The hydropower industry in India is the 7th largest producer of hydroelectric power in the world. Currently, the public sector accounts for 92.5% of India’s hydroelectric power production, but private sector investments are severely lagging. This lag has prompted government officials to finally give hydropower some policy attention. The segment has faced various challenges such as stranded projects, limited off-takers, lack of finance, and high tariffs. In a move to reduce these challenges, the union cabinet, in March 2019, approved policies that are expected to revive investor interest in the sector.
At the moment, the country’s installed hydropower capacity stands at 45,399 MW as of June 2019. In terms of electricity generation, hydropower plants produced 135,039 MUs of electricity in 2018–19, however, the share of hydropower in the overall generation mix has reduced over the years. Some of this can be attributed to erratic monsoons in the country and a decrease in the flow of rivers, but the main cause is due to the increase in renewable power generation.
A key step taken by the Ministry of Power to help promote hydropower is declaring all hydro projects as renewables, as opposed to only small-hydro projects being considered as renewables. This will help hydro projects gain access to subsidies and benefits that are otherwise available to other renewable energy projects. Benefits such as the waiver of interstate transmission charges, must-run status, and accelerated depreciation benefits will promote more investments in the segment. The new status will also ensure that state distribution utilities meet a certain portion of their total power requirement through hydropower which will lead to the signing of power purchase agreements and the financial closure of hydro projects.
Further, financial support for flood moderation components and infrastructure (roads, bridges, etc.) will be provided on an individual project basis, thus excluding these costs from the tariff determination, making hydropower tariffs more competitive. This will also help in realizing the benefits of hydro plants in terms of flood control, drought mitigation, and irrigation.
New innovative measures like pumped storage units (storage of surplus power) to meet peak load shortages can be implemented. The storage will act as a seasonal secondary source of power when rivers are flooded with excess water, at no additional cost. These storage units can also be used as pumping stations to supply river water for upland irrigation, industrial needs, and drinking water.
Since the development of hydropower projects are more complex and time-consuming as compared to other renewable energy projects, and owing to the high capital cost, the initial tariff for recently commissioned plants is noticeably higher leading to offtake issues. This is where government policies and support can play a huge role. However, although these measures are positive, they are not enough to revive the hydropower segment. The central government, state governments, and local authorities have to resolve offtake issues to promote new investments in the segment. They will need more concrete measures to balance the load and meet the peaking power requirements in the country.
Summarized from the Powerline Magazine Article on Promoting Hydropower.