Tuesday, 14 July 2020

Hydropower A key enabler for India’s future

Updated: June 17, 2016 11:54 am

India added 108 GW of new generation capacity in the last five years, which has led to power deficits declining from 12.2 per cent of peak demand in FY02 to 2.6 per cent in FY16. In energy terms, the change is more evident. Plant load factors (PLFs) have dropped to 65 per cent, which is a historic low for the Indian power sector. With respect to power exchange, traded power has declined to 2,826 INR per MWh, which is 33 per cent below the bid rate for a new long-term coal-based thermal power plant. However, medium-term forecasts suggest that the trend may soon reverse as demand starts to overtake supply, resulting in growing deficits. A recent forecast till 2022 suggests that demand will continue to outpace supply. In fact, new project initiation has tapered off. Further, considering an energy elasticity of 0.8, India is estimated to require around 7 per cent annual growth in electricity supply to sustain a GDP growth of around 8–9 per cent per annum. According to a survey by PwC India, for the country to achieve its target of 1,800 kWh per capita consumption and electricity access for 300 million people by 2034, it will require an additional power supply capacity of 450 GW.

Currently, India’s power generation landscape has largely been dominated by coal-based generation, accounting for approximately 70 per cent of the total installed capacity and over 80 per cent of the total units generated in the country. This higher dependency on thermal generation sources poses a serious threat to energy security in terms of fuel availability, long-run economic viability and environmental sustainability. Thus, availability of reliable, affordable and sustainable electricity is an essential requirement for propelling the India growth story and all potential sources of energy will need to be tapped to meet the envisaged demand and ensure its energy security. Hydropower, with an abundant potential of around 148 GW, can substantially contribute towards meeting the energy needs of the country.

Hydropower can play a crucial role in India’s sustainable development and energy security given that it meets the criteria of sustainability, availability, reliability and affordability.  Hydropower uses a clean source of fuel and does not contribute significantly to carbon emission (storage projects). Hydropower projects emit 169g CO2 equivalent compared to the 2,010g  CO2 equivalent and 443g CO2 equivalent released by coal-based and gas-based power plants respectively. Hydropower projects have the ability to control flood and irrigation by regulating the downstream flow of water. Hydropower plants do not need any outside source of power to start. This allows system operators to provide auxiliary power to other generation sources that could take hours or even days to start. Hydropower plants have a low operating cost—almost half that of thermal power plants.  The plant life of hydropower projects is normally in the range of 40–50 years. In fact, their operating life can be increased to 100 years through timely renovation, which also helps in higher revenue generation for investors.

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India is blessed with significant hydropower potential and can meet a demand of around 85 GW at 60 per cent load factor. However, till date, only 41 GW of hydropower capacity has been installed, which is only 28 per cent of the total potential. Countries like Canada and Brazil had harnessed around 69 per cent and 48 per cent of the economically feasible potential back in 2009. In order to increase the hydropower capacity, the Government of India has planned to add capacity of 10,897 MW in the 12th Five Year Plan, which is almost 25 per cent of the total hydro installed capacity. However, the actual capacity added was around 3,673 MW (till January 2016), which means that only one-third of the target has been achieved during the first two-thirds of the period. The same trend may be observed in the previous five year plan periods—for example, in the 11th Five Year Plan, only 40 per cent of the target was met. Regional assessment of hydropower development shows that almost 75 per cent of the total potential for hydropower development is concentrated in the north-eastern and northern regions. However, only 34 per cent of the total potential in the northern and 2 per cent of the potential in the north-eastern region has been developed till now. Exploitation of the large hydro potential in the north-east region would contribute significantly in meeting the country’s peaking needs in the future. The region would also benefit from the development of associated infrastructure such as roads, schools and electricity supply to remote areas, which would further improve the quality of life. However, until now, only 7 per cent of the total potential of the region has been tapped (installed capacity and capacity under development) and this provides enormous opportunities to the state governments and hydro developers to harness the rest of the potential.

