Small hydel plants to empower rural India

Small hydel plants to empower rural IndiaAccording to Umesh Raheja, Director, Raheja Power, promoting small-scale hydro projects should be on top priority where extension of grid system is comparatively uneconomicalRecent status of hydel power sector in India and key developmentsIndia has immense economically exploitable hydropower potential of over 84,000 MW at 60 per cent load factor (148,700 MW installed capacity), with Brahamaputra, Indus and Ganges basins contributing about 80 per cent of it. In addition to this, small, mini and micro hydropower schemes (with capacity of less than 3 MW) have been assessed to have 6781.81 MW of installed capacity. Out of this enormous hydro potential, India has harnessed only about 15 per cent so far, with another 7 per cent under various stages of development. The remaining 78 per cent remains un-harnessed due to many issues and barriers to the large scale development of Hydropower in the subcontinent.Various studies have established the ideal thermal:hydro power mix for India at to be at 60:40. The present mix of 75:25 is creating much problem in the Indian power system with country facing energy shortage of 9.3 per cent and peaking shortage of 12.8 per cent. The total requirement ending 11th Plan is set to be 2,06,000 MW. The current installed thermal and hydropower capacity stands at 66 per cent and 26 per cent of the total power generated with 83,272 and 32,726 MW respectively. Remaining 8 per cent of 10,091 MW is achieved from other forms including wind and nuclear. The current captive generation amounts to 14,636 MW. India’s power system is divided into five major region namely, the northern region, western region, southern region, eastern region and north-eastern region, with each region facing separate issues. While the eastern and north-eastern regions are power abundant, the northern and western regions have greater power demands. The hydropower potential is largest in NE region with 98 per cent of it still untapped. Northern, eastern, western and southern regions have 79 per cent, 77 per cent, 23 per cent and 33 per cent untapped hydropower potential respectively.The Central Electricity Authority (CEA) and Ministry of Power (MoP) are the nodal agencies involved in power sector planning and development at the central level. Being a concurrent subject under the Indian Constitution, electricity is generated, transmitted, maintained and developed both by central and state authorities, with the primary role with the states. With the central policy providing the overall direction for development, states determine the power generation, distribution and management systems. The development of water resources lies with the state governments. Since hydropower development involves water resources, the responsibility of its development stays primarily with the state agencies.Advantages of hydropower and reasons for its slow developmentHydropower has immense benefits and has been brought forward as a preferred option for power generation over the last decade. The reasons for these can be summed as follows:

Abundant potential of hydropower development in India Relative independence from international market like oil prices, hydropower involves no extra foreign exchange outgo
Hydropower is a no-inflation power as water – the ‘raw material’ for power generation is free of inflation Environment friendly
Hydropower projects support socio-economic development of remote areas as the project site is developed
Hydropower is cost-effective and renewable form of energyIt has additional benefits like irrigation, flood control, tourism etc.
Even with these benefits, Hydropower has had slow development in India especially in last few decades. This has primarily been due to:
Long gestation period
Time consuming process for project clearances
Until recently, the national focus has been on thermal generation
Highly capital intensive and absence of committed funds
Poor financial health of State Electricity Boards (SEBs)
Technical constraints due to complex geological nature of the projects
Inter-state disputes as water is a state subject
Absence of long tenure loans makes it difficult for private investors
Advance against depreciation is disallowed
14 per cent return on equity (ROE) is not attractive enough for investors
Dearth of competent contracting agencies to construct the project site.
ChallengesTechnical issues

To expedite early execution of hydro projects, bankable Detailed Project Report (DPR) based on detailed survey should be prepared to avoid geological uncertainties. Survey & investigation and analysis of geological, geo-morphological, geo-electrical, hydrological data etc. should be done at the time of preparation of a DPR itself in order to minimise the impact of risks. It is, therefore, necessary to expedite survey and investigations with the latest state-of-the-art technology and prepare a shelf of projects for execution. The quality of DPRs should be of high standard which should infuse confidence in the national/international developers to take up the execution of projects without losing time in rechecks etc at the same time, contract monitoring as distinct from project monitoring should be emphasised and land acquisition and infrastructure development be settled and completed before the start of the project.
Renovation and Modernisation (R&M) has been recognised world over as a well proven cost effective technique for improving the performance or efficiency of older power plants. The useful life of the plants can be increased by R&M and the plants yield benefits in the shortest possible time at a reasonable cost. The Indian government has set up a Standing Committee to identify new hydro R&M schemes to be undertaken for implementation under Phase-II.
The pump storage potential should be harnessed as these are essential in optimising energy generation from base load thermal stations and in meeting peak load and system contingencies. Only 2.45 per cent of total identified potential of 94,000 MW pump storage schemes (PSS) had been harnessed and another 2.5 per cent are under construction. New exclusive program or action plan for PSS should be launched, to tap the vast potential.
Contingency plan for hydro projects affected by natural calamities need to be prepared and made public.
National policy on Rehabilitation and Resettlement (R&R) should be finalised and made public.
Infrastructural issuesThere is a need to setup single window clearance for hydro projects. Various authorities such as the Central Electricity Authority (CEA), the Ministry of Finance, Ministry of Environment and Forests (MoEF), etc. are involved in the appraisal of a hydro power project before it is certified for development. It will be desirable to have a single window dispensation or authority so that a project is cleared without much hassle. Any hydro project submitted for clearance should receive all the statutory or non-statutory clearances within six months of submission of the proposal. The certification of commercial viability should be given within 15 days, especially to private developers. The techno-economic, MoEF and CCEA clearances should be given within 1, 2 and 2 months respectively. The Ministry of Power should have a set of hydro projects cleared from all the angles. MoEF should also be involved in the appraisal process.There are long delays on account of land acquisition for the project. The process of land acquisition for a project differed from state to state as per land acquisition act. The government should amend land acquisition act and include hydro power projects in the priority list and the state governments should be persuaded to provide land to the project authority in agreed time frame to facilitate shifting of project-affected persons (PAPs).The hydro projects which involve lesser risk element and entail lesser capital investment can be considered for development in the private sector. Public sector can take up multi-purpose projects; projects involving inter-state issues and in inter-state river systems; projects involving cooperation with neighbouring countries; projects for complementary peaking with regional benefits; and projects in the north-eastern region etc.Financial issues

