Hydropower accounted for 12.5 per cent of India’s energy generation in 2022-23, with an installed capacity of 46,865 MW. According to Central Electricity Authority (CEA) estimates, India has a massive hydroelectric potential of 145,320 MW, but only 29 per cent has been harnessed so far. The year has witnessed substantial advancements across the small-hydro, large hydro and pumped storage project (PSP) segments. The government has been proactive in enhancing the investment climate for hydro projects by introducing required policy interventions and streamlining regulatory processes. Meanwhile, the private sector has displayed significant interest in the PSP segment.
Developments in the small- and large hydro segments
With increasing penetration of renewable energy in India’s energy mix, hydropower is coming back in focus, owing to its capability to provide peak load capacity, quick ramping abilities and its use in the ancillary service markets. As of October 2023, the country’s hydropower capacity has reached 46,850 MW (11 per cent of power generation capacity). India has developed just 29 per cent of its 145,320 MW hydro potential till now, with another 10.3 per cent still under development. The CEA’s National Electricity Plan (NEP) 2023 predicts that large hydropower capacity will reach 62.2 GW by 2031-32, in order to sustain 500 GW of renewables in the grid.
Early in the year, the Ministry of Power (MoP) issued an order, waiving interstate transmission system (ISTS) charges for new hydropower projects that have had construction work awarded to them by June 30, 2025, and have signed a power purchase agreement between December 1, 2022 and June 30, 2025. This waiver, applicable for 18 years post-commissioning, specifically covers ISTS charges, not losses.
Various projects have been announced this year. For instance, in January 2023, the Cabinet Committee on Economic Affairs sanctioned an investment for the 382 MW Sunni Dam Hydro Electric Project in Himachal Pradesh by SJVN. In August 2023, the Arunachal Pradesh government allocated 11,517 MW across 12 hydropower projects to public sector undertakings (PSUs) under the MoP. This allocation includes substantial capacities for SJVN, North Eastern Electric Power Corporation Limited and NHPC. The Etalin hydroelectric project, targeting 3,097 MW of capacity, is the largest hydro project under development in India, and is accompanied by the construction of the Attunli, Emini, Amulin and Mihumdon facilities. Notably, earlier this year, India’s tallest dam, with a capacity of 2,880 MW, secured financing approval from the government. This monumental project in Dibang, Arunachal Pradesh, is set to be developed by NHPC.
In India, small-hydro plants, with a capacity of 25 MW or less, currently contribute 4.9 GW (1.2 per cent of the total capacity). The estimated potential for small hydro stands at 21,133 MW across 7,133 sites, with hilly states such as Arunachal Pradesh, Himachal Pradesh, Jammu & Kashmir, and Uttarakhand contributing half of this potential. Although there is currently no dedicated support programme for the sector, recent reports suggest that the Ministry of New and Renewable Energy is contemplating a scheme targeting small hydro. Policy intervention in this segment is indeed needed given its large capital requirements and lack of viable financial models.
PSPs gain traction
PSPs will have a vital role to play in future green grids, providing the required storage and balancing services to keep the clean energy supply stable and reliable. India has about 4,745.6 MW of pumped storage capacity in operation in 2023, with about 57,345 MW of pumped storage capacity under various stages of investigation and construction. As per the NEP 2023, it is projected that the installed PSP capacity will reach 26,686 MW by the end of 2031-32.
In April this year, the MoP finalised its “Guidelines for Pumped Storage Hydropower Projects in Country”, which is a landmark document that will incentivise further PSP development. The guidelines provide recommendations for the PSP market, PSP policies and safe PSP development, such as: the monetisation of ancillary PSP services to meet critical electricity market measures; reimbursement of the state goods and services tax, or exemption of fees on land to be acquired for off-river PSPs; the removal of an upfront premium for project allocation; and the identification and safe development of exhausted mines for prospective PSP sites.
