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Hydrology risks trip small hydro projects development: ICRA

According to reports, the risk of there not being enough water in the stream — the ‘hydrology risk’ — is the “single largest risk” that a small hydro project faces, says a study of the rating and analysis agency, ICRA.

The study went into the question of why small hydro projects — projects of less than 25 MW capacity — have not been happening on a scale consistent with the potential in India. It found out that after ‘hydrology risk’, the risk of ‘containment of capital cost’ was the second biggest stumbling block.

As of January 2012, there were small hydro projects (SHPs) of a total capacity of 3,300 MW in the country, as against the estimated potential of 15,384 MW. It is estimated that half the potential exists in Himachal Pradesh, Uttarakhand, Jammu & Kashmir and Arunachal Pradesh. But, surprisingly, most of the SHPs (26 per cent by capacity) are in Karnataka.

Mr S. Chandrasekhar, Managing Director, Bhoruka Power, a company that owns 150 MW of SHPs, agrees with ICRA on ‘hydrological risk’. He notes that while there is sufficient data on water flows in large rivers, there is practically no such data on flows in the smaller rivers and streams, where typically a SHP might be put up.

“We have to adopt the ‘synthetic model’”, Mr Chandrasekhar told Business Line, referring to the water-flow data arrived at by taking rainfall statistics and making adjustments to it.

Mr Chandrasekhar, who was recently also the Chairman of the Karnataka State Council of the Confederation of Indian Industry, said he had raised the issue of the need for collecting water flow data in small rivers, perhaps using satellites, at several forums.

He said either the Ministry of New and Renewable Energy or the Central Water Commission or the Indian Space Research Organisation could take up the job of data collection, which is “a costly affair”.

ICRA also views the ability of the project developer to contain capital costs as a big hurdle. The hilly regions, logistics and evacuation lines (the cost of which the developer is often made to bear) add to cost. In States in the plains, Karnataka for instance, because the ‘head’ is not sufficient, large civil constructions are required to generate even small quantities of power, Mr Chandrasekhar said. He said that input costs vary wildly, and more often than not, the tariffs given in the power purchase agreements are not sufficient to cover the escalations.

Noting that there were embedded subsidies even in power from coal-fired plants, Mr Chandrasekhar noted that the Government could provide subsidies for the setting up of SHPs too. The SHPs, like all hydro projects, are capable of being switched on or off at any time, and as such can be used for generation when the demand for electricity is the highest. A higher ‘peaking tariff’ would be of help to SHPs, he said.

The ICRA report also noted that, on the other hand, the recent amendments in the Indian Grid Code would give a fillip to the construction of SHPs. Basically, the grid code says that SHPs must be “treated as ‘must run’ under merit order despatch”, which means that the utilities should buy the power the SHPs generate even if lower cost electricity is available from other sources.

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