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Home » Power Talk » Projects above 25MW being declared renewable, giving boost to hydropower

Projects above 25MW being declared renewable, giving boost to hydropower

By March 25, 2025 5:36 pm IST

Projects above 25MW being declared renewable, giving boost to hydropower
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All stalled hydro projects in Arunachal Pradesh have been allocated to CPSUs, which have provided the State government with financial assistance for equity participation in the JV companies with developers.

India’s first hydropower station, a 130 kW plant, was established in 1898 at Sidrapong, Darjeeling, West Bengal. Following independence, hydropower became a key focus, significantly contributing to the country’s energy mix. The country possesses an estimated hydropower potential of 1,45,320 MW across 592 hydroelectric schemes, of which 52.07 GW has been harnessed through small and large projects to date. Jiban Chandra Kakoti from NTPC shares his views in interaction with EPR; let us know more from him.

Qns 1: What measures India is implementing to harness its untapped hydroelectric potential

 India is one of the pioneering countries in Asian continent with history of more than 100 years in establishing hydroelectric power plants. It established first Hydro Power station of 130KW at Sidrapong in Darjeeling, West Bengal way back in 1898.Hydro power development received intense attention from the government of India after independence. Its share in energy mix gradually increased and reached over 45% of the total energy mix in sixties, which has now been reduced to just over 10% in 2024. India is endowed with a Hydro power potential of around 1,45,320 MW from 592 HE Schemes out of which 52.07 GW has been harnessed till now in form of small and Large Hydro projects. 

Hydro power development retarded from seventies onwards due to many reasons mostly attributable to Public perception created against Hydro Project Dams, Protest against Land Acquisition, Rehabilitation and Resettlement issues, Lack of fund and Technology, Geological surprises etc.  

In order to promote economic growth of the country, faster addition of electricity was required, for which government policy shifted towards addition of thermal projects mainly the Coal Based Power Plants in the country. Coal based plants today constitute around 45.74% of the total installed capacity whereas it meets 75% of the country’s energy requirement.

When we see the scenario in 1947, the Hydro installed capacity was 508MW with the total installed capacity of 1362MW. So, 37% of the country’s capacity came from Hydro. Current installed capacity Large Hydro Projects stands at 46,968 MW accounting for approximately 9.98% of the country’s total power generation capacity of 470448 MW (as on 28.02.2025), The growth Graph is shown below.

A graph showing the increasing capacity of the company

AI-generated content may be incorrect.

In order to prevent decline of Hydro share in Hydro Thermal mix in the installed capacity of the country, Government of India introduced Hydro Policy in 1998 and undertook measures for the exploitation of vast hydro-electric potential in the country especially in the North and North Eastern Regions. Policy targeted faster exploitation of vast hydroelectric potential, promoting small and mini hydel projects and strengthening the role of PSUs/SEBs for taking up new hydel projects and encourage to increase private investment.

Further in 2008, Govt. of India took initiative for development of more Hydro Projects with issuance of new Hydro Policy in 2008 and opened up the sector to Private developers. Many private developers participated in development of Hydro Projects specially in Sikkim, Arunachal Pradesh. 

In 2019, Government of India made a paradigm shift in it policy and declared all Large Hydro Projects above 25MW as Renewable Energy Source and extended all benefits available to Renewable Projects to Hydro Projects. Further many infrastructural development works were incentivised like construction of Infrastructure (Roads& Bridges), Flood control structures, HPO (Hydro Purchase Obligation), RPO (Renewable Purchase Obligation), waiver of ISTS charges etc. The new policies have given a renewed lease of life for development of Hydro Projects. All stalled Hydro Projects in Arunachal Pradesh have been allocated to CPSUs and provided State government the Financial Assistance for equity participation of the state government in the JV Companies with developers. 

With all these initiative, it is expected that Hydro Power share will rise and provide a better mix in the installed capacity.

Qns 2: How does the integration of pumped storage hydropower projects contribute to stabilizing India’s renewable energy supply, and what recent initiatives have been undertaken in this area?

