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Green power policy: Scaling up hydel’s share in energy mix

The government is redoubling its efforts to scale up the share of the hydro energy sector in the country’s overall energy mix. Two new sub-committees have been formed to specifically look at ironing out the legal and regulatory framework that is throttling the sector.

Written by Anil Sasi | New Delhi | Published: June 15, 2016 1:13:09 am
hydro projects, Hydel power, Nathpa Jhakri Dam,  power ministry, hydel project, hydel projects India, NHPC, Indian express The Nathpa Jhakri Dam on the river Satluj in Himachal Pradesh. (Express photo)

A hydropower policy push is in the works, with the government specifically focusing on ironing out the regulatory impediments and catalysing financing options, specifically tuned to the long-gestation hydel sector. The focus on hydro generation comes at a time when the sector has plumbed to its lowest in the overall energy mix since Independence. Also, a renewed push for hydro is cited as being absolutely essential in beefing up the green component in India’s base-load capacity as a counterbalance to the rising share of intermittent green power sources such as wind and solar. Power stations comprising thermal and nuclear units that are operated on a continuous basis to generate electrical power to meet the basic minimum demand is termed as the base load capacity.

The power ministry, officials said, has formed two sub-committees to look at the overall legal and regulatory framework of hydropower, while another panel has been constituted with the objective of looking into the various financing options. “A specific mandate in the legal regulatory framework is being considered. The other committee is constituted with the terms of reference of looking at innovative financing instrument for funding the hydropower projects.”

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“Some firm steps can be expected in the next two to three months and a draft paper is being readied,” a power ministry official has said in a deposition before the Parliamentary Standing Committee on Energy. The tariff framework under discussion aims at addressing the specific requirements of the hydro sector, where the tariff is higher in the first year and then gradually decreases as and when loan is repaid and depreciation comes down. As a result, states are typically reluctant to buy hydropower because the initial tariff is high. The government has now given that flexibility to the developers to modify the depreciation rate so that the tariff is either flat or it increases with the passage of time, something that was not available to developers.

As a result of this flexibility, if the developer wants to charge lower tariff in the initial year and higher rates subsequently, that option is now available to them.

Inherently, the project financing cycle of hydro projects is very different from the financing cycle of other infrastructure projects such as highways and railways. The main reason is that in a hydro project, the investigation on the site, pre-investigation survey, preparation of the detailed project report or DPR is far more complex and takes a longer time. Secondly, the environment and forest clearance is a very tortuous process. Plus, the land acquisition and rehabilitation is a very long third-stage process.

Hydropower, in recent times, has gained greater importance due to the planning of 1.75 lakh MW capacity of power in the country from renewable sources, including wind and solar. Since these renewable sources of energy are intermittent in nature, it will require balancing power which can swiftly start up and stop down to provide grid stability. hydropower possesses this quality.

India has hydropower potential to the tune of 1,45,320 MW. Besides this, an additional potential to the tune of 96,524 MW has been estimated in the form of Pumped Storage Schemes. Against this, at present, only 42,433 MW capacity of hydropower is being harnessed. The share of hydropower in the total energy mix of the country has fallen consistently, from 51 per cent in the year 1962-63 to about 15 per cent at present.

The initial capital cost of hydro electric projects is high on account of high civil construction cost, difficult terrain, poorconnectivity, high cost of survey and investigation. The bigger problem in scaling up is that at present, the private sector’s share in hydropower generation is a meager 7.43 per cent. Incentivising the private sector, officials admit, remains one of the formidable challenges.

India’s current green power component, comprising largely wind and solar is estimated at 42,850 MW, which is expected to go up to 1,75,000 MW by 2022 if solar and wind projects were to come up as planned. That’s where the problem could lie.

The steady ramping up of green power — solar, for instance, was just 2 MW in 2010 but is now over 4,000 MW — does go a long way in ensuring some degree of leverage for India at climate talks, but simultaneously poses a serious challenge for grid managers.

The availability of solar and wind energy is largely determined by the weather conditions, and therefore characterised by strong variability. As a result, power generation from these sources cannot easily be matched to the electricity demand, like power generated from conventional plants such as coal-fired units and gas stations. Integration of large amount of fluctuating RE in the grid is a serious technical challenge for grid managers to ensure smooth operations of the Indian grid — the fifth largest in the world. To compound matters, RE generation forecasting in the country is in its early days.

A more viable strategy might be to focus on the hydro sector, alongside improving the efficiency of the country’s coal-fired power plants, replacing older coal plants with supercritical units and pushing for newer technologies such as coal gasification to breach the viability barrier by taking a leaf out of the experiences of Japan, Germany and the US.

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