Interview with R.K. Vishnoi

“The hydropower sector is set to take a quantum jump”

R.K. Vishnoi, chairman and managing director (CMD), THDC India Limited (THDCIL) and CMD, additional charge, NEEPCO Limited, spoke to Power Line about the current state of the power sector, the performance of the hydropower segment over the past one year or so, as well as the key issues and solutions to address them. He also discussed his top priorities and plans for the company over next few years. Excerpts…

What is your perspective on the current state of the power sector?

The Indian power sector has a promising and exciting future. The sector is poised for remarkable growth. However, a fundamental restructuring of power generation is needed. Today, we are the third largest electricity generating country in the world, yet the per capita electricity consumption is hovering around 1,300 kWh per annum. This figure needs to improve drastically as India makes the journey to becoming a developed country.

The major concerns associated with sector growth are the obvious environmental impacts of fossil fuel-based sources of energy. The phenomenon of climate change, global warming and greenhouse gas emissions is real, and India is committed to addressing these global concerns.

The country’s total installed capacity is around 405 GW at present. Nearly 60 per cent of this capacity comes from fossil fuels, and coal alone is used for approximately 50 per cent of the installed capacity. The total hydropower capacity (including small-hydro) comprises around 12 per cent, which is now getting a fresh impetus with the launch of the hydro policy by the government. Other renewable energy (solar and wind) capacity accounts for around 30 per cent of the total installed capacity. For sustainable growth of the power sector, these ratios have to improve. It is important to underline that whereas there is still a need for fossil fuel-based generation, renewable energy installations need to grow at a much faster pace to overtake fossil fuel-based generation.

India has a vision of becoming a net-zero carbon emissions country by 2070. This is achievable. My perspective is that coal-based plants are here to stay. In the next 10 to 15 years, we may need to enhance thermal power capacity to meet the growing base load demand. In this scenario, renewable energy needs to be developed at a much faster pace so as to bring about carbon neutrality. Thus, in my opinion, the power sector, which is already doing extremely well, will see tremendous growth in the coming decades with energy transition from fossil to non-fossil fuel.

How do you rate the performance of the hydropower sector in the last one year or so?

Hydropower stations are the most reliable sources of peaking power. The operational hydropower plants have been performing exceedingly well and thus, the operational performance of hydropower stations is good in the short as well as the long term. Overall, the performance of the hydro sector has been very strong in the last one or two years. The sector has been a key area of focus for the government. The issue of slow progress of hydropower projects in the past, despite tremendous potential, has been analysed at the level of policymakers and regulators. The critical issues causing delays in hydropower development have not only been identified but adequately addressed by the government.

With a view to promoting the hydro sector and keeping tariffs within reasonable limits, a policy has been formulated for funding enabling infrastructure and the flood moderation components of hydropower projects. State governments have also come forward to support the financials of hydro projects by giving a relaxation in their share of GST and allowing the free power rights to be staggered so as to make the tariff viable and attractive for developers. Other measures, such as equity financing by the Government of India (GoI) and longer tenor of debt, are being evolved. Pumped storage plants (PSPs) have also been a focus area for the GoI as they are essential components of the renewable energy ecosystem. The GoI has already waived the inter-state transmission system charges, which offers huge support to PSPs. Multiple dispensations are being considered by the GoI to boost PSP development. A viability gap funding policy especially for PSPs is also under discussion.

On the GoI’s persuasion, state governments are now taking active initiatives for re-allocation of stalled hydropower projects. The government machinery is also active in the transfer of projects directly from the earlier developer to new potential developers (mainly CPSUs) by bringing them together and facilitating negotiations.

Hydropower projects are generally located in remote areas and accessibility of project sites is a major issue. The government has taken up the matter with specialised organisations to focus on the construction of roads/bridges for future hydropower projects. A mega campaign, called LAHAR, has been initiated by the GoI to educate people and stakeholders about the benefits of hydro projects. This campaign has been initiated with a view to evolving a social mind-set in support of hydropower projects.

