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Accelerating Hydro Power Development, Shri R V Shahi, Former Secretary, Ministry of Power

Confederation of Indian Industry (CII) organised an Interactive Session at Delhi on 3rd November, 2009. Apart from Presentations by Senior Executives from NHPC, Bhoruka Power Corporation and Jaypee Group, a Keynote Presentation was made by Dr. Roland Muench, Global Head and CEO of Voith Hydro Private Ltd. I had been invited to give a Special Address.

The Presentation from Voith, apart from opportunities in Indian context covered extensively the global hydro scenario. Highlights of this Presentation are outlined below:

  • The Potential for hydroelectric worldwide (inclusive of power projects of all types and sizes) is of the order of 4,300 GW. It has been estimated that technically feasible hydro power potential is as much as approximately 4,000 GW. But the actual installed capacity is only about 850 GW. It may be seen that hardly 20% of the hydro power potential in the world has been harnessed.

(I recall, in December, 2006 I had been invited by the International Energy Agency (IEA) to make a presentation to the Board at the time of their meeting in Sydney. The Presentation was supposed to be on Energy Strategy. Apart from a number of other issues and suggestions that I brought out, I stressed two important aspects viz., it has been a global failure to have not harnessed more than 20% of hydro potential which, infact is renewable source of energy and which could have been a substantial answer to the climate change problems. The second point which was stressed was that it has been another tragic global failure not to have mobilised all possible resources, network researches worldwide and make all possible efforts to come out with cost effective technologies to generate solar power and extract solar energy, which is everlasting and eternal source of energy)

  • Voith has estimated that by the year 2020 the installed capacity will rise from about 850 GW to about 1,440 GW this would be inclusive of Pumped Storage Scheme. The analysis also indicated that the growth of installed capacity during the periods 1950's until 1970's was substantial in the range of 4.7 to 5.3% annually. But, subsequently during 1980's and 1990's the development of new hydro projects did not witness similar pattern. As a matter of fact, it declined because some of the old hydroelectric plants were faced out. It is expected that, considering the climate change issues, coming years and decades would see larger developments in the hydroelectric sector.

  • In respect of market volume of hydro power, Brazil is at the topmost position which constitutes about 19% of the total, followed by China - 17.4%, India - 8.2%, United States - 7%, Turkey - 6.9%, Japan - 3.4%. Canada which depends heavily on hydro power constitutes 2.9%, Russian Federation - 3.0%, Italy - 2.8% and others 26.3%.

  • During the period 2006-07 to 2008-09, about 1,24,000 MW of hydroelectric capacity was added. More than half of it (53.1%) was added in China, 9.4% in Brazil, 8.8% in India.

  • It is anticipated that during the two year period 2009-10, 2010-11, the capacity addition through hydro route would be of the order of 67,000 MW. Again, China is likely to contribute the largest amount of 24.5%, Brazil - 11.8%, India - 11.4%, Canada - 6.8%, Norway - 4.3%.

  • It is reported that the Obama Administration in the U.S.A. is pushing up development of hydro power. This is reflected by a recent statement of the U.S. Energy Secretary, Mr. Steven Chu, saying that hydro power holds big potential as "It is one of the best - kept secrets. Hydro power is an incredible opportunity and it is actually the lowest cost clean energy option..........we will be pushing this".

  • The likely technical trends in the future would be characterised by Pump Storage with variable speed pump turbines, Pump Storage with pump and turbine separated for fast grid stabilisation, Ring Gates for large Francis Turbines, and more large low head applications.

  • Voith Presentation also briefly brought out the initiatives in the field of Ocean Energy - (a) Wave Power Stations, and (b) Tidal Power Stations. The world's first break water wave power station is being built at Mutriku (Spain), with a nominal capacity of 400 KW. Similarly, a joint venture between Voith Hydro and Jeolanam (Korea), is working on a large scale tidal power plant.

From the Presentation of Voith, it may be seen that hydro power development is receiving worldwide attention. As a matter of fact, if seriously pursued, this could bring about a much quicker, better and more cost effective solution to the CO2 emissions problems than the initiatives which are being directed towards Solar, Nuclear and Carbon Capture and Storage technologies. This is not to say that any of these initiatives, particularly those concerning solar power and nuclear power plant, should receive less attention. What is being emphasised is that there has been no justification for our lack lustre efforts all these decades fructifying into a merge 20% of hydro potential having been harnessed. Though late, rather too late, atleast global attention should now be realigned to make all possible efforts to expedite the process of hydro project development including development of projects involving large dams and storages. If this means massive expenditure on rehabilitation and resettlement, this should not stand in the way, and these issues should be looked at with greater degree of generosity erring on the higher side, so that mass scale support is generated among the people for having large hydro projects.

The Presentations made by the group of Speakers from the Indian side highlighted the following issues:

  • Normally, there is a perception that the ratio between thermal and hydro should be 60:40. The basis for such a proportion has been seldom understood and needs to be clarified.

(During my own address, I tried to cover this point saying that this approximate ratio has been talked over the years keeping in view the load curve profile in the Indian electricity supply system. It was observed that during peak hours the demands are significantly higher than the base load. The assumption was that the thermal capacity would take care of the base load and the hydro capacity would handle the peak load, because it is easier to operate hydro plants and even in the run-of-the-river schemes we can increase generation during peak hours and substantially reduce during off-peak hours. When we found that this type of a support from limited hydroelectric capacity has not been possible, we undertook other exercises including an initiative on separation of rural and agricultural feeders, Demand Side Management all aimed at flattening the load curve. To some extent we did achieve modest success and, therefore, we may say that there is nothing sacrosanct about a fixed ratio as such. However, efforts to install hydro projects including Pumped Storage Scheme should continue to provide as much as possible the peak hour support).