Over the past decade, India has significantly increased RE capacity. The transition from non-renewable to renewable energy is driven by the following key targets:

  • Achieve 500 GW of RE installed capacity by 2030.
  • Ensure 50% of Grid power is sourced from Non Fossil Fuel sources.
  • Increase Wind and Solar energy deployment to mitigate dependency on coal.
  • Invest in Energy Storage solutions to enhance Grid stability and store surplus energy and provide RTC power to the consumers.

Growth of Variable Renewable Energy (VRE)

VRE, (Solar and Wind energy), is central to India’s Energy Transition. Growth trends over the past decade indicate rapid expansion indicated below:

  • Wind energy capacity grew from 23 GW in 2015 to 48 GW in 2024.
  • Solar energy expanded from 4 GW in 2015 to 98 GW in 2024.
  • Total VRE capacity increased from 80 GW in 2015 to 209 GW in 2024.

Out of 500GW of RE sources, 420GW will be from VRE (Variable Renewable Energy) which are intermittent in nature depending upon time of the day, seasons and vagaries of the nature. There is a paradigm change in Indian power system operations with addition of more and more VRE into the Grid which is going to be fully loaded with generation from VRE by 2030.

In the past, fully-controllable power generation from Hydro and Thermal Projects followed non-controllable load demand. But generation from Variable Renewable energy (VRE) sources is no longer fully controllable. Variability in VRE sources due to weather fluctuations means uncertainty in generation output due to sudden addition and withdrawal of generation from VRE. This will result in mismatch of the supply and demand of the VRE generation in the grid rendering surplus power in the grid. By the virtue of their intermittency in nature of generation, the Indian grid is anticipated to be subjected to instability which will increase with addition of more VRE power by the year 2030.  The surplus power need to be either consumed or stored in some form of energy storage system, otherwise VRE generation will have to be curtailed. Presently VRE constitute around 31% of the total energy capacity. With the increasing presence of VRE sources by 2030 and beyond, the need for curtailment will be more acute if there is insufficient energy storage in the grid.

As per a report by CII, by 2047, total Installed capacity of the country is projected as 2100GW, peak load demand is expected to reach 708GW. Generation from Solar and Wind will be 1600GW.

As per the NEP 2022-32, by 2031-32, 73.93 GW of Energy Storage (BESS-47.24GW & 26.69GW-PSP) is required in the grid to successfully integrate VRE into the grid. However presently the operational capacity of PSP in the country is a meagre 4.7 GW. As per the report by CII, requirement of Storage will be touch 116 GW.

With 2030 & 2070 goal of Carbon neutrality, grid scale energy storage will be a necessity in the future.  There are many types of Energy storage systems like Pumped Storage system, Battery Energy Storage systems, Compressed Air Storage system, etc.

While comparing all the Energy storage systems, PSPs provide Grid Scale Energy storage system which is domestically available in India. 

PSPs are   similar to Hydro Projects but with following advantages:  

  • Closer proximity of various components and occupy smaller land space and hence reduced forest land, lesser or no R & R & low environmental impact.
  • Lower gestation period due to relatively smaller water conductor system and smaller size of reservoirs.
  • No consumptive water/ only cycling of water is done
  • Life of the PSPs as per CERC norms is 40 years (EM) and extend to 70-80 years. Civil Structures are design for 100years and beyond. 
  • Lowest storage cost among all modes of energy storage 
  • PSPs can facilitate Black Start, Fast Ramping, Fast switching from Generator to Pumping and Pumping to Generation mode, Reactive power compensation, Fast synchronization etc. These features of PSPs ensure stability in the Grid in case of any disturbance.

Ministry of Power, Government of India has taken many initiatives to promote Pumped Storage Projects (PSPs)

  1. All Hydro Project above 25 MW capacity have been declared as Renewable Energy Sources through which incentives of Renewable Energy will be extended to PSPs.
  2. Energy Storage Obligation for Distribution companies has been notified as per order dated 22.07.2022 i.e. 0.35% (2022) to 2.82 % (2030). This will ensure usage of power generated from PSPs by all Discoms.
  3. Waiver of ISTS- ISTS charges are waived for PSPs if the construction work is awarded by 30.06.2025. Levy of ISTS charges beyond 30.06.2025 will follow the following trajectory:
Sl noAward of construction workISTS Charges
101.07.2025 to 30.06.202625% of applicable ISTS charges
201.07.2026 to 30.06.202750% of applicable ISTS charges
301.07.2027 to 30.06.202875% of applicable ISTS charges
4From 01.07.2028100% of applicable ISTS charges
  1. Budgetary support for Enabling Infrastructure as applicable to Hydro Projects are extended to PSPs also.
  1. Rs 1.5 crore /MW –upto 200 MW & 
  2. Rs 1 crore /MW – above 200 MW 