The government is promoting the holistic benefits of hydropower with the objective of developing hydro projects, particularly storage-based projects, as an effective tool for the water security of the nation. Variations in precipitation patterns in the times to come have been predicted based on mathematical simulations. Storage reservoirs are very effective in managing such variations in river flow. Issues relating to drinking water and irrigation facilities that are foreseeable in the near future can only be addressed through storage projects. In addition, dams and reservoirs are also potential sites for the development of tourism, water sports, fisheries and other economic activities directly responsible for employment opportunities. In fact, the indirect and intangible benefits of hydropower projects are tremendous. It would not be out of place to state that electricity is a by-product of storage projects.

In view of the aforesaid benefits, the government has decided to promote hydropower in a big way. At the same time, the impediments in the development of hydro have been addressed in the recent past. This period has been a period of consolidation for the relaunch of the hydropower sector. The hydropower sector is all set to take a quantum jump from where it stands today.

What, according to you, are the biggest issues and challenges facing the hydro sector?

Hydropower projects are mega projects. The characteristic features of such projects are their challenging locations, vast spread and major underground works. The traditional challenges facing hydropower projects emerge from these typical features.

Land acquisition in large quantum comes with its own issues pertaining to the resettlement and rehabilitation (R&R) of the affected population. At times, the unreasonable demands and expectations of landowners result in law-and-order situations. The few number of specialised construction agencies, unstable financial condition of the contractors, geological surprises and other uncertainties are some of the challenges in hydropower project development. These issues often result in serious time overruns because of which the average gestation period of hydropower projects is long. This long gestation period in itself has emerged as an issue. The long construction period has direct financial implications owing to interest during construction, price variations, market inflation, additional establishment cost, and a whole host of other reasons.

How can these challenges be addressed?

About R&R-related issues, my opinion is that project developers should implement R&R policies with a human touch. The Tehri hydropower project, for example, is one of the most extensive and successful rehabilitation programmes in the country just because of the flexibility of the project developers in meeting the real requirements of the displaced population. The project management should be considerate towards their requirements and provide training and other skills development to the land oustees. The administration should also come forward to support project implementation by maintaining law and order. The contractor should be seen as a partner in project implementation and a prudent financing model may be evolved in cases where the contracting agencies have financial issues.

The most effective measure to avoid geological surprises is to carry out comprehensive geological investigations at the detailed project report stage. In addition, progressive investigations through geological and geophysical techniques may be taken up during the construction phase. Adequate provisions may be made in the contracts to handle geological surprises and other uncertainties.

Lastly, the matter of time overruns should be considered at the planning stage itself. The project construction schedule should be drawn up realistically, including reasonable consideration for uncertainties to the extent possible. The techno-commercial analysis and the funding arrangement for the project should be done according to this realistic schedule.

What is your overall outlook for the power sector in the near to medium term and what is the role of hydropower in it?

India’s power sector is in a sweet spot at present. Power demand is expected to grow at an average of 7 per cent per year for the next five years. As per the estimates of the Central Electricity Authority, power demand will reach 1,874 BUs during the year ending March 2027, compared to over 1,320 BUs in 2021-22, which is an increase of a whopping 42 per cent. Thus, the power sector is headed northwards during the next five years or so. An expanding economy, increasing population, urbanisation, lifestyle upgrade, industrialisation, etc. are the factors triggering this growth. As per the master plan, an additional installed capacity of nearly 165 GW is likely to be commissioned till March 2027, most of which will be from renewable sources in the form of solar (about 90 GW) and wind (about 25 GW). It is important to note that new thermal power plants of more than 25 GW are envisaged to go live in the coming five years. In addition to above, the GoI has a mission to achieve about 50 per cent of cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030. A significant share of this power has to come from hydropower installations. Other than that too, hydropower projects of large capacity will be required for providing grid stability by meeting the peak demand. Further, a large number of PSPs will be essential to absorb and redistribute the generation of solar and wind energy installations. This energy storage is essential for the supply of quality power from renewable energy sources. In fact, round-the-clock green energy supply is possible only with PSP installations complementing the renewable energy installations. Thus, the hydro sector has a significant role to play in India’s journey towards a net-zero carbon emission nation.