There has been huge impetus in this segment in recent years, with private players entering a space that had solely been dominated by PSUs so far. Various tenders have been launched and auctions conducted at competitive prices. For instance, Power Company of Karnataka Limited’s auction for 1 GW of PSP capacity was won by Greenko and JSW, who acquired 700 MW and 300 MW of capacity respectively. Renewable Watch provides a round-up of the key developments in the PSP space over the past year…
February 2023: Astha Green Energy Venture India proposed a 1,200 MW off-stream closed loop PSP in Madhya Pradesh.
April 2023: Sasa Stone Private Limited was granted the terms of reference (ToR) for the 600 MW off-stream closed loop Rewa PSP in Madhya Pradesh.
May 2023: Madhya Pradesh released guidelines to promote PSP development, aiming for 11.2 GW of capacity. Torrent Power received the ToR for the 1,000 MW Pindval closed loop PSP in Gujarat. Rewa Ultra Mega Solar Limited issued a tender for the development of 13.8 GW of PSPs in Madhya Pradesh. Cerulean Energy Solutions was granted the ToR for a 300 MW off-stream closed loop PSP in Karnataka.
June 2023: NHPC Limited signed a memorandum of understanding (MoU) with the Grid Corporation of Odisha for at least 2,000 MW of self-identified PSPs. Torrent Power was granted the ToR for the 2,400 MW Shoma PSP in Uttar Pradesh. The company also signed an MoU with the Maharashtra government for three PSPs totalling 5,700 MW in Pune district. NHDC Limited announced the construction of a 525 MW PSP using existing reservoirs in Madhya Pradesh. Volthills Private Limited was granted the ToR for the 900 MW off-stream closed loop Arunachalam PSP in Tamil Nadu.
July 2023: NTPC Limited entered into an MoU with the Meghalaya government for PSP development in the state. NTPC Renewable Energy Limited issued a tender for the development of 2 GW of pumped hydro storage projects across India.
August 2023: Tata Power signed an MoU with the Maharashtra government for two 2,800 MW PSPs. NHPC Limited signed an MoU with Andhra Pradesh Power Generation Corporation Limited for two PSPs. Torrent Power received the ToR for the 3,000 MW Saidongar-I and the 1,200 MW Saidongar-II PSPs in Maharashtra, as well as the 1,300 MW closed loop Tokarpada PSP in Gujarat.
September 2023: ACME Cleantech Solutions Private Limited was granted the ToR for the 600 MW off-stream closed loop Brahmani PSP in Rajasthan.
October 2023: Uttarakhand announced its Pumped Storage Policy, which provides significant incentives to developers and aims to promote the development of PSPs in the state. The state also signed an MoU with JSW Energy for the establishment of two PSPs with a combined capacity of 1,500 MW in Almora over the next six years.
November 2023: Coal India Limited shared that over 20 abandoned mines have been identified for evaluation and feasibility study for PSPs. NLC India Limited has also taken up a feasibility study for PSPs. The sites may be developed in engineering, procurement and construction, and public-private partnership modes after consultation with stakeholders.
THDCIL recently signed an MoU with Karnataka Power Corporation Limited and Karnataka Renewable Energy Development Limited for the development of 3,270 MW of PSPs and floating solar projects in the state.
Conclusion
The outlook for the hydropower segment in India over the coming years seems promising, driven by ongoing policy initiatives, project approvals and private sector participation, as evinced by the large pipeline of projects under various phases of implementation across the on-river and off-river segments. Concerted efforts to tap into the vast hydro potential and the increasing focus on PSPs indicate a positive trajectory for energy transition in the country in general, and the achievement of India’s green energy commitments by 2030 in particular.
However, the possible local environmental damage at hydropower sites should not be overshadowed by their benefits. Numerous disasters, such as landslides, flash floods, and drying up of downstream waterbodies, and disruption of the activities of local populations have been linked to hydro projects, which have therefore received immense scrutiny from environmental groups and activists across the country. With the reinvigorated enthusiasm for hydropower in India, there is also a strong need for incorporating proper environmental assessments, regulatory compliances and engagement with local communities, along with continuous adherence to best practices to ensure the overall safety and long-term sustainable operation of these projects.
