The hydropower segment plays a vital role in meeting climate change commitments and achieving the country’s renewable energy capacity targets. Hydropower is a green energy source that offers storage, flexibility and round-the-clock power and helps meet peak hour demands. Furthermore, it is expected to play a key role in maintaining grid stability in the evolving energy landscape. Pumped storage plants (PSPs) are gaining traction, providing peaking power and maintaining system stability in the power system. They provide spinning reserve at minimal cost to the system and regulate grid frequency to meet sudden load changes in the network. Additionally, these plants offer ancillary benefits such as flexible capacity, voltage support and black start facility.
Size and growth
As of June 2023, the total installed large hydropower capacity in the country stood at 46,850.17 MW. This comprises 212 hydroelectric projects, with an aggregate installed capacity of 46.8 GW including 8 PSPs of approximately 4.7 GW. If small-hydro power is factored in, the overall installed hydro capacity reaches 51,809 MW, accounting for a 12.3 per cent share of the total installed capacity and a 29.4 per cent share in the total renewable energy capacity in the country. Hydroelectric plants (HEPs) commissioned since the previous financial year include Uttarakhand Jal Vidyut Nigam Limited’s Vyasi Units 1 and 2 (2×60 MW). Historically, hydropower capacity additions have lagged behind thermal and other renewable energy sources. Between 2018-19 and 2022-23, the installed thermal power capacity grew at a compound annual growth rate (CAGR) of 1.2 per cent, while hydropower grew at 0.8 per cent. In contrast, other renewable energy sources recorded a CAGR of 12.7 per cent and the total installed capacity registered 4 per cent during this period. In terms of generation, hydropower plants generated 162 BUs of electricity in 2022-23, approximately 7 per cent more than that the previous year. During April-June 2023, hydropower generation stood at nearly 34.5 BUs, reflecting a decrease of about 10 per cent compared to the same period in the previous year.
In December 2022, the Ministry of Power (MoP) issued an order for the waiver of interstate transmission system charges on the transmission of electricity generated from new hydropower projects, for construction work awarded and PPA signed on or before June 30, 2025. The waiver/concessional charges will be applicable for a period of 18 years from the date of commissioning of the hydropower plants. Furthermore, the MoP has declared any tax/duty on the generation of electricity as illegal and unconstitutional. It stated that hydropower projects do not consume water to produce electricity, so imposition of tax on non-consumptive use of water from these rivers for electricity generation is in violation of the provisions of the Constitution of lndia. Additionally, the Central Electricity Regulatory Commission has allowed the introduction of hydropower contracts in green contingency and green term-ahead contracts at the Hindustan Power Exchange with effect from January 11, 2023. In March 2023, the MoP released a report to examine contractual issues and different modes of contracting in hydropower projects. As per the report, selecting the mode of contracting package should be considered on a case-to-case basis, considering factors such as the project’s nature, cost, status of project clearances, and law and order. Therefore, a one-size-fits-all approach may not be appropriate and the decision should be left to the developer of the project.
Currently, India’s PSP capacity stands at 4,745.6 MW across eight plants. Meanwhile, four PSP schemes totalling 2,780 MW are under construction and nearly 50 GW across 39 projects is under survey and investigation, as per the Central Electricity Authority (CEA).
In April 2023, the MoP released guidelines to promote PSPs in the country. These guidelines propose market reforms to incentivise ancillary services provided by PSPs, exempt them from free power obligations, and streamline environmental clearances for such projects. To facilitate the early development of projects, state governments can directly award projects to hydro central or state public sector undertakings on a nomination basis. PSP projects can also be awarded to private developers through a two-stage competitive bidding process. The Ministry of Environment, Forest and Climate Change, in May 2023, amended the environmental impact assessment notification of 2006 to ease the process of environment clearances for PSPs.
In August 2023, Tata Power and the Maharashtra government signed an MoU to develop two large PSPs with a combined capacity of 2,800 MW. These projects will be located at Shirawta, Pune (1,800 MW), and Bhivpuri, Raigad (1,000 MW), and will entail an estimated investment of Rs 130 billion.
In June 2023, Torrent Power Limited signed an MoU with the Maharashtra government for developing three PSPs with a total capacity of 5,700 MW. The projects will be executed at Karjat in Raigad district (3,000 MW), Maval (1,200 MW) and Junnar (1,500 MW) in Pune district. The projects would entail an investment of about Rs 270 billion and will be executed over a period of five years.
