dropower in the energy port­fo­lio can also con­trib­ute to energy se­cu­rity, re­duc­tion of green­house gas emis­sions, meet­ing the peak de­mand and also in­creased flex­i­bil­ity in grid op­er­a­tion. Be­sides, projects may also be con­ceived as multi-pur­pose ones con­tribut­ing not only to power but also to ir­ri­ga­tion, flood con­trol, nav­i­ga­tion, etc.

In­dia is en­dowed with rich hy­dropower po­ten­tial to the tune of 148 GW (which would be able to meet a de­mand of 84 GW at 60% load fac­tor) which makes it one of the most im­por­tant po­ten­tial sources to meet the energy se­cu­rity needs of the coun­try. In­dia has around 41,632 MW of in­stalled hy­dropower ca­pac­ity while an ad­di­tional 13,000 MW is un­der con­struc­tion. This puts the to­tal ca­pac­ity that has been tapped at around 33 per cent of the po­ten­tial. Cur­rently, over 93 per cent of the to­tal po­ten­tial in the north eastern re­gion is yet to be tapped, pri­mar­ily in parts of the Brahma­pu­tra river basin.

There are at least 21 hy­dropower projects that are fac­ing time over­runs of five or more years, with those hang­ing fire for over 10 years. Re­cently, Power Min­is­ter Piyush Goyal ad­mit­ted in the Lok Sabha that un­cer­tain­ties in the hy­dropower sec­tor were keep­ing in­vestors away, de­spite the huge po­ten­tial. “There is un­cer­tainty over hy­dropower projects... In­vestors are not ready to make in­vest­ments. Dif­fer­ent projects are stuck due to dif­fer­ent rea­sons,” he said and cited pol­i­tics, en­vi­ron­men­tal is­sues and court rul­ings be­ing among the var­i­ous rea­sons, while as­sur­ing that the gov­ern­ment would make ef­forts to start hy­dro projects once the “Un­cer­tainty” is over.

Pri­vate sec­tor projects take a beat­ing

From 1991 to 2012, the pri­vate sec­tor has con­trib­uted to about 11.5% of the hy­dropower ca­pac­ity ad­di­tion. So far only about 2859 MW has been com­mis­sioned through the pri­vate route (as of May 2015), which con­sti­tutes less than 7% of the to­tal in­stalled hy­dropower ca­pac­ity.

Though pri­vate par­tic­i­pa­tion in the hy­dropower sec­tor has gained mo­men­tum in the re­cent past, it still faces im­ped­i­ments in the ex­e­cu­tion of projects across var­i­ous stages of the pro­ject im­ple­men­ta­tion cy­cle. The cen­tral and state gov­ern­ments need to cre­ate an en­abling in­vest­ment cli­mate for in­creas­ing pri­vate par­tic­i­pa­tion by ad­dress­ing is­sues re­lated to safe­guards, land ac­qui­si­tion, evac­u­a­tion, law and or­der prob­lems, tech­ni­cal chal­lenges and non-ap­pre­ci­a­tion of the risks in­volved in pro­ject de­vel­op­ment.

Un­der the present cir­cum­stances, where ob­tain­ing en­vi­ron­men­tal clear­ances for hy­dro projects is a time con­sum­ing ex­er­cise and land ac­qui­si­tion is prov­ing to be dif­fi­cult, projects which have al­ready ob­tained the clear­ances and ac­quired land should not be al­lowed to lan­guish ir­re­spec­tive of their own­er­ship, in the na­tional in­ter­est.

Small hy­dropower: An al­ter­na­tive?

Ac­cord­ing to a new study, small hy­dropower projects (SHPs) (projects up to 25 MW) are con­sid­ered safer than big dams in In­dia’s quake-prone western Hi­malayas, but projects to build them get bogged down by ad­min­is­tra­tive de­lays and other fac­tors.

While In­dia‘s to­tal in­stalled ca­pac­ity for small hy­dro power (SHP) units re­ported a sig­nif­i­cant in­crease from 1,909 MW as in March 2006 to 4,055 MW (as of May 2015) thereby tak­ing up SHP‘s share of the coun­try‘s to­tal in­stalled re­new­able energy (RE) ca­pac­ity to al­most 12%, con­sid­er­able po­ten­tial still re­mains un­tapped across states with favourable SHP po­ten­tial.

The low util­i­sa­tion of the coun­try‘s SHP po­ten­tial is at­trib­ut­able to sev­eral fac­tors in­clud­ing chal­lenges in set­ting up plants in dif­fi­cult and re­mote ter­rain, de­lays in ac­quir­ing land and ob­tain­ing statu­tory clear­ances, in­ad­e­quate grid con­nec­tiv­ity and high wheel­ing and Open Ac­cess charges in some states. The fur­ther de­vel­op­ment of small hy­dro projects has been ham­pered mainly by ris­ing costs, with the con­struc­tion costs of these projects in­creas­ing to Rs 8.5 crore to Rs 9.5 crore per MW from be­tween Rs 5 crore and Rs 6 crore per MW a few years ago.

Af­ter un­veil­ing its big plans for har­ness­ing so­lar energy and wind energy, the gov­ern­ment seems to have turned its fo­cus to the small hy­dro sec­tor with a draft mis­sion doc­u­ment (Na­tional Mis­sion on Small Hy­dro) al­ready been pre­pared, with the aim of set­ting up 5000 MW of small hy­dro projects in the next five years.

