The power ministry is reported to be moving in to rescue the country’s largest public-private hydel project with a deal that would see a joint venture of the Sikkim government and public sector utility NHPC Ltd buying out the original promoter — the Athena group — and partially mopping up stake of six global private funds in Teesta Urja, the special purpose vehicle implementing the project. The deal is aimed at preventing the 1,200 MW project in the Himalayan state from turning into a dud investment, a fate that awaits a majority of the country’s hydro projects that are currently under implementation.
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 the 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.
The continuing slide comes despite the NDA government’s stated resolve to increase the share of renewables in the country’s overall energy mix, something that is focussed overwhelmingly on solar. According to government’s data updated till April 2015, there are at least 21 hydro power projects that are facing time overruns of five or more years, with those hanging fire for over 10 years. In March, during the first half of the Budget session, power, coal and renewables minister Piyush Goyal admitted in the Lok Sabha that uncertainties in the hydropower sector were keeping investors away, despite the huge potential. “Investors are not ready to make investments,” he said, while extending an assurance that the government would make efforts to start hydel projects once the “uncertainty” is over.
Untapped hydro potential
India ranks fifth in the world in terms of usable hydroelectric potential, with an estimated potential of 148 GW (1 GW is equal to 1,000 MW), making it one of the most important potential sources to meet the energy security needs. India has around 41,000 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. Countries such as Canada and Brazil had harnessed around 69 and 48 per cent of the economically feasible potential back in 2009. Closer home, Sri Lanka has harnessed a whopping 96 per cent of its hydro potential. From a regional perspective, 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. However, issues in implementation of such policy initiatives and regulations still plague the sector resulting in the declining share of hydropower in India’s energy mix since 1966.
The skewed development pattern between different generation technologies is evident from the fact that the current portfolio of installed capacity of 267 GW is dominated by thermal power with around 68 per cent share (which has an energy contribution of well over 80 per cent as most of these thermal units are base load stations).
From a technical point of view, hydropower is crucial in the country’s power mix as increasing reliance on thermal plants vis-à-vis hydro assets results in inadequate peaking and quick response capability. The impetus has been progressively slowing through the last decade, with environmental concerns, R&R issues and land acquisition problems slowing hydropower development, which has largely remained under the ambit of state governments and has been prone to varying policies (such as upfront premium, royalty power, land acquisition policy) adopted by different states, according to PwC-FICCI’s ‘Hydropower in India-Key enablers for a better tomorrow’ report.
The Uttarakhand flashflood put a fresh spanner in the works amid concerns over climate change and its impact on rainfall and on river flow and its patterns, which in turn may have an impact on plans for hydropower generation. Most of India’s hydropower potential falls in seismic zone 5, a region classified as highly vulnerable to high-intensity quakes. According to a PwC executive who worked on the FICCI report, though reservoir based hydro projects have come under criticism due to CO2 and methane emissions beyond acceptable limits, most hydro-rich countries have followed an integrated full life-cycle approach for the assessment of the benefits and impacts to ensure sustainability. India is going the other way. Even among green projects, hydro takes top billing. The energy output of hydro projects is two times compared to wind and solar for the same capacity, while the landed cost is lesser because no backup capacity is needed for hydro.
The test, though, is to salvage the under-construction projects as a first-step towards overturning the overtly negative investment sentiment towards hydro projects. Developers put the ball in the government’s court, claiming that both the Central and state governments need to create an enabling investment climate for 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 hydro project development.