According to reports, the tiny water mill on river Beas, has metamorphosed into a 3 KW hydro project at Kullu in Himachal, lighting up the remote Jibhi village. The Nabard-funded micro hydro project set up three years ago is part of a social campaign for green energy.
Exposed to the merits of location-specific interventions through such social campaigns, some high net worth individuals are monetising the idea.
Ask Umesh Raheja, 31, who manages his family’s realty business out of Gurgaon. Lured by the glaring supply-demand mismatch in the power generation business, he decided to set up a 1.5-MW plant near Dharamshala in 2009. “When it comes to output, a hydro project runs round the clock unlike other ventures,” he says. Originally estimated at Rs 10.5 crore, the project set him back by another Rs 50 lakh when it went on-stream in 2011 due to spiralling interest costs. That’s chump-change for the long-term potential and promise of the project, says Raheja. He sells the entire power to the Himachal Pradesh power utility under the long term Power Purchase Agreement (PPA).
But some developers transmit the power for captive use to different states after paying transportation charges. Even though developers are allowed to sell the power in the open market, most prefer the assured market that PPAs promise.
Arun Sharma, a hydraulics engineer who worked in Canada for a decade, originally planned to set up a grid-connected 33 KV project in Himachal Pradesh. But today, his Power Himalayas Limited, jointly promoted by a bunch of technocrats, is investing around Rs 250 crore in nine small hydro projects with a capacity of 30 MW in Himachal Pradesh and Uttaranchal. The company has already commissioned three projects of 9 MW each in the two states.
Sharma, who is president of Himachal Pradesh Power Producers Association, seeks prioritisation of hydro power generation for boosting new investments and says the RBI and banks could have been more far sighted: “These projects are for 40 years, so banks need to provide loans for longer duration.” He sees long-term PPAs without any provision for factoring in price escalation as a deterrent for new investors.
Industry estimates peg India’s potential for small hydro power at 15,000 MW. Himachal Pradesh itself has around Rs 35,000 crore lined up in 500-odd projects while Uttarakhand is waking up to the potential. In Punjab, a state not known for hydel power, textile firm Winsome has commissioned two-canal based projects of 3 MW and is setting up three more.
Delhi-based polyster filmmaker Polyster Corporation has set up 5.5 MW canal-based projects through a consortium in the state. View from Shimla With over 500 small hydro projects having been given the go ahead, Himachal Pradesh is leading the mini hydel race. The state’s power policy provides special incentives for projects of up to 5 MW. Early birds like Himalayan Power Crest, a special purpose vehicle of Delhi-based textile company Spentex, have already commissioned three projects; three-more projects of 12 MW are due.
A company can take on up to three small hydro projects at a time in the hill state. The condition opens up power generation market for new entrepreneurs but deters monopoly of moneybags like Reliance Power or JP Group. “The stipulation was brought in the power policy after major players sat on projects. It ensures timely completion,” says Harsh Mitter, chief executive officer of Himurja, the state-run nodal agency for small hydro projects.
A major infrastructure company with a finger in this pie is Hyderabad-based Lanco Infratech. The company commissioned two small hydro projects of 5 MW in the state. It has set up a 70 MW project in Himachal Pradesh and is constructing a 500 MW project in Sikkim. It’s a win-win situation for states as small projects bypass issues like deforestation, submergence or rehabilitation. States offer incentives like nominal upfront payment at the time of allotment and low rates of royalty for such projects.
The centre’s Renewable Energy Certificate scheme for small hydro power projects is a major driver for new investors as it supplements per unit cost by more than 30%. Despite the favourable power market, procedural bottlenecks have hampered speedy growth of small hydro projects. But with no conventional solution in sight for India’s power crisis, small, eco-friendly solutions like mini hydel projects could offer a leg-up to the quest for assured power.