What is the current status of THDCIL’s upcoming projects?

The development of the 1,000 MW Tehri PSP is an ambitious project of THDCIL, which is at the final stages of implementation. The project will use the existing reservoirs of THDCIL’s flagship hydro projects – Tehri and Koteshwar. The commissioning of the project is expected in the current financial year.

Our Vishnugad Pipalkoti project (4×111 MW) is a run-of-the-river hydroelectric scheme on River Alaknanda in Uttarakhand. The project had some impediments in the past, which have been effectively resolved through the innovative approach of the THDC management and support from the central and the state government. The construction of the project is in full swing and we are confident of completing it as per the stipulated time schedule.

With a view to diversifying our portfolio, THDCIL has ventured into coal-based thermal power installation. Our 2×660 MW Khurja super thermal power project (STPP) is at a very advanced stage of construction and is, in fact, running ahead of schedule. The project will be commissioned by February 2024 in record time. THDCIL is also in the process of developing a captive coal mine in the Amelia coal block in Singrauli district of Madhya Pradesh for assured coal linkage for the Khurja STPP. The development of the coal mine is on track and its operation is expected within the current quarter.

What have been the key operational highlights for THDCIL in the past one year?

The last financial year was a period when the world was hit by the calamity of the pandemic. Amidst the tough times and the slowdown across sectors, the power sector and THDCIL displayed resilience. The company’s operational and financial performance was quite robust during 2021-22. THDCIL generated 4,671 MUs of energy during 2021-22 against a target of 4,520 MUs. Its total capital expenditure in 2021-22 was Rs 32.33 billion against a target of Rs 27.3 billion. The company’s gross revenue during the year was Rs 22.27 billion and the total comprehensive income was Rs 8.97 billion. These figures demonstrate THDCIL’s commitment towards unabated operation and construction activities even during the tough pandemic times.

What are the future plans and key priority areas for THDCIL?

THDCIL is looking forward to diversification and expansion of its portfolio in the times to come. This includes technological expansion as well as geographical expansion. At present, we are the only CPSE in India with a complete basket of all forms of energy generation, including hydro, thermal, wind, solar, PSP and captive coal mining. We are now looking forward to taking a big leap in the field of solar energy, along with a matching PSP capacity. This is THDCIL’s commitment to contributing to the government long-term vision of reducing the dependence on fossil fuel-based electricity generation. We have signed an MoU with Rajasthan Renewable Energy Corporation Limited for the development of ultra-mega renewable energy parks of 10,000 MW capacity in Rajasthan. The possibility of the development of PSPs in peninsular India is being explored. We are also entering into new geographies within and outside India to expand our core portfolio.

What are some of the new areas being explored?

The GoI has entrusted THDCIL with the development of the Lohit Basin in Arunachal Pradesh, which includes the development of the Kalai II HEP (1,200 MW) and the Demwe (Lower) HEP (1,750 MW). We have made significant headway in this area. Also, the Ministry of Power has identified PSPs with more than 15,000 MW capacity, to be studied and explored for development by THDCIL across different states. Three off-stream PSPs in Uttarakhand are already at the in-house PFR preparation stage by our highly skilled team. THDCIL is also at an advanced stage of discussion for providing consultancy services or implementation of hydro projects in some countries in Central Asia and Africa. THDCIL is implementing green hydrogen technology and carbon capture technology on a pilot project basis. These are cutting-edge technologies and will be a game changer for THDCIL in the near future.

Overall, THDCIL is heading steadily towards a leadership position as an integrated power utility company of India.

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