There are many factors hindering the growth of the hydropower sector in the country. Hydropower planning and development in India are generally project oriented and not based on any basin development plan. Non-sequential development of a hydropower project may make it unviable and inefficient. In India, water is a state subject and requires the consent of states that are impacted by a project. This is a time-consuming process that hinders integrated river basin development for hydropower projects. A large number of hydropower projects with common river systems between adjoining states are held up due to a lack of interstate agreements and disputes on water sharing. The Sutlej-Beas dispute between Punjab and Haryana and the Mullaperiyar Dam conflict between Kerala and Tamil Nadu are well-reported examples of water-sharing disputes between states. The conflicts in Assam and Arunachal Pradesh on the division and utilisation patterns of the Brahmaputra are another case in point.

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Land acquisition is one of the key reasons for delay when it comes to the implementation of major infrastructural projects like hydropower. Previously, under the 120-year-old prevailing act, most of the land was acquired in the name of development and little stake or benefits were given to the people affected by a project. Not only were they not given adequate compensation or rehabilitation, but they also did not get enough employment opportunities. For example, in the case of the Hirakud Dam project, there was hardly any rehabilitation or compensation given to the project affected people. The Land Acquisition Act, which came into effect from January 2014, attempts to address some of the social inequities in the existing framework of land acquisition. However, certain amendments were proposed in the New Land Acquisition Bill, 2015, with respect to various clauses, such as those on consent of landowner and social impact assessment (SIA), in order to address the land acquisition problem from the perspective of both landowners and developers.

Hydropower projects are site specific and may impact the environment in a variety of ways, such as affecting the natural river system and changing the river course, thereby impacting the flora and fauna. Furthermore, large storage based hydropower projects involve submergence of villages, causing relocation of people, disruption of community networks and loss of biodiversity. They also affect the downstream irrigation activity by altering the volume of water flow.

Hydropower projects are capital-intensive and require higher upfront costs to address greater complexities in design, engineering, environmental and social impact mitigation, etc. These complexities and technical challenges often lead to time and cost overruns and increase the uncertainty of cash inflows, thereby resulting in higher risk premiums on financing charges. Moreover, the provision of free power to the state, irrespective of the technical parameters, affects the financial viability of projects, especially of those with a low load factor. This makes projects even more costly and tariff becomes almost unsustainable.

Hydropower development is challenged by varying risks and uncertainties, and needs government support in terms of data availability, financing, market development, etc., for efficient development. Sustainable growth in the sector can be channelised through an efficient governance framework by adopting a suitable policy framework, sector-specific strategies, and simple and transparent processes.  Ministries, state governments and departments must be on the same page to approach sustainable development of hydropower in an efficient and coordinated manner. The processes, structures and institutional frameworks are all required to be well aligned with the development goals and targeted capacity addition. The present state-level institutional framework and organisations of concerned institutions need to be reviewed for hydropower development. Both government and private parties are required to play a key role in the process to ensure quality planning, procurement, and development and operation of the assets. The central government can constitute an authoritative body to improve river management, address interstate water-sharing disputes and conduct integrated river basin development. A proper planning forum must be in place to bring all the stakeholders together to reach a consensus on the way forward.  A basin-wide study needs to be conducted under the guidance of the Central Electricity Authority (CEA)/Central Water Commission (CWC) to understand the effect of one project on another and to ensure efficient project allocation in a river basin. Moreover, the Ministry of Environment and Forest (MoEF) is expected to conduct a basin-wise, cumulative impact assessment study and identify clear go/no-go areas to eliminate uncertainty. The allocation of hydropower sites must be done keeping in mind the financial and technical capacity and credibility of developers. Also, cost-benefit analysis should be carried out with different project allocation models.

The Ministry of Power and the Ministry of Finance, Government of India, may allocate funds for the construction of a dedicated transmission corridor for hydropower (e.g. Green Energy Corridor) to evacuate the hydropower generated from remote areas. The state governments should make provisions for building pooling substations in locations having a large concentration of hydro resources to help developers reduce the project cost on account of last mile connectivity.

Governments should organize Public Awareness Programs emphasizing Hydro Power as safe and sustainable for green development, so that people become aware of seismic & safety aspects which are taken care during the design of the Dam and how it safe guards the people of the Downstream. Hydropower’s critical role in our nation’s energy security is based on the elements of sustainabili ty, availability and affordability.

One should expect Modi government’s collective efforts to address the concerns and issues will help in the development of the hydropower sector.

                By Sanjay K bissoyi

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