NHPC Limited, the country’s largest hydropower generation company, with a portfolio of 7 GW, is expected to double its installed capacity over the next five years. In a recent interview with Power Line, Abhay Kumar Singh, chairman and managing director, NHPC, talked about the company’s growth plans, the status of key projects, and the prospects for the hydro segment. Excerpts…
What have been the key highlights for NHPC in the past year?
The past year has been very good for us. We recorded our highest ever annual generation. NHPC has always been a financially sound organisation and the past year was especially significant as we crossed Rs 30 billion in annual net profit for the first time. For me, the key highlight was the restart of major construction activities at the Subansiri Lower hydro project. This project had been held up since December 2011. NHPC also got approval from the Cabinet Committee on Economic Affairs (CCEA) for pre-investment activities at the Dibang multipurpose project, paving the way for the implementation of the ambitious project. Further, despite the lockdown, we successfully completed the tendering process for the award of a civil contract package for the Teesta VI hydro project.
How has Covid-19 impacted the operations of the company? What steps have been taken to tackle this?
The Covid-19 situation is an unprecedented one and nobody could foresee such a massive disruption to the economies and day-to-day lives of people everywhere. All businesses have been impacted by the Covid crisis, with varying degrees of severity. Fortunately, for us, as hydropower plants have must-run status, the crisis did not have much impact on our generation. However, on the project execution side, we have faced far greater headwinds. Initially, it was an overwhelming situation for everyone as we navigated uncharted waters. Even in the initial uncertainty, I had full faith in human ingenuity and adaptability.
My clear priority was to ensure that the operations of power stations continue smoothly. The first step was ensuring that our premises remain sanitised and all precautions are in place for keeping our employees safe. I conveyed to the entire organisation that although we are staring at a crisis of an unknown nature, we must face it with a spirit of reinvention by accelerating digital transformation and implementing agile operations. Despite the suddenness of the situation, the ability of people to learn and change behaviours has helped us to continue our operations. We immediately identified the minimum manpower necessary for operations at the powerhouses and the rest of the manpower was assigned work from home. Our medical team at sites and stations ensured proper screening of all manpower. I am proud of the fact that my employees did not let me down and ensured operations at all 24 power stations.
In one such instance, our project team at the 132 MW Teesta Low Dam III project (TLDP) undertook an in-house departmental repair of a gas-insulated switchgear, the first such work at NHPC. We have successfully achieved the remote operation of TLDP III and TLDP IV.
As the pandemic broke out before the monsoon, many critical works could not be completed. Due to obvious social distancing norms and Covid-19-dictated protocols, round-the-clock construction work at all the available fronts could not be restored immediately. Although we are trying to make up for the lost time through resource augmentation, the issues persist.
What is your assessment of the performance of the hydro segment in the past year?
The growth of the hydro sector has been muted during the past year. Only 300 MW of hydro capacity was added in 2019-20 while the overall power sector added around 16,451 MW. The share of hydropower has come down significantly which, in the overall capacity, is only around 12 per cent while that in generation is around 11 per cent. Other renewables like solar and wind have captured the imagination of everyone while hydro capacity addition has languished. It is an irony that despite hydro being the best time-tested renewable source of energy, there is a huge untapped hydropower potential in the country.
What are the challenges facing the hydropower segment? What is the way forward? Will the HPO mechanism expedite capacity additions?
Developing a hydropower project is a multidisciplinary and multi-authority enterprise where active and effective involvement of the state government is the utmost requirement. Water is a state subject while electricity is a concurrent one. Thus, making state governments willing and proactive partners is essential for the revival of the sector. This can be done through project-specific steering committees comprising officials from the centre and states. Also, the clearance process can be further eased and long-term soft loans should be made available to developers. There have been delays in the execution of many projects due to environmental issues. Once clearances are granted, we should not look back at them midway. This will only increase the uncertainty and drive up the overall cost of the project and consequently the power cost.
The implementation of the hydropower obligation (HPO) will increase the share of hydro in the grid and this would help grid operators manage the intermittent solar and wind power. A separate HPO with a clear mandate for hydropower procurement will help ensure greater offtake from hydropower projects. This is a win-win situation for everyone. I am sure that this will not only increase capacity addition but will also improve our grid stability.
What are the steps needed to promote pumped hydropower storage?
The past decade has seen tremendous growth of wind and solar generation in response to favourable tax incentives and other policies. While increasing the amount of renewables on the grid is a good thing, the variability of wind and solar generation increases the need for energy storage. We are moving into a world with far greater amounts of renewable energy on the grid. A reliable, affordable and grid-scale storage of energy must be on the table. For the foreseeable future, hydropower pumped storage stands alone as the only commercially proven technology available for grids-cale energy storage. I believe that pumped hydro energy storage is a proven, affordable means of supporting greater grid reliability and bringing clean and affordable energy to more areas of the country.
