Hydel Outlook 2018

Hydropower projects, often located in remote regions, are essential to alleviate the grid as India looks to add 175 GW of renewable capacity

India has enormous potential for hydro-power development. A major part of the untapped potential subsists in Himalayan and North Eastern regions. The hydro sector innately poses few challenges largely on account of risk linked with implementation that can be mitigated with judicious involvement of government agencies to be made responsible for. The private developers will employ themselves only if they find compatible risk adjusted returns in the hydro sector. Thus, government has now two-fold work of eliminating the barriers and restoring the investor’s interest in the sector and to create a facilitating environment.

In the past year and a half, a total of 1,795 MW hydro power capacities have been commissioned. Out of this, 1,659 MW was commissioned in 2016-17 and the rest in 2017-18 until July 2017.

The Ministry of Power is in the course of finalising a new hydro power policy that could lead to its acknowledgment as a renewable source of energy. The proposed policy seeks to blur the difference between large and small hydro power plants. Given the awful condition of the hydro power sector with virtually all under construction projects postponed and/or stalled, the policies is intended at stimulating the projects and accelerate their construction. To this end, the government has also proposed Rs 160 billion hydro power development fund that will assist resurrect stalled projects.

Taking into account the cost overruns of delayed and stalled projects, investments required for concurred projects as well for those under survey and investigation stage, a total investment of Rs 1,737 billion will be essential for the realisation of the total hydro power capacity. The magnitude of this investment is expected to increase with added interruption in the implementation of these projects.

Taking into consideration the natural unpredictability of solar and wind power and the country’s need to go green, the grid-balancing act will have to be increasingly taken over from coal by hydro power, making its development crucial for the Indian power system. Hydro power plants have the ability to be quickly ramped-up, particularly in the case of pumped storage hydro power plants. Unfortunately, India has only nine of these plants developed so far.

The financing outlook in the hydro power sector has been quite damp in the past two years with no major financial closure being reported. Stressed projects and assets have led to mergers and acquisitions in the sector as companies are looking to sell assets to ease the burden of debt.
India is considering tariff-cut for new hydro-electric power projects to help them compete against cheaper forms of electricity. The central power ministry has proposed excluding the costs of building infrastructure such as roads and bridges from tariffs to make new hydropower projects feasible,

Practically 100 GW of electricity potential in India’s rivers is lying unexploited because of high tariffs. Hydropower projects, often located in remote regions, are essential to alleviate the grid as India looks to add 175 GW of renewable capacity. These plants can be promptly turned on and off, helping the grid endure fluctuations caused by alternating supplies from solar and wind.

Hydel: The Way Ahead!
Dr. Rajib K Mishra, Director, PTC India Ltd says, “Hydro power is important energy source for balancing the grid and to meet the peaking requirement. However it is continuously decreasing in the total energy mix. The current energy mix has come down to less than 14 per cent for the financial year 2017-18. The new Hydro Power Policy is being contemplated which would bring necessary changes to encourage investment in the hydro projects and to make investment in hydro sector more attractive for the Developers and Investors. It may also ease loan repayment norms to a period of 25 years and may have provisions to mandate states to buy at least 2.25 per cent of the demand through hydro power resources. The other major changes in the policy which is expected would be changes in the depreciation of the plant which will be further allowed for a tenure of 25 years bringing down the per unit cost of the power generation and making it more affordable.”

Most of the new projects in hydro are suffering from time and cost overrun leading to higher tariff. This is more worrisome as the renewable supply from both solar and wind is continuously on declining trend and has reached to the level of 2.44 per unit in the recent bids. We should not ignore the fundamental that hydro power is not to substitute the cheaper other renewable resources (solar and wind) but to supplement them. The solar & wind sources are dependent on time of the day. Government is also planning to introduce the separate HPO (Hydro Power Purchase Obligation) considering the falling capacity addition in the hydro sector. There can be a subsidy from Central Government and may also get 4 per cent interest subvention under the new hydro power policy.

As per the proposed new hydro power policy the subsidy may be sourced from National Clean Energy Fund (NCEF) and National Investment and Infrastructure Fund (NIIF). We are all aware of the fact that the mandate of new capacity of 175 GW of power from renewable source by 20-22 per cent which consist of 5GW of small hydro power capacity up to 25 MW. However, the most important aspect in the proposed policy would be to consider all hydroelectric capacity as renewable which is only up to the extent of 25 MW as on date. This would enable lower taxes and several other project benefits which might encourage investment in the sector, he adds.

At present hydro is not on priority for capacity addition but this is essential for stability of the grid and balancing power. The new hydro policy may be cleared on priority so that all the pending projects can be expedited. In other developed economy considering the renewable nature of Hydro, this clean energy source is preferred choice. But for developing economy the energy source which can be established in shorter period are given priority. In Indian context, we need Hydro for balancing and better energy mix. We must identify good Hydro projects and develop them on war footing basis, examines Mishra.

Advertising

The government’s initiative on river linking is also bring out more opportunities for hydro projects. A huge scaled study is currently being conducted to enhance water-way transportation, lift irrigation schemes and hydro projects.
Neelav Samrat De, General Manager – Market Management, Andritz Hydro Pvt Ltd.