The hydropower segment has witnessed low capacity addition over the past few years. This is owing to issues and challenges facing the segment, such as the long gestation period of projects, delays in obtaining clearances, and the lack of adequate funding. In the emerging power sector scenario, characterised by the large-scale penetration of intermittent renewable energy sources, hydropower is likely to play a key role in maintaining grid stability. Hydroelectric plants (HEPs) have quick ramping capabilities, which make them suitable for flexible operations.
In view of this, the Government of India has approved various measures to promote the development of hydropower, such as the inclusion of large hydropower projects in renewables, tariff rationalisation, budgetary support for the flood moderation and enabling infrastructure components of HEPs, and the introduction of the hydro purchase obligation (HPO) mechanism as a separate category within the non-solar renewable purchase obligation (RPO). Recently, in February 2021, the government also notified the HPO trajectory, giving states hydropower procurement targets along the lines of RPOs.
Installed capacity and power generation
As of March 2021, the installed hydropower capacity (projects over 25 MW) in the country stood at 46,209 MW. The state sector accounted for the highest share in the installed hydro capacity at 58.6 per cent, as water is in the state list. It was followed by the central and private sectors with 33.9 per cent and 7.6 per cent share respectively. Some of the key projects commissioned during 2020-21 were North Eastern Electric Power Corporation Limited’s Kameng HEP Unit 3 and 4 (150 MW each), Himachal Pradesh Power Corporation Limited’s Sawra Kuddu HEP Units 1-3 (3×37 MW) and L&T Uttaranchal Hydro Power Limited’s Singoli Bhatwari HEP Units 2 and 3 (33 MW each).
The installed hydro capacity has recorded a low compound annual growth rate (CAGR) of about 1.9 per cent in the past seven years (2014-15 to 2020-21). In comparison, the coal-based and renewables power capacity have grown at a CAGR of 4.1 per cent and 15.9 per cent respectively, during the same period. The slow pace of hydropower capacity addition can be attributed to factors such as the long gestation period of HEPs, geological surprises, rehabilitation and resettlement issues, local resistance, delays in obtaining environmental clearances, limited off-takers, and the lack of policy focus. Hydropower held the third largest capacity share of around 12 per cent in 2020-21, a decrease from 15 per cent in 2014-15.
During 2020-21, hydropower generation stood at over 150 BUs, marking a decline of around 3.5 per cent from 156 BUs recorded in the previous fiscal, but 7 per cent higher than the target level. Hydropower generation remained largely insulated from the effects of the pandemic due to its must run status. The share of hydro generation in total generation remained at around 12 per cent in 2020-21, similar to that in 2014-15.
Key recent developments
In February 2021, the Ministry of Power (MoP) issued a revised RPO trajectory, including a long-term trajectory for large hydropower projects commissioned after March 8, 2019. As per the notification, the RPO has been calculated in energy terms as a percentage of total electricity consumption, excluding the consumption met by hydropower sources. The solar RPO target may be met by power produced from solar power projects. Other non-solar RPO (excluding HPO) may be met from any renewable source other than solar and large hydropower projects. The HPO benefits may be met with the power procured from large hydropower projects commissioned on and after March 8, 2019, and up to March 31, 2030. Further, free power must be provided as per the agreement with the state government. A separate HPO with a clear mandate for hydropower procurement is expected to ensure greater offtake from hydropower projects. Also, the HPO will bridge the gap between hydro and other renewable forms of power by bringing hydro on a par with other RPOs.
New project announcements
As per the Central Electricity Authority (CEA), 79 HEPs (above 25 MW) totalling 32,012 MW of capacity have been envisaged to be set up between 2020-21 and 2029-30, of which 510 MW of capacity was commissioned during 2020-21.
In January 2021, the union cabinet approved an investment of Rs 52.82 billion for the 850 MW Ratle HEP located on the river Chenab in Jammu & Kashmir. The project will be developed by Ratle Hydro-electric Power Corporation Limited, a joint venture (JV) between NHPC Limited and Jammu & Kashmir State Power Development Corporation Limited (JKSPDCL). In April 2021, NHPC signed a promoters agreement with JKSPDCL and the Government of Union Territory of Jammu & Kashmir for the incorporation of the JV. NHPC will hold a 51 per cent stake in the JV while JKSPDCL will hold 49 per cent. Another MoU was signed by the two entities in January 2021 for the execution of the Kirthai II (930 MW), Sawalkot (1,856 MW), Uri I Stage II (240 MW), and Dulhasti Stage II (258 MW) hydropower projects.
Meanwhile, in December 2020, central hydropower company SJVN Limited was awarded three HEP projects totalling 501 MW – Tandi (104 MW), Rashil (130 MW) and Sach Khas (267 MW) – by the Himachal Pradesh government. The three projects are to be developed at the Chenab river basin in the Chamba district of Himachal Pradesh.
In January 2021, the Asian Development Bank approved a $231 million loan for the construction of the Lower Kopili HEP plant by Assam Power Generation Corporation Limited (APGCL). The plant will double the hydropower generation capacity of APGCL by harnessing water from the Kopili River to generate a total capacity of 120 MW.
Major construction activities have restarted at one of the country’s key upcoming HEPs, NHPC Limited’s 2,000 MW Subansiri Lower hydro project in Assam. It is now scheduled for commissioning by March 2022. Work on the project was halted for almost eight years, from December 2011 to October 2019, due to protests by locals on the adverse impact of the project downstream. In another development, NHPC has received approval from the Cabinet Committee on Economic Affairs for pre-investment activities for the 2,880 MW Dibang multipurpose project in Arunachal Pradesh, paving the way for the implementation of the mega project.
