The development of hydropower projects is key for providing firm renewable energy to the grid. However, the sector faces several challenges, which have led to low capacity addition compared to the estimated potential. This article explores these nuances and highlights the emerging developments in India’s hydropower space, key challenges, policy initiatives and the way forward…
Current status compared to the potential
According to the Central Electricity Authority (CEA), around 133 GW of hydroelectric potential across India has been identified. Of this, as of August 31, 2024, just about 47 GW and 5 GW of large hydro and small hydro is operational, respectively. This indicates that less than 40 per cent of the hydropower potential is operational in India. The north-eastern states offer a substantial opportunity in the large hydro segment, with a potential capacity of 55,929.7 MW. This is followed by the Himalayan states – Himachal Pradesh with 18,305 MW, Uttarakhand with 13,481.35 MW, and Jammu & Kashmir with 12,264.5 MW. Currently, about 3.62 per cent of the potential in the Northeast, 56.16 per cent in Himachal Pradesh, 29.93 per cent in Uttarakhand, and 27.4 per cent in Jammu & Kashmir is operational.
Additionally, the evaluated potential for small-hydro power is about 21,133 MW from 7,133 identified sites, as per a study by IIT Roorkee. The current installed capacity of small hydro is around 5 GW, just about 25 per cent of the potential. Meanwhile, pumped storage projects (PSPs) have identified potential totalling 176,280 MW, with significant opportunities in the western and southern states, offering 66,580 MW and 60,475 MW respectively. The current PSP installed capacity in India is less than 5 GW, with an operational capacity of around 3 GW, way below the estimated potential.
The government has been proactive in boosting hydroelectric project development in a bid to fully harness the potential. Positive measures undertaken include recognising large hydropower projects as renewable energy projects, setting up hydro purchase obligations, rationalising tariffs, offering budgetary support for infrastructure and flood management, waiving off interstate transmission system charges for hydroelectric projects (HEPs) and PSPs, reducing the time needed for detailed project report (DPR) approval by the CEA and introducing new guidelines and incentives for PSPs.
In addition, in August 2024, the union cabinet approved central financial assistance to the north-eastern state governments for equity participation for the development of HEPs. These projects would be a joint venture collaboration between state governments and central public sector undertakings. Under the scheme, a cumulative hydro capacity of about 15,000 MW would be supported in northeast India. The scheme has been allocated a budget of Rs 41.36 billion for a period of seven years from FY 2024-25 to FY 2031-32. The state governments of the north-eastern region are allowed to own a maximum of 24 per cent of the project equity, with an upper limit of Rs 7.5 billion contributed towards the project. As an incentive, states will waive and stagger free power, or reimburse state goods and services tax to make the project viable. This scheme aims to reduce time and cost overruns in hydro projects.
New avenues are emerging in the hydropower sector, including the setting up of floating solar projects on reservoirs by hydro public sector undertakings. For instance, recently, in August 2024, SJVN Limited commissioned the 90 MW Omkareshwar floating solar project at a cost of Rs 6.46 billion. It is projected to generate 196.5 MUs of energy in its first year and 4.62 BUs over the next 25 years. In addition, hydropower has the potential to meet the needs of large commercial and industrial customers. For instance, the Indira Gandhi International Airport in Delhi, which is powered entirely by renewable energy, procures hydropower for over 94 per cent of its energy needs. These avenues can advance the uptake of hydropower going forward.
Cross-border trading of hydropower
In recent months, a key trend has been emerging in the hydropower space, with increasing uptake of cross-border hydropower trading and investments in hydropower projects by Indian enterprises in neighbouring countries.
India and Nepal have reached an agreement by which Nepal would supply 10,000 MW of power from 28 different projects to India in the next 10 years. Over 941 MW has already been imported by India this year. About 251 MW of power will be imported from 12 hydropower projects in Nepal and supplied to Bihar. Nepal exported 39 MW of electricity to India for the first time in October 2021. This amount has increased by almost 24 times since then. India will include hydropower imports from Nepal under the hydropower purchase obligation to incentivise Indian buyers to purchase power from Nepal.
The Cabinet Committee on Economic Affairs approved an investment of Rs 57.92 billion for SJVN Limited’s 669 MW Lower Arun HEP in Sankhuwasabha, Nepal. It is expected to generate 2,900 MUs of energy annually and be completed in five years. It will provide electricity to Sitamarhi in Bihar through a 217 km transmission line currently under construction.