Due to concerns regarding storage reservoirs and their impact on river ecology, the implementation of pumped storage schemes has not been highly successful. However, with the advent of closed-loop pumped storage schemes, we have the opportunity to utilise the immense potential of pumped storage. In these projects, the reservoirs are physically separated from the existing river systems. After the initial filling of the reservoirs, the only additional water requirement is minimal operational make-up water required to offset evaporation or seepage losses. These projects can be located wherever needed to support the grid.
We need to make the tariff for peak generation from pump storage systems attractive. This can be achieved by having a differential tariff structure for peak and off-peak generation, suitably compensating hydropower for its ability to meet the peak demand. At present, the ancillary services market is limited to frequency support only. We need to explore the requirements for extending the ancillary services market to include spinning reserves, voltage regulation, black start, etc. The ancillary services market mechanism should be suitably modified to compensate pumped storage plants for both generation and pumping modes of operation.
What are NHPC’s capacity addition and capex targets for the next one to two years? What is the current status of the Subansiri and Dibang projects?
We are planning to commission the 800 MW Parbati II project in 2021-22 and the 2,000 MW Subansiri Lower project by August 2023. Our fully owned subsidiary, Lanco Teesta Hydro Power Limited (LTHPL) is executing the 500 MW Teesta VI project, acquired through the NCLT route. The civil work packages for the project have already been awarded. Another project of Jal Power, the 120 MW Rangit IV hydroelectric project (HEP), is also under acquisition through the NCLT route. Besides these projects, we have two projects, namely, the 1,000 MW Pakal Dul and the 624 MW Kiru project, in the construction stage in Jammu & Kashmir. NHPC is already present in the wind and solar segments and we are looking at around 4,000 MW of projects in this space.
Our capex for the current fiscal is Rs 52.56 billion. This includes the equity contribution to our JVs and subsidiaries. As construction activities in our hydro and renewable projects peak over the next couple of years, we will cross a capex of Rs 50 billion annually. Construction work has restarted at the Subansiri Lower project although the pandemic has impacted its progress. The contract package for the balance work of the powerhouse was awarded in September 2020. The CCEA has sanctioned the pre-investment activities for the Dibang multipurpose project. We have all the statutory clearances required for implementation of the project. The Public Investment Board for the implementation of the project is under process. We have initiated a tendering process for major contract packages for the project.
What are your top priorities for the company? What are some of the new areas being explored?
NHPC Limited is the top organisation in the country as far as hydropower development is concerned. However, we need to work on improving our project implementation capabilities to deliver projects on schedule. My top priority is to complete the Parbati II HEP by December 2021 and Subansiri Lower by August 2023. I have a clear vision for NHPC and want to make it one of the most prestigious organisations in the power sector, which is ready for challenges and opportunities, not only in hydro but also in solar and wind. In the next five years, we plan to double our installed capacity.
We successfully conducted an e-reverse auction for 2,000 MW of interstate transmission system-connected PV projects at a competitive tariff of Rs 2.55-Rs 2.56 per unit. This was done at a time when businesses were struggling due to the lockdown. We have already awarded the 2,000 MW of projects to solar power developers.
What is your outlook for the power sector for the next two to three years and what are the prospects for hydropower?
We are in the midst of a pandemic, which has disrupted every sphere of the economy and the power sector is not untouched by it. In the short term, we may witness stagnant growth due to the Covid situation, but as soon as things normalise we expect robust growth. The demand for power has already begun to pick up. In view of the government’s focus on attaining self-reliance, I foresee a greater emphasis on manufacturing and rapid industrialisation. This will require huge capacity addition although we have to be wary of skewed growth in certain sectors at the cost of others. A holistic approach towards the development of the power sector and optimisation of the available resources across sectors – thermal, hydro, renewables and nuclear – will enable us to serve the people better.
To take the growth to the next level, we need to lay emphasis on improving infrastructure and speeding up the approval process. One area of concern for me is the pace of ramping up the transmission network. To harness the immense solar potential of the country, we need a corresponding development of the transmission network. We may not see much growth in the immediate term, but I am extremely bullish on our growth in the long term. Policymakers today realise the importance of hydropower in the energy mix. New initiatives such as recognising large hydro as a renewable energy source and budgetary support for enabling infrastructure have given a fillip to the hydro sector and we are witnessing a renewed interest. We must also appreciate that hydro projects are more than just power projects; they are our strategic assets and the sooner we develop them, the better it is for the nation.