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Measures to promote Hydro Power Sector

Topics Covered:

  1. Infrastructure and energy related issues.

 

Measures to promote Hydro Power Sector

 

What to study?

  • For Prelims: About the recently announced measures, classification of hydropower projects.
  • For Mains: India’s hydropower potential, challenges present and measures in support.

 

Context: Cabinet has approved measures to promote the Hydro Power Sector.

 

These measures include:

  • Large Hydropower Projects to be declared as Renewable Energy source (as per existing practice, only hydropower projects less than 25MW are categorized as Renewable Energy).
  • Hydropower Projects (HPO) as a separate entity within non-solar Renewable Purchase Obligation to cover LHPs commissioned after notification of these measures (SHPs are already covered under Non-Solar Renewable Purchase Obligation).
  • The trajectory of annual HPO targets will be notified by Ministry of Power based on the projected capacity addition plans in hydropower sector. Necessary amendments will be introduced in the Tariff Policy and Tariff Regulations to operationalize HPO.
  • Tariff rationalization measures including providing flexibility to the developers to determine tariff by back loading of tariff after increasing project life to 40 years, increasing debt repayment period to 18 years and introducing escalating tariff of 2%;
  • Budgetary support for funding flood moderation component of hydropower projects on case to case basis.
  • Budgetary support for funding cost of enabling infrastructure i.e. roads and bridges on case to case basis as per actual, limited to Rs. 1.5 crore per MW for upto 200 MW projects and Rs. 1.0 crore per MW for above 200 MW projects.

 

Major Impact including employment generation potential:

  • As most of the hydro power potential is located in the higher reaches of Himalayas and North- East Region, it will result in overall socio-economic development of the region by providing direct employment in the power sector.
  • Provide indirect employment/ entrepreneurial opportunities in the field of transportation, tourism and other small scale businesses.
  • It provides a stable grid considering 160 GW capacity addition by 2022 from infirm sources of power like solar and wind.

 

India’s hydropower potential:

India is blessed with immense amount of hydro-electric potential and ranks 5th in terms of exploitable hydro-potential on global scenario.

India is endowed with large hydropower potential of 1,45,320 MW of which only about 45,400 MW has been utilized so far. Only about 10,000 MW of hydropower has been added in the last 10 years.

The hydropower sector is currently going through a challenging phase and the share of hydropower in the total capacity has declined from 50.36% in the 1960s to around 13% in 2018-19.

 

Why hydropower?

  • Besides being environment friendly, hydropower has several other unique features like ability for quick ramping, black start, reactive absorption etc. which make it ideal for peaking power, spinning reserve and grid balancing/ stability.
  • Further, hydropower also provides water security, irrigation and flood moderation benefits, apart from socio-economic development of the entire region by providing employment opportunities and boosting tourism etc.
  • The importance of hydropower is increasing even more as the country has targeted to add 160 GW of intermittent Solar and Wind power by 2022 and 40% of the total capacity from non-fossil fuel sources by 2030 to honour its Nationally Determined Contribution for Climate Change.

 

Challenges ahead:

  • DISCOMS are reluctant sign Power Purchase Agreements (PPAs) Hydro Power due to higher tariff, particularly, in the initial years. One of the reasons for high tariff of hydropower is the loading of cost of flood moderation and enabling infrastructure in the project cost.
  • Due to inherent risks associated with the sector, such as geological surprises, natural calamities, environmental & forest issues, and rehabilitation and resettlement issues apart from commercial risks and change of river basin during operation, many developers are averse to enter into the sector. The major commercial deterrents for the private developers are high capital cost and long payback period due to high gestation period which may also create issues in financing.
  • The other issue related to Hydropower projects is financing and evacuation. Hydro Power projects are capital-intensive and financing them for long such as 20 years is really a challenge. Further, a number of hydropower projects are located in remote sites in states which do not have enough demand for electricity that presents geographical constraints in developing requisite transmission infrastructure for evacuation.

 

How much is the world’s electricity supplied by Hydroelectric Power Plants?

2700 TWH is generated every year. Hydropower supplies at least 50% of electricity production in 66 countries and at least 90% in 24 countries.

 

What is the classification of Hydro Projects based on Installed Capacity?

  1. Micro: upto 100 KW.
  2. Mini: 101KW to 2 MW.
  3. Small: 2 MW to 25 MW.
  4. Mega: Hydro projects with installed capacity >= 500 MW.
  5. Thermal Projects with installed capacity >=1500 MW.