January 2021

India has ambitious renewable energy capacity goals of 175 GW by 2022 and 450 GW by 2030. Renewable energy sources such as solar and wind are, however, subject to intermittency issues, thus giving rise to a need for sources with fast ramp up and ramp down capacity.

Hydro is seen as a valuable resource in India’s mix, especially given its role in imparting flexibility to the system and balancing load. This was best demonstrated when India recently executed the unique feat of managing a staggering load reduction of almost 32 GW in April 2020 during the 9 p.m.-9 minutes light switch-off event amidst the pandemic-led lockdown. Hydropower plants played a key role in managing this.

Despite being a promising source, the segment has grown at a tardy pace. As per estimates, almost 14.4 GW of capacity is stranded at various stages of development. There are frequent time and cost overruns in hydro project development. The situation has aggravated further due to the Covid-19 pandemic, with under-construction projects impacted by supply chain challenges and lack of manpower.

Many of the reforms that were introduced in the hydro segment in 2019 are yet to see the light of day, say industry observers. Among the reforms announced was the classification of large hydropower as a renewable source; however, many benefits applicable to renewable energy sources are still not applicable to hydro, they point out. Also, the HPO trajectory as proposed under the reforms is yet to be announced. The lack of parity with other generation sources remains a key concern. For example, the GST for solar and wind projects is 5 per cent while that for hydro is 18 per cent, making the latter uncompetitive.

What the sector needs is a set of coordinated actions by all stakeholders to fast track development. Integrated river basin studies, differential tariffs (peak and off-peak), technical capacity augmentation and the availability of long-term finance are some strategies that can help address the sector’s challenges. Also, state-level initiatives, such as the deferment of free power in Himachal Pradesh, will also help the segment.

Power Line’s Infocus section this month on “Hydro Power in India” attempts to take a look at some of the issues impacting the segment and the way forward.

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