  • No doubt, Electricity Act 2003 has delicenced power generation. Yet, when it comes to developing hydroelectric projects effect of such delicensing is not visible. We continue to struggle with so many sanctions including Techno-economic concurrence from the Central Electricity Authority.

(This is an important issue and must be clarified. Prior to Electricity Act 2003 not only Techno-economic clearance of the CEA was necessary for all projects including thermal projects, but also Under Section 18 of the Electricity Supply Act permission of the State Government was required. No such permission from the State Government is any more necessary. Even for hydro projects, the concurrence of Central Electricity Authority is needed only for large projects (500 MW and above). This was felt necessary because hydro projects involve safety of dam, quite often they are integrated schemes consisting of irrigation, drinking water and flood control. While this clarification should explain the spirit of the Electricity Act, 2003 this is not to say that the difficulties which are being faced by developers in getting consent and co-operation of the concerned State Governments, in securing environmental and forest clearance are easy to handle. In fact, there is a lot of scope to improve all the procedures. Unless we facilitate from the Government side (both State Governments and Central Government) and provide the required hand holding not only for sanctions but also during execution our vision and ambition to have larger proportion of hydroelectric projects, implement 50,000 MW hydroelectric initiative may not materialise. This definitely needs intense co-ordination between State Governments and Central Government to streamline the procedures to make them developer friendly. We need to appreciate that water is a State subject and the State Governments do have a definite role. It is a fact that in the last few years there have been delays in decision making process in a number of States in allocating the hydro projects to developers. There also have been complaints about the lack of transparency. There is a need that these issues are regularly discussed between the State Governments and the Central Government, so that the process not only becomes transparent but also fast. The new Hydro Power Policy notified by the Government of India goes a long way in sorting out many of these issues).

  • Role of Regulators assumes greater relevance and importance in case of hydro power projects because it has not been possible to get these projects on the basis of Competitive Bidding for tariff as has been the practice now in case of thermal power projects (for example Ultra Mega Projects). The developers, therefore, do feel some degree of uncertainty on cost that Regulators would approve for the purpose of tariff fixation.

This indeed is a relevant issue. When we were evolving the Scheme of Ultra Mega Power Projects, we did examine the possibility of hydroelectric projects also being included in such an approach. However, we found that unless more reliable and authentic project reports are available, which can be considered by the developers, to estimate the capital cost, it would be difficult for them to compute the tariff. Experiences have shown that even the Detailed Project Reports prepared on the basis of investigations spreading over couple of years cannot be fully depended upon. Invariably geological surprises have led to not only delays in projects, but also considerable escalation of costs. In such a situation, to expect the developers to bid for tariff could have been unrealistic unless they bid excessively high prices on safer side to take care of all uncertainties. Under the given situation, therefore, determination of tariff by Regulators on the basis of principles and terms and conditions notified by them becomes inevitable. Having said this, I must also emphasise that there is considerable weight in the argument that unless Regulators and Central Electricity Authority come out with clear cut guidelines on how they will deal with the issues of deviations from the original cost estimates, developers and lenders both would continue to remain concerned about regulatory uncertainty.

  • The Presentation from the Bhoruka Power Corporation, which is engaged in development of small hydro projects, brought out a number of issues which relate to such small power projects. Some of the issues which are relevant to mention are as follows:

    • Non-availability of hydrological data for the identified project sites is a major area which creates a lot of doubts and ambiguity about the projected capacity of such projects.

I have been closely associated with some of these projects and I do agree that in their anxiety to allot a number of such small projects to private developers many of the State Electricity Boards have prepared brief Project Reports for such projects and reliability of hydrological estimates is indeed a matter of concern. This leads to a number of post implementation problems such as inaccurate tariff, reopening of Power Purchase Agreements etc. If this situation is not corrected, it would lead to a set back for large scale development of small hydro projects. Not only the developers would be apprehensive, but also financial closure of these projects would face difficulty.

  • Wheeling and Banking facilities and charges are non-uniform across the States.

This is an appropriate subject for the Forum of Regulators to evolve consensus based on which a common guideline could be issued by the Central Electricity Regulatory Commission which should be acceptable to all Regulators and State Utilities. Such a guideline could also address issues such as connectivity to the nearest grid or distribution network. What is needed for these small hydro power projects is a proper and positive consideration by all concerned including State Governments, State Utilities and State Regulators.

  • Buy-back tariff notified by State Regulators could go a long way in encouraging development of these projects. The recent guidelines of the Central Electricity Regulatory Commission if followed by State Regulators could be a good beginning.

  • A number of Presentations brought out the issue regarding Single Window Clearance for hydro projects. While all professionals sympathise with this suggestion, we must recognise that it is easier said than done. We have a host of Legislative and Administrative Policies which were all formulated to take care of specific important areas of concern. These include protection of environment, conservation of forests, protection of wildlifes, ensuring the rights of tribals over land, safety of dams, flood control issues etc. Therefore, to think that all these issues could be handled by anyone agency may be somewhat unrealistic. What, however, can be done, and should be done, is to institutionalise a co-ordination mechanism, so that all the agencies and authorities concerned develop right procedures and implement their actions and decisions with reference to a schedule, which becomes part of such a procedure.

Hydroelectric projects hold key to not only clean and green energy but also to the major problems relating to climate change. A lot of policy initiatives have been taken. In the future there would be a need to dynamically keep reviewing these policies and procedures, so that hydro projects (small, medium, large including storage projects) are developed on an accelerated path.