There is a need to off-load indirect cost components on hydro project. Many hydro projects are located in troubled areas and infested by militancy and terrorist activities. There is an urgent need to amend the present policy in regard to charging the entire security expenditure from concept and until commissioning – on the project cost. However, the recurring expenditure incurred on security, once a project goes on stream could to be charged on the project developer.
The cost of access roads should not be included in the project cost, as development of hydro projects triggers economic and commercial activities around the project site and results in economic benefit to the state. Inclusion of R&R, flood moderation costs, along with the provision of 12 per cent free power to the state in the capital cost of the project needed reconsideration as the provision did not apply to thermal power projects.
Incentives such as benefits/concession in custom duties and local levies/taxes on project components are being denied for projects even up to 250 MW resulting in low investments in new power schemes.
A premium as well as lease rent of 10 per cent is charged where forest land is diverted for a hydro power project. This needs to be discussed with the state governments as land is a state matter.
Future outlook

The recommendations made by the standing committee for hydropower development are crucial and should be enforced for maximum benefit to the Indian hydropower sector.
Consistent policies and regulations should be made through the states. Any variation in policies and benefits offered by different states will cause problems in development of many project sites in different states.
Large scale hydro projects which involve greater risks due to geological uncertainties etc should be implemented by the state nodal agencies, while the relatively safer projects with reduced risks and smaller capital investments should be offered to the private entrepreneurs.
A single window clearance setup for hydro projects will solve most problems related to the clearances etc
Renovation and modernisation of existing old hydro power plants should be promoted and planned for, instead of complete focus on setting up of green field power projects.
Financial issue like long term debt financing / long tenure loans, differential tariff for peak and off-peak hours need serious thinking and early implementation.
Private sector participation in the large scale development of hydropower should be promoted. This can be achieved either through public-private partnerships or through independent private projects way. The Government of India has already recognised the need to increased private involvement and has referred to it in the national policy document.
The hydro sector needs to develop a set of competent civil engineers/ contracting agencies that have the technical and the management expertise to conceptualize and develop a project of the required scale. The contract management practices with a transparent system of selection of contractors and resolve any disputes that may arise need to be reviewed.
Small hydel plants – is it the answer to deal with power shortages?The rural energy scenario in India is characterised by inadequate, poor and unreliable supply of energy services. Realising the fact that small scale hydropower projects can provide a solution for the energy problem in rural, remote and hilly areas where extension of grid system is comparatively uneconomical, promoting small scale hydro projects is and should be one of the main objectives of the small hydro power program in India. In fact, it is highly recommended that along with grid control the small power houses should mandatorily be equipped to work in isolation mode so that in case of grid failure the powerhouses can still be operational. Like the blackout of 2012, if the powerhouses were equipped to run in isolation mode then it would have been much easier and faster to restore the electricity.Isolated grid often faces the problem of poor plant load factor and making financial return difficult for the plant. But this provides opportunities for the area to have industry expansion, cottage or small industry, irrigation pumping, drinking water, agro and other application, education and entertainment activity for the overall development of the area.Lac of finance – the major roadblockThe biggest handicap of hydro power is that it has one of the longest gestation periods amongst all industries which in turn add to the IDC of the project. The lack of long term financing makes tariff front-loaded, comparing unfavourably with initial tariff of thermal plants.The high rates of interest are literally bleeding all the power projects in the country. Thus, the ECB route should be made more accessible for small hydro plants so as to provide better competitive interest rates.Also, differential tariff for peak and off-peak hours need serious thinking and early implementation. Raheja in powerRaheja Group diversified into renewable power by taking up its first hydro pilot project in Himachal Pradesh. The pilot project was of 1.5 MW capacity and went online in 2011 and since then the company has bided for various new and higher capacity projects in various parts of India specially in Uttranchal and J&K. The group now has close to 40 MW of solar thermal and 10 MW of solar PV projects in Rajasthan.Future plans  The company currently targets commissioning close to 100MW of renewable energy projects by 2018.

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