The Indian Renewable Energy Development Agency (IREDA), SJVN Limited and GMR Energy Limited signed an MoU for the establishment of the 900 MW Upper Karnali HEP in Nepal. Additionally, IREDA announced plans to invest approximately Rs 2.9 billion in a 900 MW hydroelectric power project in Nepal. With this investment, IREDA will have up to a 10 per cent stake in GMR Upper Karnali Hydropower Limited and Karnali Transmission Company Private Limited, Nepal, subject to approval from the Indian government and other regulatory authorities.
Several Indian private companies have also signed MoUs to develop hydropower projects in Nepal and Bhutan. Tata Power formed a strategic partnership with Bhutan’s Druk Green Power Corporation Limited to develop the 600 MW Khorlochhu hydropower project to help Bhutan meet its growing electricity demand. The project is estimated to cost Rs 69 billion, with a development timetable of five years. The construction of the project has already begun. Tata Power Trading Company Limited will also enter into long-term power purchase agreements with Khorlochhu Hydro Power Limited for the import of summer surplus power to India. In addition, the Adani Group signed an MoU with Druk Green Power Corporation for a 570 MW hydroelectric plant in Chukha, Bhutan.
Cross-border trading of hydropower will receive a fillip with the recent policy announcement. In August 2024, the Ministry of Power issued amendments to the guidelines for the Import/Export (Cross Border) of Electricity, 2018. According to the amendment, Indian gencos or discoms can export electricity generated from coal, renewable or hydropower sources to neighbouring countries with approval from the designated authority.
Key challenges and the way forward
Developing new hydro projects comes with a range of complex challenges. Many projects face significant delays due to issues with land acquisition and resettlement. The Dikhu HEP, proposed nearly 30 years ago on the Dikhu river near Tamlu village in Longleng district of Nagaland, remains stalled at the land acquisition stage. Its techno-economic clearance from the CEA is set to expire in March 2025. Similarly, the Luhri HEP Stage I in Himachal Pradesh is encountering local opposition over land and rehabilitation matters, while the Upper Siang 11,200 MW HEP in Arunachal Pradesh is facing resistance due to environmental and livelihood concerns.
Other projects are also experiencing delays. The 1,200 MW Yerravaram PSP in Andhra Pradesh and the 2,100 MW Patgaon PSP in Maharashtra are both hindered by environmental issues. Additionally, cost overruns are a major problem, for instance, the cost of the Subansiri Lower 2,000 MW HEP in Arunachal Pradesh has increased more than threefold since its initiation. The Teesta VI 500 MW HEP in Sikkim is expected to face delays and a cost overrun of Rs 2,335.6 million due to flash floods in the Teesta basin.
Another challenge faced by hydropower projects is increased insurance costs for hydropower firms due to natural calamities, thereby increasing the overall cost. According to media reports, insurance premiums have risen by almost 20-50 per cent due to the significant number of claims for damages.
These challenges need to be resolved if the planned projects are to be completed on time with no cost overruns. This is key, as the country has an ambitious trajectory in this space. Going forward, according to the CEA, 32 large projects with a total capacity of 16,737.5 MW are currently under construction, comprising 12,056 MW from the central sector, 3,091.5 MW from the state sector and 1,590 MW from the private sector. The National Electricity Plan 2023 predicts that large hydro will contribute about 17 per cent to India’s renewable energy capacity by 2026-27. Upcoming capacity includes 10,814 MW of conventional hydro and 2,700 MW of PSPs by 2027, with further additions of 9,982 MW of hydro and 19,240 MW of PSPs by 2032. India is expected to need 7 GW of PSP capacity by 2027, 27 GW by 2032 and 90 GW by 2047, with projected funding of Rs 542 billion for 2022-27 and Rs 752 billion for 2027-32. The country has identified 119 GW of PSP potential, with eight projects (4.7 GW) operational, four (2.8 GW) under construction and 44 (60.05 GW) under survey for DPR preparation as of May 2024.
Net, net, while the hydropower sector in India is on an upward trajectory, achieving its full potential requires continued investments, timely project commissioning and avoiding project development in geographically sensitive areas.
By Nivedita Bobal and Jayati Arora