 (As per the new Policy (being revised), this is going to be Rs 1 crore/MW upto 200MW and Rs 0.75 crore/ MW above 200MW. For bigger projects, Govt may consider 1.5 crores/MW also from case to case basis.)

  1. PSPs are exempted from Free Power obligation/ water cess/ upfront premium
  2. There will no requirement of Local Area Development Fund.
  3. PSPs are not subject to double taxation on power supplied by PSPs.
  4. PSPs will be applicable for Regulatory Support for market reforms to be issued from time to time. 
  5. All incentive available for conventional Hydro Projects shall be extended to PSPs.

Qns 3: How is the government incentivizing private sector participation in hydropower projects, and what policy reforms have been introduced to accelerate capacity addition? 

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In 1947, hydropower capacity was about 37% of the total power generating capacity and over 53% of power generation. In 2024-25 (as of 31.01.2025), the share of hydropower generation capacity (excluding small hydropower and pumped storage) is just over 10% and its share in power generation is also just over 9% of the total generation. To increase investment in the hydropower sector and facilitate growth, the government opened hydropower generation to the private sector in 1991. However, the share of the private sector in hydropower generation is less than 10% today, the lowest compared to over 97% in the renewable energy sector and approx. 35 percent in the thermal power generation segment.

The Government of India has implemented several policies and reforms to encourage private sector participation in hydropower projects and accelerate capacity addition:

1. Policy Initiatives and Reforms

  • Hydropower Development Policy (1998): This policy permitted private investment in hydropower projects, aiming to boost capacity addition through private sector involvement. 
  • Electricity Act (2003): This act de-licensed power generation (excluding certain hydro projects), allowing private entities to establish and operate generating stations without licenses. It also introduced open access in transmission, enabling generators to sell electricity directly to consumers or distributors, thereby promoting competition. 
  • National Electricity Policy (2005): The National Electricity Policy emphasized private participation in power generation, transmission, and distribution, with a focus on harnessing hydropower potential.
  • Hydro incentives 2019:  All Large Hydro Projects have been declared as Renewable Energy sources and benefits of RE have been extended to Hydro Projects. Incentives have been extended to developer to compensate the expenditure incurred against development of Infrastructure like Roads & Bridges, Flood control measures, waiver of ISTS charges etc. Some more incentives are in offing.

2. Financial Incentives

  • Goods and Services Tax (GST) Reforms: Recommendations have been made to lower the GST on hydropower components from the current 18-28% to 12% aligning it with rates applicable for Solar and Wind projects, to reduce capital costs and encourage private investment. 

3. Streamlined Approval Processes

  • Single-Window Clearances: The government has introduced single-window clearance mechanisms to expedite approvals for hydropower projects, reducing delays and uncertainties for private developers. 
  • Techno-Economic Clearances: Thresholds for mandatory Techno-Economic Clearances by the Central Electricity Authority (CEA) have been raised, simplifying procedures for private developers, especially for projects selected through competitive bidding. 

4. Environmental and Social Considerations

  • Rehabilitation and Resettlement Policies: The government has framed policies to address the concerns of communities affected by hydropower projects, ensuring fair compensation and rehabilitation, which in turn facilitates smoother project execution. National Rehabilitation & Resettlement Policy (NRRP), 2007 has been framed to minimize the displacement and ensure adequate rehabilitation for those affected by land acquisition or other involuntary displace

These measures collectively aim to create a conducive environment for private sector participation in hydropower development, thereby accelerating capacity addition and contributing to India’s renewable energy goals.

Qns 4: How can advancements in digitalization and IoT improve the efficiency and reliability of hydropower generation? 