In December 2022, the Andhra Pradesh State Investment Promotion Board approved investments worth Rs 239.85 billion for the development of PSPs. Adani Green Energy Limited will set up 1,600 MW of PSPs with an investment of Rs 63.3 billion. The company’s plans include a 1,000 MW plant in Pedakota, Alluri Sitarama Raju district, and a 600 MW plant in Raiwada in Anakapalli and Vizianagaram districts. Work on the project is expected to commence in December 2024, with project commissioning within four years. Further, Shirdi Sai Electricals Limited will set up 2,100 MW of PSPs with an investment of Rs 88.55 billion. The company will develop a 1,200 MW project at Yerravaram and a 900 MW project at Somasila. The work is expected to commence in July 2023 and will be completed in phases by December 2028.
The Arunachal Pradesh government has signed memorandums of agreement (MoAs) with hydro public sector undertakings to execute 12 stalled HEP projects in the state with a cumulative installed capacity of about 11,517 MW. Of these, five projects with 2,620 MW have been allocated to North Eastern Electric Power Corporation Limited (NEEPCO), five projects with 5,097 MW to SJVN Limited and the remaining two projects with 3,800 MW to NHPC Limited. The projects allotted to NEEPCO include the 180 MW Tato-I HEP, the 240 MW Heo HEP, the 500 MW Hirong HEP, the 700 MW Tato-II HEP, and the 1,000 MW Naying HEP. The projects allotted to SJVN include the 400 MW Mihumdon HEP, the 420 MW Amulin HEP, the 500 MW Emini HEP, the 680 MW Attunli HEP and the 3,097 MW Etalin HEP. The projects allotted to NHPC include the 1,800 MW Subansiri Middle (Kamala) HEP and the 2,000 MW Subansiri Upper HEP. These projects were previously allotted to private sector developers about 15 years ago but remained non-starters due to various reasons. These projects are expected to bring an estimated investment inflow of approximately Rs 1,265 billion to Arunachal Pradesh.
In April 2023, the Arunachal Pradesh government launched an ambitious plan to build 50 mini hydropower projects for the electrification of remote villages. These projects of 10-100 kW capacities will be built at an estimated cost of Rs 2 billion under the Golden Jubilee Border Village Illumination Programme and will be implemented in a phased manner. Under Phase I, 17 projects with an installed capacity of 1,255 kW have been initiated, entailing an estimated cost of Rs 0.5 billion.
In February 2023, the central government approved an estimated investment of Rs 318.76 billion for the 2,880 MW Dibang multipurpose project to be developed in Arunachal Pradesh by NHPC Limited. The approved investment includes budgetary support of Rs 61.59 billion towards the flood moderation component and Rs 5.56 billion towards enabling infrastructure, such as roads and bridges connecting the construction site.
In June 2023, NHPC Limited and the Maharashtra government signed an MoU for the development of four PSPs aggregating 7,350 MW capacity, namely, Kalu (1,150 MW), Savitri (2,250 MW), Jalond (2,400 MW) and Kengadi (1,550 MW). These projects will attract an investment of about Rs 440 billion. In another development, in June 2023, NLC India Limited signed an MoU with WAPCOS Limited to develop hydropower projects, pumped storage and reservoirs across the country.
In January 2023, the Cabinet Committee on Economic Affairs approved investment for the 382 MW Sunni Dam hydroelectric project in Himachal Pradesh by SJVN. The estimated cost of the project is Rs 26.15 billion, including Rs 138 million as budgetary support from the Indian government to set up enabling infrastructure.
In December 2022, SJVN’s subsidiary SJVN Green Energy Limited and Gridco Limited announced a joint venture to develop a 1,000 MW HEP and a 2,000 MW solar project with an investment of Rs 200 billion in Odisha. These projects will enhance green generation capacity and assist in meeting Odisha’s renewable purchase obligation target.
Issues and outlook
The total hydroelectric power potential in the country has been assessed at 84,044 MW from a total of 845 identified hydroelectric schemes, which, when fully developed, would result in an installed capacity of approximately 148,701 MW. The total energy potential is assessed as 600 BUs per year. Meanwhile, small hydro-based plants, with an installed capacity of up to 25 MW, have a power generation potential of around 20 GW. However, the full development of India’s hydroelectric potential, while technically feasible, faces various issues such as water rights, environmental concerns, lack of financially sound civil contractors, resettlement and rehabilitation issues, and geological surprises, which lead to considerable time and cost overruns for HEPs. In addition, much of the hydroelectric potential in the country lies in climate-vulnerable regions.
The CEA’s National Electricity Plan (NEP) anticipates hydro capacity additions of over 20,796 MW during 2022-32. The NEP estimates a total fund requirement of Rs 661.48 billion for hydropower development, Rs 542.03 billion for PSPs and Rs 18.59 billion for small hydro during 2022-27. The fund requirement during 2027-32 is estimated at Rs 1,297.77 billion for hydropower development, Rs 752.4 billion for PSPs and Rs 16.69 billion for small hydro. This requires policy support, including a well-defined remuneration mechanism for hydropower and PSP projects, affordable financing, streamlined processes for obtaining environment clearances and the development of off-river potential.