A view of the Salal Hydroelectric Power Station in Reasi district, J&K. Photo: 7kB/Wikimedia Commons, CC BY-SA 4.0
- With a target of 500 GW of renewable power capacity by 2030, India needs to add 80 GW of energy storage to stabilise the grid, and meet peak power demand.
- The Indian government is pushing technologies like battery energy storage systems (BESS) and electrolysers, together with a giant hydel push.
- If India misses the 500 GW target, its need for storage will be lower. If the alternative technologies live up to their promise, they will be cheaper than hydel.
- What are the fallouts of this uncertainty?
This is the third part of a three-part series on hydroelectric power in India’s future.
India’s latest hydel push is facing strong headwinds. With a target of 500 GW of renewable power capacity by 2030, the country needs to add as much as 80 GW of energy storage to stabilise the grid, and meet peak power demand.
Accordingly, not only is the government pushing technologies like battery energy storage systems (BESS) and electrolysers, it has also readied a giant hydel push. It wants to add over 30,000 MW in fresh hydel capacity – and 96,000 MW in pumped storage – by 2030.
PSUs like North East Electric Power Corporation (NEEPCO) and NHPC (formerly, the National Hydroelectric Power Corporation) have been assigned projects to build. State governments are pushing these projects as well.
And yet, as the first two reports in this series have shown, the viability of these projects is far from clear. If India misses the 500 GW target, its need for storage will be lower. If technologies like BESS and electrolysers live up to their promise, they will be cheaper than hydel.
In the third – and concluding – part of this series, we look at the fallouts of this uncertainty.
Winners and losers
As the second part of this series reported, run of the river (RoR) and pumped storage projects will have to compete with BESS and electrolysers. All four, unlike multipurpose projects, discharge their stored energy in a matter of hours. As such, they are more suitable for addressing day-to-day power variations. Therefore, a number of parameters will determine the relative competitiveness of each project.
If BESS and electrolysers live up to their promise, will they be cheaper than RoR and pumped storage projects? That said, all hydel projects are not in the same boat. Cheaper projects, like the older ones which have paid off their loans, will be more competitive.
As for newer projects, dams that become a part of a larger power portfolio will be more competitive. At this time, a clutch of Indian generators are investing in renewables to round off their portfolios. As CarbonCopy reported in 2021, pairing costlier thermal projects with cheaper solar is one way for firms like NTPC to sell power from even expensive units.
This is seen in hydel as well. Instead of setting up a hydel project, generators have begun buying a part of their output – 30 MW here, 50 MW there. This makes generators eligible for round-the-clock bids – running a mix of thermal, solar and hydel at night. Such arrangements are another sign that India’s power sector is rebundling. (This trend is starting to extend beyond generators. In March, Greenko tied up with Adani Enterprises to supply the latter’s “proposed industrial complex” with up to 6 GWh of pumped storage power).
Hydel projects that become part of such a “bundled” entity might be more competitive than standalone dams. It also leaves larger hydel projects with a problem. “If a firm is creating a round-the-clock portfolio of 200/400 MW, hydel will be just 50-60 MW of that,” said a Hyderabad-based power sector veteran. “What will happen to the very large projects – 1,200-1,500 MW?”
Such projects will have to sell their power, under hydel purchase obligation, to DISCOMs. But that, as the second story in this series said, comes with its own implications for DISCOMs and their users.
The view from the states
The aftermath of the previous hydel push was not pretty. Pushed without considering their social, environmental or economic feasibility, most of these dams never got made. Work began on some but halted due to local opposition. Others never started construction due to the absence of necessary infrastructure like roads and transmission lines. Yet others, signed by speculators hoping to offload MoUs to serious players, didn’t find any takers.
The ones that did come up struggled as well. Given lower solar tariffs, not only was demand lower than expected, these projects also ran into payment delays — state DISCOMs are cash-strapped.
Project promoters weren’t the only ones affected. As hydel power sales stayed low, the states where these projects came up paid a price as well. Sikkim commissioned projects adding up to 4,694 MW and projected revenues at Rs 1,337 crore. It eventually built 2,169 MW. Despite producing as much energy as envisaged, these projects have netted the state a revenue of just Rs 286 crore (2020-21).
In other words, while 46% of the capacity came up, only 21% of the revenues materialised.
Similar refrains can be heard from Himachal Pradesh. “Even as the installed capacity in Himachal rose from around 7,913 MW to 10,547 MW in the last ten years,” Third Pole reported, “The annual revenue from the sector has actually fallen.”
Some states have had to bail out distressed hydel projects. In the case of the Baglihar project, delays resulted in the cost of its energy rising to Rs 11 per unit. Eventually, as Umer Ahmed reported for The Wire Science, Jammu & Kashmir had to buy its power.
In Sikkim, when investors said project delays were making the project unviable, the state government actually bought the project from investors like Morgan Stanley Infrastructure Partners, General Atlantic, Goldman Sachs Asset Management and Ashmore Investment Management.
A case of déjà vu
Some of these processes are about to play out again. In Sikkim, for instance, the Lepcha are up in arms about the revival of the 520 MW Teesta IV project in their Dzongu region. At the same time, state governments are pushing these projects. The talk is again about earning revenues from hydel power sales. This narrative, however, is simplistic. The business case for hydel projects now is less clear-cut than it was 20 years ago.
States need to examine the viability of each project coming up in their area. Otherwise, they might end up paying large environmental and social costs, only to reap a white elephant at the end of it all.
This article was first published by CarbonCopy and was republished here with permission. M. Rajshekhar is an independent reporter studying corruption, oligarchy and the political economy of India’s environment.