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Generation | October 2014

Untapped potential

India is endowed with rich hydropower potential to the tune of 148 GW (which would be able to meet a demand of 84 GW at 60 per cent load factor) which makes it one of the most important potential sources to meet the energy security needs of the country.

As per the latest available data, India has around 36 GW of installed hydropower capacity whereas an additional 13 GW is under construction. This puts the total capacity which is yet to be tapped at around 67 per cent of the potential. Countries such as Canada and Brazil had harnessed around 69 and 48 per cent of the economically feasible potential back in 2009. From a regional perspective, over 93 per cent of the total potential in the north-eastern region is yet to be tapped, primarily in parts of the Brahmaputra river basin. The scenario is in sharp contrast to the southern and the western regions where more than 65 per cent of the potential has already been harnessed.

´Climate change and other negative effects of using fossil fuels for power generation along with growing concerns over energy security are driving the expansion of hydropower around the world,´ says Vivek Pandit, Senior Director & Head, Energy, Defence & Aerospace, FICCI.

To this, Yogesh Daruka, Director, Energy, Utilities & Mining, PwC India, says, ´Though reservoir based hydropower projects have come under criticism due to CO2 and methane emissions beyond acceptable limits, most hydro-rich countries have followed an integrated full life-cycle approach.´

Recent trends
The Government of India has increased financial allocation, along with other non-financial support, to prioritise hydropower development and increase capacity addition. Accordingly, in the 11th Five-Year Plan, the target for hydropower capacity addition was placed at 16.5 GW, which was almost half of the total installed capacity back then. However, the achievement, at around 5,400 MW, was well short of the target. The same trend of achievement falling short of target by far can be observed in the previous plan periods too.

Various factors such as environmental concerns, R&R issues, land acquisition problems, long clearance and approval procedures, capability of developers, etc., have contributed to the slow pace of hydropower development in the past. Says MD Pendse, President, Hydro Power Association (India), ´These issues have been compounded as hydropower development has largely remained under the ambit of State governments (water being a State-specific subject) with varying policies (e.g., upfront premium, royalty power, land acquisition policy, etc.) adopted by the States.´

Roadmap for responsible development
Governance framework:
Strengthening of governance in the natural resource sector is a key determinant for sustainable and inclusive growth. Thus, a nation needs to have an overarching policy framework, specific sector strategies, and clear and transparent processes for accelerating hydropower development. Standardised processes and efficient inter-agency governmental coordination reduces unpredictability to create a better climate for potential investors.

Benefit-sharing framework: Mitigation of social and environmental risks also plays a critical role in the development of hydropower projects. Since the benefits and negative effects of natural resource development are often unevenly distributed, benefit-sharing mechanisms and mitigation measures are crucial for sustainability and stability in development. Benefit-sharing is a commitment by the government and the developer to share the monetary and non-monetary returns with stakeholders. An appropriate benefit-sharing mechanism ensures social stability and also aligns a country´s national strategy with the local needs.

Facilitating financing: In order to attract investments for capital-intensive hydropower projects, it is necessary to address the concerns of developers, consumers as well as PAPs. To broaden investment avenues, the government needs to facilitate optimum risk allocation and often, on a case-specific basis, better upside to developers. Furthermore, the PPP framework needs to be designed considering key factors needed to develop commercial hydropower projects such as capital, capability and credibility.

Technical capacity development: Hydropower development involves significant challenges on account of terrain and geology. The solution to such challenges requires capacity-building of the agencies involved as well as the introduction of modern techniques and technologies. The capacity-building initiative will need to appreciate the technical challenges specific to hydropower and equip the concerned institutions with tools, training and systems to help address them.

Team Power Today

Key enablers
  • State-of-the-art investigation and construction techniques.
  • Hydropower purchase obligations.
  • Development models and ownership structures.
  • Differential tariff structure.
  • Developing market for ancillary services.
  • Evacuation infrastructure.
  • Fiscal incentives.
  • Innovative financial products.
  • Streamlining clearance processes.
  • Benefit-sharing with PAPs.
  • Project allocation procedures.
  • Planning for integrated river basin development.
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