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Enhancing declining hydro power proportion is essential, Shri R V Shahi, Former Power Secretary,, Ministry of Power

Enertia organised, at Delhi, a one day Conference "Hydro Vision India 2010" on 29th April, 2010. I was invited to give the Keynote Address. In this paper, I propose to briefly highlight the issues that I brought out:

(a)

In last over three decades of my association with the power sector, I have observed that all the concerned stakeholders - the Government, power project developers, financial institutions, academics, NGO's, press and media and public at large, have empahsised the need for developing hydroelectric power projects. All of us argue that this is a renewable source of energy, that it is environment friendly, that it does not suffer from the problems of ever increasing prices of fossil fuel, and that it uses technology which can most conveniently deliver higher amount of peaking power at times when we need such power the most. In spite of such intense desire to promote such projects on the ground of the merits mentioned above, the reality has been quite different. Forty years ago hydropower capacity was indeed more than 40% of total installed capacity of the country. As demands grew, technologies which can provide faster capacity additions, for example, coal and gas based generation, overtook. Large capacity additions through thermal systems witnessed declining proportion of hydro power capacity to almost 24% by the end of 90's. In view of some of the very old and complex, but large, hydropower projects getting commissioned during the Tenth Five Year Plan (2002-07), there was a marginal improvement in the overall ratio to above 25%. These projects included Naphtha Jhakri (1500 MW), Tehri (1000 MW), Sardar Sarovar (1200 MW) and others.

(b)

Thereafter the proportion has started declining again. And, that too at a time when climate change concerns all over the world are at the peak. India is under pressure because our power sector profile is heavily weighted in favour of fossil fuels. Several steps are being taken. National Solar Mission may lead to reasonably good amount of capacity getting added. But, we need to recognise that these capacities would not give more than one fifth of the similar conventional power capacity, in view of highly low load factors of these systems. We have a potential of about 50,000 MW through wind energy. But, here again, the best of the load factor that has been achieved is not more than 30%. Nuclear is being given required emphasis. Even though we succeed, though it would be a great challenge, to enhance nuclear proportion from less than 3% to about 7% by 2032, which is an optimistic projection as per the Integrated Energy Policy, we will have a lot of gaps between demand and supply. It has been estimated that at 800 GW, to restore the balance, almost entire 150 GW of hydro power may have to be developed. This means that when the country targets to scale up the overall capacity to 800 GW, in next about 25 years, domestic hydro capacity at 150 GW would be less than 20%. Unless further investigations are carried out, and all possible sources, rivers and rivulets, are reinvestigated to find out whether 150 GW of so far estimated potential could, in reality, be substantially higher, it looks unlikely that even the present proportion of about 25% could be maintained by the year 2032.

(c)

One of the possibilities could be that we make all possible efforts to collaborate with neighbouring countries viz. Bhutan, Nepal and Myanmar to further intensify the project identification and development activities in mutual interests of India as well as these countries, in the spirit of regional co-operation. The present estimates indicate that in these three countries the potential is approximately of the same order, i.e. 150 GW. In the case of Nepal there is a school of thought which estimates the potential to be much more than 80 GW as being projected today. In case of Bhutan, we have succeeded and both the countries have identified hydropower development to be a win-win situation. Therefore, reasonably good degree of success has been achieved. In cases of Nepal and Myanmar, however, we have a long way to go.

(d)

But, before we think of any major contribution, from hydropower inputs for our power system, from neighbouring countries, we must analyse the criticality of the issues within our own country. Nepal and Myanmar would definitely be difficult cases. What is worrisome is that hydropower capacity in our country is declining fast in the current Eleventh Plan and also in the Twelfth Plan. From all accounts, it appears that during the Eleventh Plan, the country may succeed having an additional capacity of the order of about 62,000 MW (compared to the target of about 78,000 MW). Hydro capacity addition is likely to be only about 10,000 MW (compared to the target of about 16,000 MW), out of 62,000 MW, which will be only about 15% of the total capacity added during the Plan. In the Twelfth Plan, the targeted capacity is likely to be of the order of over 90,000 MW. Since, development of hydro projects from the stage of identification of site to completion takes 8 to 10 years, keeping in view the present preparations, it is unlikely that Twelfth Plan could have a target of more than 20,000 MW, which means that hydro capacity addition in the Twelfth Plan also may not be significantly more than 20%. To achieve this also appears to be a challenge.

