Hydro power has obvious benefits but, despite that, we remain overwhelmingly dependent on thermal power, which accounts for 84 per cent of the country’s electricity generation. Hydro power, on the other hand, contributes only 12 per cent.
Sixty six per cent of the country’s hydro power potential of 1, 45,320 mw is yet to be harnessed as on March 2015.
Thermal vs hydro capacity
While the country’s thermal power generation capacity has been multiplying, it has not been quite the same for hydro power. During 2014-15, even as India’s thermal capacity expanded by 20,830 mw, hydro power capacity crawled up by a much smaller 736 mw. It has been the same story in the past too. The difference is even more telling when we look at private sector investment — no new hydro power generation capacity was set up by private players in 2014-15.
In contrast, 64 per cent of the addition to thermal power capacity last fiscal was made by private power producers. In 2013-14 too, the private sector contributed to only 9 per cent of new capacity. This happened even as thermal power producers have been plagued by fuel concerns.
Cheaper running cost
A shortage of both domestic coal and gas has been the bane of thermal power plants. Hydro power plants, on the other hand, do not incur any fuel expense. The cost of power generation is therefore lower. Take the cost of power produced by NTPC (National Thermal Power Corporation), the country’s largest thermal power producer and NHPC (National Hydro Power Corporation), the largest player in hydro power. NTPC spent ₹2.33 on fuel, employee and other expenses (excluding interest cost and depreciation) for every unit of power produced in 2013-14. It cost NHPC ₹1.5 for the same.
Multiple factors
So, what has held back hydro power development in India, despite the operational cost advantage? Several factors have been at work — high capital investment, delays in getting environmental and other clearances and cost overruns because of opposition from people affected by hydroelectric projects and the technical challenges involved in setting up such plants. That apart, hydro power projects are also susceptible to the risk of natural calamities.
Though the operational cost of a hydro power plant may be lower than that of a thermal plant, setting up a hydro power plant can require substantially higher investment. Recent cost estimates indicate that setting up a megawatt of hydro power capacity entails an investment of ₹5.2-12.3 crore, while a megawatt of thermal power capacity would cost ₹4.8-7.2 crore to install.
Fall in production
The largest player, NHPC, is a good example of what can possibly go wrong with a hydro power producer. NHPC reported a 3 per cent year-on-year decline in power generation in 2013-14 due to a fall in production from its existing projects. This was despite the 654 million units of additional power generated from new plants. The company’s 280-mw Dhauliganga plant became non-functional following the floods in Uttarakhand in June 2013. It was able to resume operations only a year later in May 2014.
NHPC has also been facing delays in the completion of its projects. Its 2000 mw Subansiri Lower Project (Assam-Arunachal Pradesh) was originally expected to be commissioned by December 2012. The project has been facing interruptions due to local protests since December 2011 and has since been grounded. Consequently, the project cost estimate more than doubled from ₹6,285 crore in 2002 to ₹15,300 by 2014.
Possible alternative
With several hurdles coming in the way of large hydro power projects, setting up smaller plants (of up to 25 MW) could offer a possible way out. Their inherent advantage lies in their non-adverse impact on the environment. However, the viability of these plants hinges on their being remunerative. While many States have been providing preferential tariffs to promote small hydro plants, these have not always been very attractive.