The News
- In a boost to hydro-electric power capacity in the country, the government has approved a number of measures.
In Brief: Hydel power sector in India
Status
- The hydropower potential of India is around 1,45,000 MW.
- Out of this, only 26% of this potential has been exploited.
Issues
Financial Constraints
- A large number of hydel-projects are constrained with finances as they are highly capital-intensive.
- As a result, these projects are stalled.
High Tariffs
- In comparison to other sources of power, hydro power tariff is higher.
- As a result, Discoms refrain from buying hydel power.
- Discoms are obligated to buy renewable energy under non-solar Renewable Purchase Obligation (RPO). However, only small hydel projects of up to 25 MW capacity were considered renewable so far.
Low private investment
- Currently, in calculating the price of power from hydel projects, cost incurred on building roads and bridges is not taken into account.
- As a result, it is hindering the private sector from entering the sector.
Free power to host state
- Currently, states hosting the hydel-projects get free power for first five years up to 12% of the plant capacity.
- This makes it unviable for private sector to venture into hydel projects.
Measures taken to improve hydel power sector
Renewable energy status
- Large hydel projects are being granted renewable energy status.
RPOs to Discoms
- Large hydel projects can now sell renewable energy certificates under non-solar Renewable Purchase Obligation (RPOs) to discoms.
Infrastructure funds
- Government has approved infrastructure fund for building roads and bridges.
- Hydel- projects up to 200 MW will be provided Rs 1.5 crore per MW.
- Hydel- projects above 200 MW will be provided Rs 1 crore per MW.
Flood-moderation
- Government will also share the cost of measures adopted by hydel project companies in flood moderation efforts.
Reduction of free power from 12% to 10%
- The state hosting the hydel projects will now receive only 10% free power from 6th to 10th year of commissioning of the projects.
Other benefits
- Higher debt-repayment periods
- Cheaper loans.
Impact
- Extending renewable energy status to large projects will make them eligible for incentives like funding and access to cheaper credit.
- Financial incentives will significantly bring down the cost of production and thus help in rationalization of tariff by hydro power projects.
- Infrastructure financing and inclusion of cost of flood moderation will make it viable for private players
- Entry of private players can significantly increase capacity and production.
- All these factors will significantly reduce the price of power for consumers.
- Finally, large hydro projects will significantly help India achieve its target of renewable energy production of 175 GW by 2022.