Advancements in digitalization and IoT (Internet of Things) can significantly enhance the efficiency and reliability of hydropower generation by enabling real-time monitoring, predictive maintenance, and optimized operations in the following ways.

  1. Real-Time Monitoring and Data Analytics
  • IoT sensors can continuously track key parameters like water flow, turbine speed, vibration, pressure, and temperature.
  • Cloud-based platforms and AI-driven analytics can process this data to identify inefficiencies and anomalies in real time.
  1. Predictive Maintenance
  • AI algorithms analyze sensor data to predict potential failures before they occur.
  • This reduces unplanned downtime and extends the lifespan of critical components like turbines, generators, and gates.
  1. Automation and Remote Operation
  • Smart control systems can automatically adjust turbine settings for optimal power generation based on real-time water levels and demand.
  • Operators can remotely monitor and control plant operations, reducing the need for on-site personnel and improving safety.
  1. Grid Integration and Demand Response
  • Digitalization enables smart grid integration, ensuring stable power supply by adjusting generation based on demand fluctuations.
  • Hydropower plants can act as virtual power plants (VPPs), supporting grid stability and renewable energy integration.
  1. Hydro-Asset Management
  • IoT-enabled asset tracking improves the management of infrastructure such as dams, penstocks, and spillways.
  • AI-driven models can predict sedimentation buildup and water availability, allowing better resource planning.
  1. Cybersecurity and Risk Management
  • With digital connectivity, cybersecurity measures like AI-based threat detection and encryption ensure the protection of critical infrastructure.
  • Digital twins (virtual models of the plant) can simulate different operational scenarios for risk assessment and optimization.

vii. Some of the Key Technologies for Enhancing Hydropower Efficiency are as follows:

a) Digital Twin Technology: It creates a virtual replica of hydropower assets (dams, turbines, generators) for simulation and predictive maintenance. This Digital Twin predicts turbine wear and optimizes water usage.

b) IoT-Enabled Sensors: They collect real-time data on temperature, vibration, water levels, sedimentation, and turbine efficiency. For example: Siemens’ IoT-powered MindSphere system integrates these sensors for enhanced decision-making.

c) AI and Machine Learning for Predictive Maintenance: AI models analyze past and real-time data to predict failures before they happen.For example, Voith’s HyCon GoHydro AI helps detect cavitation, turbine imbalance, and efficiency losses.

d) Remote Operation & Control Systems:  Cloud-based platforms / other arrangements enable engineers to remotely monitor and control turbines and gates.  NTPC’s Koldam HPP can be operated and controlled from a remote control room at NTPC’s Delhi SCOPE office.                                                                                                 ABB’s Ability Symphony Plus enables operators to control hydropower plants from anywhere.

e) Smart Grid Integration: Hydropower plants can function as virtual power plants (VPPs), adjusting generation based on demand. For example- Three Gorges Dam integrates AI-based demand forecasting for stable grid balancing.

vii. Some Case Studies of Digitalization in Hydro projects are as follows:

 a. In Belo Monte Hydropower Plant (Brazil), With the digital solutions from ABB, turbine efficiency was improved by 5-10% using AI-driven predictive maintenance. Remote monitoring of the plant reduced operational costs and prevented unscheduled shutdowns.

b) In Three Gorges Dam (China), IoT-based SCADA (Supervisory Control and Data Acquisition), AI-driven grid balancing Technology has been used due to which Real-time data analysis improved water flow optimization. The Machine learning algorithms adjusted power generation based on grid demand, reducing energy wastage.

c) In Grand Coulee Dam (USA) GE Renewable Energy’s Advanced Digital Hydro “Digital Twin” Technology has been used which enabled real-time simulation of turbine behaviour and reduced unplanned maintenance by 30%, increasing annual generation capacity.

ix. Challenges in Implementing Digitalization & IoT in Hydropower: While digitalization offers huge benefits, it also presents technical, financial, and operational challenges. Here’s a closer look:

ixa.  Technical Challenges

a) Legacy System Integration

Many hydropower plants are 50+ years old and were not designed for IoT or AI-based systems.

