Opinion

India’s true hydropower potential remains untapped

AK Verma | Updated on May 14, 2020 Published on May 14, 2020

Hydropower is key to fulfil India’s renewable enrgy ambitions for electricity generations. But contractual conflicts, environmental concerns and financial constraints play spoilsport

On April 5, 2020, India carried a nine-minute-long electricity experiment to express solidarity and combat Covid-19. Hydropower heralded its heroic capacity to manage the safety and stability of the nationwide electricity grid system despite an unexpected load depression of about 31,089 MW. Hydropower is clean and cheap in long run. It has features like quick ramping, black start and reactive absorption — required for ideal peaking power or spinning reserve.

India is committed to have 40 per cent of its installed capacity from non-fossil fuel sources by 2030, and is pursuing a renewable target of 175 GW by 2022 and 450 GW by 2030. Therefore, hydropower is highly relevant for grid integration of renewable energy and for balancing infirmities.

Project status

India has an estimated hydropower potential of 1,45,320 MW, excluding small hydro projects (SHPs). At the end of February 2020, installed capacity was about 45,700 MW. Several hydroelectric projects (HEPs) in India are languishing due to contractual conflicts, environmental litigations, local disturbances, financial stress and unwilling purchasers. Only about 10,000 MW of hydropower could be added over the last 10 years. In a bold move, the Government of India accorded renewable energy (RE) status to large HEPs in March 2019, enabling new HEPs to receive concessions and green financing available to RE projects. Courtesy the Draft Electricity (Amendment) Bill 2020, hydropower purchase obligation (HPO) may appear to become a reality soon. However, a better option is re-engineering of the power market to treat hydropower as a peaking and grid-balancing power, and also to distribute its higher tariff over the entire energy consumption on a prorate basis.

Hydropower potential is located mainly in northern and north-eastern regions. Arunachal Pradesh has the largest unexploited hydropower potential of 47 GW, followed by Uttarakhand with 12 GW. As water and water power are State subjects, the construction of HEPs is often delayed due to conflicts among riparian States — the Subansiri HEP is a prime example of this. Unexploited potential is mainly along three river systems — the Indus, Ganges and Brahmaputra (see Chart). India has several international issues across these river systems. Like electricity, hydropower should also be brought on the concurrent list to formulate uniform policy and process for faster development.

 

Clearance issues

Environmental clearance would remain necessary for HEPs. Several HEPs were dropped or had their design and capacity modified due to environmental considerations. Parameters like e-flow, free flow stretch, eco-sensitive zone, impact on wild flora and fauna are now better defined. Therefore, the hydropower potential including pumped storage hydropower, should be reassessed using modern technology and environmental considerations. Thermal projects do not require techno-economic clearance (TEC) from the Central Electricity Authority (CEA), but for HEPs with capital expenditure above ₹1000 crore, the concurrence of the CEA is required. Site-specific changes required during construction also need approval. Clearance is given in consultation with the CWC, and takes an inordinately long time. Processes must be revisited to reduce the time taken for the TEC. A unit of the CWC may be co-located within CEA itself.

Hydropower projects are more than engineering ventures. They have large-scale socio-economic and environmental implications. HEPs often encounter geological surprises during construction. The land acquisition process is elaborate, requires public hearing and approval of the Gram Sabha. Forest clearances take time. Resettlement and rehabilitation (R&R) issues are not only sensitive but also entail substantial cost. It has been experienced that projects do not envisage adequate cost on these items at the approval stage. Subsequent arrangement means cost and time overruns. Adequate R&R cost should be made integral part of the project cost. The project management team should also include experts from social science, environment as well as communication. If HEPs could be allocated after obtaining requisite clearances on the pattern of Ultra Mega Power Projects, it would avoid undue delay and cost overrun.

Financial aspects

HEPs are located in difficult and inaccessible sites. They require the development of roads and bridges for project implementation. Roads and bridges provide higher opportunities for the development of neighbouring areas. Hence, the Government of India has decided to give budgetary support for them. However, the process to grant financial support needs to be streamlined. Large HEPs perform flood moderation also, but they do not get any grant unless declared a national project by the Ministry of Water Resources. The Ministry of Power has now decided to support flood moderation. These measures would certainly make the cost of power workable.

HEPs have debt-equity ratio of 70:30 and their tariff is designed to recover debt in the initial 12 years. This frontloading of tariff makes hydro energy unviable. The government has now allowed debt repayment period and project life as 18 years and 40 years respectively, and has also introduced an escalating tariff of 2 per cent annually to reduce the initial tariff.

Requisite changes in tariff regulations are required to operate them. Though the tariff can be rationalised, it may not address cost and time overrun. Geological surprises, R&R issues and environmental factors result in several unforeseen situations not envisaged in the construction contracts, and lead to unnecessary arbitration, litigation, and delays in implementation. Delayed or deferred payments incapacitate contractors financially. Therefore, a robust and reliable mechanism for quick resolution of contractual conflicts must be contrived in the system to fast-track implementation of HEPs.

The writer worked as Joint Secretary in the Ministry of Power. Views are personal

Published on May 14, 2020

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