NHPC Limited, the country’s largest hydropower producer, is optimistic about the sector’s growth story. Hydropower is expected to play a larger role in the grid due to its ability to meet peak demand and balance supply to the grid with the rising influx of renewables. At a recent conference organised by Power Line, Balraj Joshi, chairman and managing director, NHPC Limited, shared his views on the performance of the hydropower sector, the key issues and challenges facing it, NHPC’s capacity addition plans and the way forward. Excerpts…
Role of hydropower: Hydropower is being compared with other forms of electricity, which, I believe, may not be the right thing to do because it is not just another power source, but has other aspects to it. However, if we must compare, then due to cost economics, we find that hydro is basically taking a back seat with solar and renewables coming up in a very big way.
There is no doubt that energy is required as it is the key source for development. Our per capita power consumption has improved significantly from 200 kWh in 1947 to 1,100 kWh at present. Our installed capacity base has seen a quantum jump from a meagre 1,362 MW to 347,219 MW. Thermal power has taken a leading role with a capacity of 223 GW, hydro is at 45 GW, while the share of nuclear is small, at 6.7 GW. Notably, renewable energy, at 72 GW, has been key to the growth story and the target is to reach 175 GW by 2022. This has actually given food for thought to planners on the future of hydropower. We do not see solar or renewables as a competitor but as an enabler of hydropower, which is superior to other forms of energy in terms of its ramp rate. Hydro is best suited to handle the intermittency issues of renewable energy. This realisation has also come out clearly during meetings at NITI Aayog and at the ministerial and planning levels, and hydro is expected to receive a major fillip in the coming times.
Issues and challenges impacting the hydro sector: The journey of hydropower has not been satisfactory. Its share in installed capacity has come down to 13 per cent from 50.62 per cent. Even though the installed hydro capacity has increased, its share has been dented by the substantial rise in thermal capacity. Moreover, environmental, technical, financial as well as infrastructural and administrative issues have impacted the sector.
Delays in forest and wildlife clearances, delays in public hearings, challenges in securing environmental clearances as well as rehabilitation and resettlement (R&R)-related issues have been the major bottlenecks.
Another challenge is the non-availability of longer-tenor loans at low interest rates. This has made hydropower costly. However, these issues, including the problems of high capital costs and long gestation periods, are being addressed at various levels. Recently, at a meeting, bankers expressed their willingness to give standardised loans of up to 20 years, so the issue of non-tenor availability of long-tenor loans is being addressed. The dearth of competent contractors is also a challenge and the financial woes being faced by them are well known.
There are infrastructural issues such as inaccessibility of the area, as hydropower projects are mostly put up in remote areas. However, we have requested the government to consider funding a part of the infrastructure cost.
Technical issues including geological uncertainties, natural calamities and the dearth of competent contracting agencies are not exogenous, but we can certainly provide for them. One of the reasons why hydro projects have got a bad reputation is because such projects do not have a track record of getting completed within time and cost. Historically, the sector has not had access to good construction equipment, survey instruments or modern techniques. However, today, the best technologies are available and it is incumbent upon all of us to utilise these facilities and complete projects within time and cost. We have done it in the Kishanganga project. Implementing NHPC’s Kishanganga project, which involved the construction of a 24 km long tunnel in snowbound areas of Jammu & Kashmir, was a challenging task. However, using latest construction technologies such as tunnel boring machines (TBMs), we were able to complete it within cost and time, in 2018.
NHPC’s plans: The company’s installed capacity is currently about 7,071 MW, which comes from 24 power stations (22 hydro, one wind and one solar). In 2017-18, NHPC commissioned two projects aggregating 380 MW – the 330 MW Kishanganga project in Jammu & Kashmir and a 50 MW solar project in Tamil Nadu. Further, hydropower capacity of 3,800 MW, which includes three projects, is under construction. A capacity of 7,835 MW is under clearance and about 780 MW of capacity is under survey and investigation, while 581 MW is under pre-survey and at the investigation stages. Overall, we have a capacity of 20,000 MW, which is either installed or in the process of getting installed.
On the Dibang project, the government has given us permission to go ahead with the multi-purpose project by sanctioning the pre-investment approval amounting to Rs 160 billion. This is a large project, with 2,880 MW installed capacity and a dam height of 278 metres, and will also help in flood moderation in the areas downstream of the dam.
Acquisition of stranded assets: NHPC had bid for one of the stranded assets – the Teesta 6 project of Lanco – in the National Company Law Tribunal (NCLT). I am happy to report that we were the highest bidder and will take over the project soon. We are looking at more opportunities through the NCLT route.
PPA signing: Signing of power purchase agreements (PPAs) has not been a problem for us so far. For the Kishanganga project, the PPA was signed with the governments of Chhattisgarh and Uttar Pradesh. It was apparently a costly project but a strategic one nevertheless, wherein the central government provided a large chunk as subordinate loan. The per unit power tariff for the project was about Rs 6.23 to start with. However, through financial re-engineering, the first-year tariff was brought down to Rs 4.19 per unit. It was not difficult for us to service loans even though we might have asked for a lower tariff in the initial years. With the new policy coming in, the project’s depreciation period is expected to be increased to 40 years from 35 years, which should also help. Further, with regulatory changes such as the introduction of time-of-day tariffs, the signing of PPAs is not going to be a constraint.
Plans for power trading: This is a new area that we have ventured into. According to initial estimates, we might be able to earn revenues of about Rs 400 million a year. We see some promising business opportunities in this area.
The way forward: The central government has shown inclination to consider hydro, irrespective of size, as a renewable energy source. This will help hydropower projects to secure long-tenor loans. That said, this may not lead to a waiver of the transmission charges for hydro projects even though it may be christened as renewable energy.
The lack of simplified procedures for land acquisition and R&R remains an issue and requires stakeholder consultation. Land pooling or making landowners the stakeholders in the project by taking the land on lease could probably be looked at. With regard to sharing the cost of basic infrastructure works by states, it is easier said than done.
Meanwhile, the central government’s intervention in resolving interstate disputes will help. Another area which we need to work on is the development of trained and skilled manpower for the hydropower sector. I think, we are losing professionals who have been working in this field and this could just be the right time that people started thinking about training hydro professionals. Another aspect that needs to be taken into consideration is the provision of benefits to the downstream affected people. So far, this has not been a planning ingredient, but it has acquired importance in the contemporary scene.
Overall, hydropower generates the least greenhouse gases and provides a number of other benefits including grid stability, spinning reserves, water security and flood moderation. Further, it helps in the development of remote areas of the country. NHPC’s Loktak project in Manipur, which was built 35 years ago, remains the only biggest central investment in the sector till date. We are planning to set up a 66 MW downstream project in that area and are currently grappling with lowering the tariff.
Outlook for hydropower capacity addition: According to the National Electricity Plan, the projected installed capacity by 2022 will be 522 GW, and by 2027, this will increase to 640 GW. This is a quantitative jump, and renewable energy is expected to contribute about 275 GW, making the management of its intermittency issues important. With a view to meeting our Intended Nationally Determined Contribution targets at COP21, about 72 GW of hydropower will be required by 2027 so that there is opportunity for everybody to come in and build. According to NHPC’s estimates, by 2032, the total installed capacity will reach about 732 GW, of which hydropower will contribute 82 GW. With this, we would have exploited 60-65 per cent of our economically exploitable hydropower potential.