Hydropower, SHP Update

August 16, 2016 1:39 am0 commentsViews: 294

Then there was the devastating 2013 Uttarakhand flash-flood, which served to further damage perception regarding hydro-power generation. Uttarakhand has a fragile eco-system and reportedly activity required for such projects such as tunnelling, blasting, mining, construction, etc, can contribute towards weakening the fragile area. So all these factors have contributed towards creating a negative public perception about hydro-power projects.

Financing: Hydro-power projects are capitalintensive and financing them, by finding an optimum balance between bankability and affordability, is often a challenge. Although the operating cost of hydro projects are minimal and the project life longer than thermal, there are multiple other factors that make hydro-power projects difficult to finance. Additionally, hydropower development needs a long tenure debt (20 years or more) availability which is limited in Indian capital markets. Furthermore, the technical challenges often result in time and cost overrun, posing additional risks for financiers. As per government’s data updated till April 2015, around 21 hydro power projects are facing time overruns of five or more years.

Highlighting the need to expedite clearances such as those for environment, forest and land,  an ASSOCHAM-PricewaterhouseCoopers (PwC) study suggested that the government should form a specialised institution to facilitate large infrastructure projects in terms of clearances and approvals, thereby minimising the time taken for these processes. Viability gap funding (VGF) can also be a viable proposal to make hydro-power projects price competitive, it said. It has also been suggested that the Central Electricity Regulatory Commission (CERC) should facilitate marketbased instruments like hydro-power purchase obligations (HPOs), which have an underlying principle of mandatory purchase of hydro-power by distribution utilities. When asked to what extent hydro energy certificates will attract more investments, Bruno Godin, Business Leader, Hydro India, GE Renewable Energy, said, “Hydro energy certificates are a great way to promote the use of energy produced by renewable means. The certificate meant for states that do not have potential to meet the proposed mandatory hydropower obligation, will in effect mandate the increased production of hydro-power. With buyers already lined-up and backed by the certificate, hydro projects will become more viable and be able to attract more investments.”

Privatisation: To accelerate growth in the sector, the private sector is being seen as an important stakeholder. The sector was opened up for private sector participation in 1991 however from 1991 to 2012 the private sector has contributed to about 11.5% of the hydro-power capacity addition. So far only about 2700 MW has been commissioned  through the private route, which constitutes less than 7% of the total installed hydro-power capacity. Though private participation in the sector has gained momentum in the recent past, it still faces impediments in the execution of projects across various stages of the project implementation cycle. The central and state governments need to create an enabling investment climate for increasing private participation.

The government of India though has, over the years, taken a number of initiatives to prioritise hydro-power development and to attract investments in the sector. Key measures include the preparation of a shelf of well investigated projects, which could substantially reduce risk perceptions, streamlining clearance procedures, the provisions of Open Access and trading as per the Electricity Act 2003, etc. However, issues in implementation of such policy initiatives and regulations still plague the sector. A model guideline for land policies that facilitates streamlined clearances and speedier project implementation needs to be put in place. But a knee-jerk approval process could also lead to poor appraisals and ultimately expensive delays. A case in point is the manner in which work on the Lower Subansiri project has been stalled for over four years.

Technology: A school of thought suggests that we do not really need more hydro for peaking power, since the current capacity is sufficient to cater to our peaking needs, if it were operated optimally. So there is a need to make technology  more efficient. Queried about any technological advances abroad that we ought to emulate, in terms of digitalisation, etc, Bruno Godin, Business Leader, Hydro India, GE Renewable Energy, said, “Renewable energy is intermittent by nature, and as the market grows, so too does the need to address this issue. Globally, hydro utility companies are changing the way they operate their plants with more at stake than ever before.

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