Upgrading aging SCADA systems, analog sensors, and control mechanisms without disrupting operations is a big challenge.  Edge computing can be used to the real-time data locally, reducing dependency on cloud systems. Outdated components can be gradually replaced with IoT-enabled devices like smart sensors for temperature, pressure, and vibration etc.

b) Cybersecurity Risks: With increased connectivity of the system pose higher risk of cyberattacks on critical infrastructure. Therefore it is required to secure data transmission between sensors, cloud storage, and control systems. Hence AI-based threat detection and blockchain can be used to secure data logging and multi-layered security protocols can be used such as firewalls, intrusion detection, and encrypted communications.

ixb.  Financial Challenges

a) High Initial Investment

Installing IoT sensors, AI platforms, and digital twins requires significant capital investment for which many hydropower operators hesitate to make large upfront investments despite long-term cost savings. Therefore Government incentives may be provided & different financing models like public-private partnerships, green energy funds may also be allowed.

b) Uncertain ROI (Return on Investment)

Digital transformation requires years to show full-scale benefits. Operators demand clear evidence of efficiency gains before committing. Therefore Pilot projects may be developed demonstrating small-scale improvements before full-scale rollout. The Operators may also partner with technology providers who offer performance-based payment models   like payments based on efficiency improvements).

c) Operational Challenge:  Hydropower Engineers are experts in mechanical & electrical systems but may lack AI and IoT knowledge. There is always a Resistance from operators unfamiliar with Automation and AI-driven decision-making technologies. Therefore there may be regular Training programs on digital tools, AI analytics, and cybersecurity.

Considering the above, it is concluded that by leveraging IoT, AI, and digital twin technologies, hydropower plants can achieve higher efficiency, reduced downtime, enhanced safety, and better integration with renewable energy sources. This transformation makes hydropower more competitive and sustainable in the evolving energy landscape.

Qns 5: With the recent focus on hybrid renewable energy parks, how can hydropower complement solar and wind energy to provide round-the-clock power supply?

The recent focus on hybrid renewable energy parks in India is an essential step towards achieving a more reliable and sustainable power grid. Hybrid Renewable Energy parks integrate solar, wind, and hydropower specially the Pumped Storage Projects to address the intermittency issues of renewable energy sources, ensuring a Round-the-Clock (RTC) power supply

Hydropower plants, especially large-scale Hydro Project with storage reservoirs like Tehri and Koldam, Bhakra HEPs with high inflow are capable of providing base load support to the grid. As water flow through the Turbines can be managed and controlled as per the load demand, these plants can operate continuously and are less affected by seasonal or intermittent fluctuations in the Grid.

Hydropower, is one of the few renewable sources that can respond quickly to changes to the Grid frequency and the demand, making it an ideal solution for meting peaking power, Black start, Ramping up and down etc. This flexibility is crucial as other Variable Renewable Energy sources like Wind and Solar may not be available when needed most. Hydro Power follows the load in the Grid unlike the Solar and Wind power sources and provide the inertia to stand the Grid fluctuations. Hydro Units can start from standstill to Full load within 10 min. 

Hydropower, particularly pumped storage hydropower (PSH), plays a critical role in complementing Solar and Wind energy by providing energy storage and Grid stability, ensuring that power is available consistently, even when solar and wind generation fluctuate. 

For instance, the response time for 4×225 MW Purulia1 PSP is only 5 minutes to start from standstill to full load and 11 minutes to stop (including Auxiliary equipment like Oil Lifter) in generation mode. Similarly, the unit takes only 11 minutes to start from standstill to full load and 11 minutes to stop (including Auxiliary equipment like Oil Lifter) to stop in pumping mode.

The response time of the PSPs is around 1-5 mins for generating mode and 5-7 min for pumping mode.  It takes around 6-10 minutes to switch over from full generation to pumping mode and 6-10 minutes from pumping mode to generation mode. The quicker response time provide the PSPs the advantage to stand the fluctuation in the Grid and feed the additional power requirement during dipping in the Grid. 

In order to provide 1000 MW of RTC @ 95% availability, a combined source from PSP with an installed capacity of around 980 MW (say 1000MW) supported by Solar generation with capacity of 2500MW (20 % CUF) and Wind generation capacity of 2000 MW (24 % CUF) is expected to be required in the Hybrid Renewable Energy Park.


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