Resolution of stressed HEPs
In November 2020, NHPC began the process of merging with Lanco Teesta Hydro Power Limited (LTHPL). As per the approved resolution plan, NHPC will pay Rs 8.77 billion to LTHPL’s financial creditors while Rs 111.2 million will go to its operational creditors. The project will supply power at a levellised tariff of Rs 4.07 per unit and is likely to be completed in the next four years.
Meanwhile in January 2021, the resolution of another non-performing asset loan account in the hydro segment, Dirang Energy Private Limited’s 2×72 MW HEP in West Kameng district of Arunachal Pradesh, was announced by PTC India Financial Services.
More recently, in April 2021, Power Finance Corporation as the lead financial institution and Punjab National Bank as co-lender of the consortium successfully completed the resolution of Jal Power Corporation Limited’s (JPCL) 4×30 MW Rangit IV HEP in Sikkim. The stressed project was handed over to NHPC Limited on March 31, 2021 after the payment of Rs 1.65 billion as resolution amount to the lenders. The corporate insolvency resolution process for JPCL was initiated in April 2019.
Role of hydropower in grid balancing
Hydropower’s role in grid balancing was demonstrated in the management of the pan-Indian lights-off event by the Power System Operation Corporation, which took place at 9 p.m. on April 5, 2020 during the Covid-19 lockdown. The anticipated reduction in all-India demand during this event was estimated at 12-14 GW. However, the total reduction recorded during the event was much higher, at 31,089 MW. Prior to the event, there were concerns that the sudden fluctuation in demand could result in grid instability and blackouts in many states. However, they were invalidated as hydropower plants played a key role by providing flexibility to quickly ramp up or down generation, as they take the least time to switch on or off.
In December 2020, under the Greening the Grid-Renewable Integration and Sustainable Energy initiative, the automatic generation control (AGC) pilot was launched at the Sharavathi hydro plant in Karnataka. A team comprising system integrators and the state load dispatch centre (SLDC) led the test run, demonstrating the Sharavathi generators smoothly increasing and decreasing generation in response to AGC signal commands by the SLDC. AGC will enable grid operators to easily adjust the power output of generators in response to changes in load.
Focus on pumped storage
Pumped storage plants (PSPs) can provide an ideal solution for energy storage and load balancing. It is the only commercially-proven technology available for grid-scale energy storage. Currently, there are nine PSPs with a total capacity of 4,786 MW in the country. However, only six PSPs (Kadamparai, Bhira, Srisailam, Ghatgar, Purulia and Nagarjuna Sagar), aggregating 3,306 MW, are working in both generation and pumping modes. The remaining three PSPs (Panchet Hill, Sardar Sarovar and Kadana Stages I and II), aggregating 1,480 MW, are working only in generation mode, owing to the unavailability of lower reservoirs/tail ponds and vibration issues. While India has a PSP potential of 96.5 GW, only 5 per cent has been harnessed so far.
Further, there are three under-construction PSP projects with a total capacity of 1,580 MW. These include the 1,000 MW Tehri Stage II project in Uttarakhand being implemented by THDC Limited, the Kundah PSP Stages I, II, III and IV (500 MW) being implemented by TANGEDCO in Tamil Nadu, and the Koyna Left Bank (80 MW) in Maharashtra being implemented by the Water Resources Department of Maharashtra, which is stalled at present. Further, survey and investigation are in progress for eight projects totalling 7,530 MW. The detailed project report for the Turga project (4×250 MW) in West Bengal has been approved and construction is expected to start shortly, while the 1,200 MW Pinnapuram project in Andhra Pradesh is under examination.
As per the CEA’s optimal generation capacity mix, the installed hydropower capacity is estimated to reach 73 GW (including 5,000 MW of small hydro and 4,356 MW of hydropower imports) by 2029-30, contributing to nearly 8 per cent of the total power generation. Nearly 13 GW of hydropower projects are also currently at various stages of execution. In order to accelerate the development of HEPs, the segment needs to overcome various challenges. The benchmark capital cost of HEPs has been rising on the back of the rising cost of inputs such as steel, aluminum and cement. It has increased gradually from Rs 60 million per MW in 2004 to Rs 160 million per MW in 2018. Besides, the segment saw disruptions due to Covid-19 as the schedule of under-construction projects was impacted due to labour and material supply constraints, and generators’ receivables piled up due to discom liquidity issues.
The way forward
In order to tackle the challenges facing the hydropower segment, a number of policy measures have been taken in the past couple of years. Key among these are the inclusion of large hydro in renewables, tariff rationalisation, and budgetary support for the flood moderation and infrastructure components of hydropower projects. Furthermore, with the reclassification of hydro as a renewable energy source, the centre plans to impose obligations to ensure the firm offtake of hydropower, and a HPO provision has been included in the Draft Electricity (Amendment) Bill, 2020.
With regard to the dispute resolution issue facing the segment, the MoP has issued guidelines for hydropower developers, mandating a quick resolution of contractual disputes. These guidelines are binding on central public sector undertakings. Besides this, on the ministry’s advice, the states are now coming forward to promote investments in the hydro segment by reducing or waiving their free power commitments, bringing down GST, reducing water cess, etc. Apart from this, implementing measures such as integrated basin studies, differential tariff (peak and off-peak), and providing long-term finance to projects could help expedite hydropower development in the country.
The HPO notification has reinforced that hydropower is seen as an important source of power for the grid by policymakers. Going forward, the accelerated development of hydropower in the country will depend on the introduction of policy measures, particularly a separate pumped storage policy and appropriate tariffs for PSP services, and their speedy implementation.