Large hydro power (LHP) projects are back in the limelight in India, thanks to the recent notification by the Ministry of Power in which such projects were reclassified as renewables. The Cabinet Committee on Economic Affairs (CCEA) approved the reclassification, endorsing a slew of economic benefits and incentives for the sector.

India, which is the seventh largest producer of hydroelectric power in the world, has a goal of installing 175 GW of renewable energy by 2022. Achieving this goal became a little bit easier by adding 43 GW of installed hydro power to the total.

Out of the 305 GW of total installed power capacity in India, 43 GW comes from LHPs and 44 GW from other renewables.

The argument in favor of LHPs is that they are ideal to meet peak load because they are relatively easier to switch on and off, providing grid stability.  Additionally, it doesn’t hurt that valuations of state-run public sector undertakings (PSUs) like NHPC in the hydro power sector may go up with the government planning on selling stakes in these units.

However, there are organizations who feel  LHPs are mired in controversies across the globe. Often the environment impact assessment and statutory clearances are not complied with strictly, leaving enough room for errors which lead to cost and time overruns and making projects unviable and unsustainable in the long term; the very reason hydro power from LHPs are per unit more expensive compared to other renewables like solar or wind.

Since social impact assessment is not in place for LHPs, issues of land conflicts with people affected or likely to be affected by these projects, environmental violations and finally, geological surprises are some impediments associated with LHPs. Projects are mostly identified by the Central Water Commission in India, but in certain instances, independent producers develop self-identified projects despite strict government guidelines for ICB in project allocation.

“Considering the huge social and environmental impacts of large hydro, they cannot be described as green, clean, cheap or renewable power that the hydro lobby has been trying to advocate. The government decision announced on March 8 included a slew of additional subsidies to the already highly subsidized large hydro sector. However, this whole package was under discussion for several years as is apparent from Union Power Minister’s statements in the Parliament since mid-2014”, said Himanshu Thakkar of South Asia Network of Dams, Rivers and People (SANDRP).

“In fact, the industry association promptly came out with an additional demand list, which also shows that this package is not going to help large hydro become viable when it is clear since several years now that large hydro is economically unviable even with all the subsidies it is getting. The government, instead, should allocate scarce resources to real energy solutions including rooftop solar rather pushing unviable hydro in the name of renewable energy,” Thakkar concluded.

Another private large hydro power developer with two operational projects of 100 and 110 MW, said on the condition of anonymity, that the move to include LHP in the renewable mix is nothing but a politically motivated one.

Responses from the Ministry of Power and the Central Electricity Authority, requesting a comment on how the new energy mix will shape up, given that many LHPs in India are stressed due to time and cost overruns, went unanswered.

It is noteworthy that around 10 GW of generation assets with debts are already before the tribunals, and a large chunk of the remaining stressed assets is also set to take the insolvency route.

Mercom has previously reported that with the inclusion of hydropower, renewable energy will account for almost 35% of India’s total installed power capacity and it would make it much easier for the country to meet the Paris Climate Agreement goal of generating 40 percent of its electricity from renewable energy sources by 2030.

Several hydropower projects in India are witnessing significant overruns in both time and costs. Only 28% of the total hydropower potential in India – out of 148 GW – have been developed so far, according to a report by PwC-Associated Chambers of Commerce and Industry of India (ASSOCHAM).

For the third successive year in a row, in 2018-19, power generation from India’s large hydropower projects was below 10% of total electricity generation in India, according to data obtained from the CEA. In 2016-17, for the first time in independent India’s history, power generation from large hydropower projects in India fell below 10% of total electricity generation. This calculation is based on actual generation (measured as Million or Billion Units and not installed capacity).

Some of the major reasons for this declining proportion of hydropower generation are: diminishing generation of existing hydropower projects in India and large hydropower projects becoming more and more unviable.

The union government has created a ₹160 billion (~$2.5 billion) hydropower development fund to revive stalled projects in the country.

“Each country will make its own decisions about how to address hydropower in its energy policy, but the stronger pressure coming from the Paris Agreement and the regular review cycle will likely help to ensure support for hydropower within the renewables policy frameworks,” the International Hydropower Association IHA commented.

International Rivers went on to say that LHPs, which are non-innovative, last-century technology should have no place at the Green Climate Fund projects under the United Nations framework, where the mandate is to promote a paradigm shift toward low-emission and climate-resilient sustainable development.

“We are not expecting to see many new hydro projects come online in the future. The Inclusion of large hydro to the renewable mix will simply add 43GW of existing hydro to the renewables basket – and in turn, will mean that less solar and wind installations will be needed to meet the Paris Agreement target. Considering many nations include hydro in the renewable energy mix, this should not come as a surprise,” – commented Raj Prabhu, Co-Founder and CEO of Mercom Capital Group.