The hydropower segment in India has witnessed sluggish growth in the past few years. As of August 2017, its total installed capacity stood at 44,653.42 MW, representing only about 30 per cent of the country’s estimated potential of around 148 GW.
Hydro’s contribution to the country’s generation mix has also been declining steadily. From 12.5 per cent in 2012-13, its share in total generation (from conventional sources) came down to around 10.5 per cent in 2016-17. This has been largely due to the addition of a significant 72.3 GW of thermal capacity during this period, as against only 5.4 GW of hydro.
Going forward, however, the hydro segment is set to get a fresh lease of life. The central government is proactively working on a number of new policy initiatives to reinvigorate the sector, including bringing out a new hydropower policy. Power Line takes a look at the key trends in the hydropower segment, the issues impacting growth and the future outlook…
Sector size and growth
The installed hydro capacity has grown at a compound annual growth rate (CAGR) of only 2.7 per cent, from 38,990 MW in 2011-12 to 44,478 MW in 2016-17. Of the current installed capacity, the state sector accounts for the majority share of 66.5 per cent, followed by the central and private sectors at 26 per cent and 7 per cent respectively.
The country’s total hydroelectric potential is estimated at 148 GW, of which over 145 GW is for hydroelectric projects (HEPs) of over 25 MW capacity. The overall utilisation of hydro potential stood at 35 per cent, as of August 2017. In terms of hydropower development, the Northeast region is the least exploited with 93 per cent of the 58.3 GW potential still undeveloped.
Capacity addition in the segment has followed a fluctuating trend over the years. In 2012-13, 510 MW of hydropower capacity was added, followed by 1,058 MW in 2013-14; in 2014-15, it decreased to 736 MW. In the past two years, however, there has been consistent growth, with a capacity addition of 1,516 MW in 2015-16 and 1,659 MW in 2016-17. For 2017-18, a target of 1,305 MW has been set, of which 136 MW had been commissioned till June 2017. Generation from hydropower plants has been declining over the past three years. From 134.8 billion units (BUs) in 2013-14, it came down to 129.2 BUs in 2014-15 (a decline of 4.1 per cent), and to 121.3 BUs in 2015-16 (a decline of about 6 per cent). It increased marginally, by less than 1 per cent, to 122.37 BUs in 2016-17.
A key policy development for the segment was the issue of guidelines on cross-border trade of electricity in December 2016. These guidelines are expected to facilitate the import of power from major hydropower projects being developed in Nepal and Bhutan. As per the guidelines, entities with the Central Electricity Authority’s approval and complying with the regulations of the Central Electricity Regulatory Commission are eligible to engage in cross-border electricity trade through Indian power exchanges. The guidelines also give preferential treatment to overseas power generators and trading companies in which the majority stake is held by Indian firms (public or private). It has also simplified the process for all government-owned companies of neighbouring countries.
Meanwhile, a new hydropower policy for addressing regulatory and financial issues and reviving stalled projects is also under discussion. Some of the incentives proposed under the policy are interest subvention of 4 per cent during the construction period of up to seven years and for three years after commencement of commercial operations for all hydro projects with capacity beyond 25 MW; the formation of a Rs 160 billion hydropower fund and fiscal support for stalled HEPs, and the introduction of a hydro purchase obligation. It is also proposed that the funding for this policy would come from the coal cess or the National Clean Energy Fund or the non-lapsable central pool of resources for north-eastern states for eight years till 2024-25.
Future pipeline and outlook
A total of 41 hydro projects are currently under execution, with a cumulative capacity of 11.8 GW. All these projects are expected to be completed during the period 2017-18 to 2022-23. Of these, the highest capacity is under execution by the central sector (52 per cent), followed by the private sector (27.4 per cent) and the state sector (20.3 per cent). However, the commissioning of all these projects is delayed, leading to cost overruns. Further, multiple hydropower projects remain stalled (a review by the Ministry of Power states that there are 16 stalled projects at present, aggregating over 5.1 GW).
Undoubtedly, the hydropower segment has fallen behind despite its high generation potential and investor confidence in the segment has eroded. The new hydropower policy is thus keenly awaited by the industry. It is expected to not only open up the segment to accessible and competitive capital but also make available various fiscal benefits to the segment and revive hydro growth.