Na­tional Mis­sion on Small Hy­dro is es­sen­tially to ad­dress dif­fi­cul­ties be­ing faced by pri­vate de­vel­op­ers. These re­quire some pol­icy changes and some fis­cal fa­cil­i­ta­tions more than di­rect fi­nan­cial ben­e­fits. How­ever, some ac­tiv­i­ties of Phase I of the Mis­sion would re­quire fi­nan­cial in­vest­ments. It is as­sessed that the fi­nan­cial re­quire­ments of Phase I of the Mis­sion, which is more of a prepara­tory to Phase II, can be met within the XII Plan al­lo­ca­tions for the small hy­dro pro­gramme.

Funds re­quired for Phase II will be worked out in the sec­ond year of Phase I and would be part of the XIII Plan bud­get for the small hy­dro pro­gramme. No di­rect sub­sidy to pri­vate sec­tor projects is en­vis­aged in Phase II of the Mis­sion.


There is a large gap be­tween de­mand and sup­ply of elec­tric­ity, which can be filled by de­vel­op­ing large and small hy­dropower projects. There is large po­ten­tial avail­able in this sec­tor which needs to be tapped. Dur­ing peak time, hy­dro power sta­tions, which ac­cept and re­ject load al­most in­stan­ta­neously, can meet peak­ing power de­mand in no time and pro­vide quick con­trol of fre­quency by load-gen­er­a­tion bal­ance and thus main­tain proper fre­quency. Con­ven­tional hy­dro plants with pondage/stor­age pro­vide peak­ing power and pumped stor­age schemes pro­vide load dur­ing off peak hours and gen­er­ate peak­ing power. There­fore, to meet the coun­try’s energy de­mand at a faster pace, de­vel­op­ment of mega hy­dropower projects are re­quired, which war­rants the need of in­no­va­tive prac­tices in con­struc­tion as­pects in­te­grat­ing pro­ject man­age­ment, en­gi­neer­ing and qual­ity man­age­ment tools and tech­niques along with im­bib­ing suit­able mit­i­ga­tion mea­sures ad­dress­ing the flip side of hy­dro sec­tor, as key to suc­cess for mak­ing up the past gen­er­a­tion loss, as far as pos­si­ble. Cli­mate change and other neg­a­tive ef­fects of us­ing fos­sil fu­els for power gen­er­a­tion along with grow­ing con­cerns over energy se­cu­rity are driv­ing the ex­pan­sion of hy­dropower around the world. It’s time In­dia does that too and the test, though, is to sal­vage the un­der-con­struc­tion projects as a first-step to­wards over­turn­ing the overtly neg­a­tive in­vest­ment sen­ti­ment to­wards hy­dro projects.


Given power dis­tri­bu­tion com­pa­nies’ re­luc­tance to sign long-term con­tracts for pro­cure­ment of elec­tric­ity from hy­del projects, ex­pe­dit­ing de­vel­op­ment of hy­dropower po­ten­tial could prove a tough chal­lenge for the Cen­tre. Hy­dro Pur­chase Obli­ga­tion (HPO) was mooted by the Min­istry of Power but no progress has been made on it. It is high time that, HPO is be­ing con­sid­ered on the lines of the Re­new­able Pur­chase Obli­ga­tion (RPO) or Re­new­able Energy Cer­tifi­cates (RECs) used for re­new­able energy de­vel­op­ment. Gov­ern­ment needs to en­sure that there is an HPO on each ob­li­gated en­tity to en­sure long-term sta­bil­ity of elec­tric­ity prices which would in­su­late the con­sumer from the vari­able price volatil­ity that is now be­ing ex­pe­ri­enced through the im­port of fos­sil fu­els which is due to forex and price fluc­tu­a­tions both for fuel and trans­porta­tion. In ad­di­tion, it would also boost the hy­dropower sec­tor which is hav­ing dif­fi­culty get­ting fi­nanc­ing for var­i­ous rea­sons in­clud­ing the un­cer­tainty due to ab­sence of cred­i­ble long-term buy­ers of such power.

Hy­dro Power Obli­ga­tion (HPO) for dis­coms should be in­tro­duced and en­forced.

In­vest­ment at­tract­ing con­ces­sion agree­ments to at­tract big pri­vate play­ers in hy­dropower de­vel­op­ment.

A clear road map for en­cour­age­ment of public pri­vate part­ner­ship (PPP).

Ex­clu­sion of cost of ac­cess roads from pro­ject cost, as de­vel­op­ment of hy­dro projects trig­gers eco­nomic and com­mer­cial ac­tiv­i­ties around the pro­ject site and re­sults in eco­nomic ben­e­fit to the state.

Cost of se­cu­rity may be borne by the State/Cen­tre in trou­bled ar­eas and in­fested by mil­i­tancy and ter­ror­ist ac­tiv­i­ties.

Ex­emp­tion of roy­alty on con­struc­tion ma­te­rial, since hy­dro­elec­tric projects pro­vide 12% free power to state.

Re­lax­ation in cus­toms duty for im­ported equip­ment and ma­chin­ery for mega projects.

Clear­ance process should be stream­lined and the gov­ern­ment should con­sult all stake­hold­ers be­fore vet­ting any pro­ject, so that there is no de­lay start­ing right from zero date to ac­tual com­mis­sion­ing of the pro­ject.

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