(e)

While we are confronted with a situation that can hardly be called satisfying, the problem is getting further compounded because of the following reasons. These reasons are such that willingness and determination could address them appropriately.

(i)

Approach of the Ministry of Environment and Forest, in recent months, has become tougher. If any authority which was expected to be somewhat more friendly to accelerated development of hydroelectric projects, it is the Ministry of Environment and Forest. They need to look to this technology, and this strategy, is definitely in preference to solar and nuclear. Though India has hardly any choice to prefer one to the other, because it needs to harness all sources of energy, definitely hydro projects should rank higher in giving priority. It is a fact that in case of hydro projects deforestation is an issue, preservation and protection of wildlife is an issue, and also rehabilitation of people, particularly for storage projects, is also an important issue. But, all these can be solved. We need to have a more pragmatic, positive and generous attitude to all these issues. If forests are destroyed, compulsory afforestation has got to be done, not on paper but in practice. The huge money which has been deposited so far must be utilised to create such forests in different regions and areas. India can ill-afford to slacken on development on its entire 150 GW of hydro potential. It is not only Ministry of Power which has to think in that manner, it is entire Government of India which has to accord that type of a priority, formulate a much simpler procedure, so that clearances are faster. These have been articulated in the past as well. What makes the situation different now is that we are confronted with a paradoxical approach - we need to be more environment friendly and support non-fossil fuel based generation in a much bigger way while the approach of the Environment Ministry seems to be just the reverse.

(ii)

If we analyse the inordinate delays in execution of most of the hydroelectric projects, in 90% of them the problem could be attributed to improper contracting and more importantly inadequate way to respond to an issue when construction gets into difficulties. We don't have to over emphasise the point that hydro project development is invariably associated with geological surprises. I have personally tried to educate myself in different global conferences and through interactions with renowned specialists. The consensus seems to be that capturing the correct geological structure in 100% of the area is an impractical proposition inasmuchas it would be too time consuming and too costly. Of course, our investigations must be made more comprehensive than they have been hitherto. But, to think that we will get rid of geological surprises would be too simplistic and impractical. It is, therefore, important that our contract documents capture these realities and extensively predict differing situations and provide for immediate solutions within the contractual arrangement. Contract Document and Contract Management in hydro projects has to be distinctly different. We have examples to show that in many cases, particularly in public sector projects, these issues linger on not in terms of months but in terms of years, leading to delays of several years in completion of the projects.

(iii)

In the last few years, a large number of private companies have shown interest in developing hydro projects. The Revised Hydro Policy of the Ministry of Power has captured the needs of the developers in the private sector who have been put at par with public sector companies in the matter of tariff fixation on the basis of cost and with reference to norms of performance. However, private sector will need to be reasonably assured that the capital cost for the project does not get into uncertainty when it is examined by the Regulatory Commission for tariff fixation. In case of public sector companies there is a mechanism of Government Departments like Public Investment Board examining and approving such capital cost. In the case of private sector, certain degree of uncertainties about final decision may creep in. In this context, the decision of the CERC to engage expert technical organisations to assist them, and to get support of the CEA, could reduce the degree of uncertainty. Since, there is no case which has come up for this dispensation so far, developers as well as lenders are apprehensive of how the regulatory mechanism will deal with cost variations. It is necessary to provide sufficient degree of regulatory certainties, so that interests of both developers and lenders are kept intact.

In conclusion, it needs to be reiterated that development of hydroelectric projects, at this point of time requires much greater support than any time in the past not only because of the emerging problems but also because of India's long term approach on climate change issues. State Governments, different Ministries of Central Government and other stakeholders have all to approach this issue in a unified manner with the sole objective of accelerating the pace of hydro project development in the country as also in the neighbouring countries.