Hydro power may see renewed interest from private sector

After almost a decade of stagnancy due to issues like environmental concerns, huge costs and viability issues, hydro power generation may soon see a revival.

There will be renewed interest from the private sector to invest in hydro power if the modified hydro power policy, which suggests making hydro power more affordable and competitive, comes into effect, say experts in the sector. The government is also planning to set up a Hydro Power Development Fund (HPDF) to give capital support in the form of interest subvention as banks at the moment are reluctant to fund large hydro projects.  

At present the private sector accounts for only 3,200 MW of the total installed hydropower capacity of around 45,000 MW. Of this, Sajjan Jindal-led JSW Energy alone accounts for 1,300 MW, which it had acquired from Jaiprakash Power Ventures for Rs 9,700 crore in FY16.

"We are looking to acquire stressed hydro projects, along with reviving our green-field 240-megawatt (MW) Kuther hydro power project in Himachal Pradesh which we started in 2007," says Sharad Mahendra, chief operating officer (energy business), JSW Energy.

He said the company is close to signing power purchase agreement (PPA) for the project. JSW Energy participated in the bids invited by the Haryana government for long-term PPA for 500 MW of hydro projects. So far JSW Energy has invested close to Rs 250 crore in the project, which will cost about Rs 2500 crore and can be completed in four years, said the executive.

Sources say hydropower has the advantage of offering stable power during peak hours at cheaper rates, as currently many procurers are purchasing power for peak hours at exorbitant rates. Hydropower projects can almost instantly ramp up to meet peak load requirements as these have ability to quick-start in a matter of minutes as compared to 30 minutes or more for other sources.

At present large hydropower (above 25MW) accounts for only 14 per cent of the total installed power capacity in India, which was about 46 per cent in the year 1966.

Various estimates say over 12,000 MW of hydro power is under construction, of which nearly 4200 MW is in the private sector. In the private sector, nearly 2700 MW are stranded projects. While geology, hydrology and topography issues are some of the leading reasons for slippage of hydro projects, delays in clearance, local issues and law and order problems have also resulted in significant delays in project commissioning in states like Himachal Pradesh, Uttarkhand, Jammu and Kashmir and North Eastern states.

Declaring all hydropower irrespective of size as renewable power and mandating hydropower purchase obligation within currently mandated non-solar renewable purchase obligations (RPOs) are some of the policy changes the sector expects from the government. Interest subsidy during construction with a maximum of seven years and three years post commissioning date to all hydro projects above 25 MW, creation of a Hydro Power Development Fund (HPDF), easy lending norms are some of the other major recommendations to revive the sector.

Sources say hydro power became less attractive following the focus shifted to solar and wind energy. With prices crashing for solar and wind energy, various electricity boards were reluctant to enter into power purchase agreements with hydro developers. At present on average a MW of hydro power installation costs nearly Rs 10 crore, which is less than half of that in the case of solar or wind energy.  

Most hydropower projects lack adequate power evacuation infrastructure as they are usually located in remote areas and development of associated infrastructure such as roads and bridges for improving accessibility to project site increases the cost of project development, affecting the financial viability of the project.