Mr. Ashok Sethi, COO & Executive Director, Tata Power

Over the last five decades, the share of hydropower, which is universally accepted as a cost-effective and clean source of electricity has been witnessing a steady and significant decline in its share of power generation worldwide.  Since 1970, the share of hydropower has fallen from 44% to around 13% today.   The health of any grid is determined by its ability to ramp up or down the load which is characteristic of the choice of the energy mix, propagated, encouraged and ensured by the policies.

With the growing popularity of renewables, the role of hydro today has become more complex than it was before. For example, disruptive technologies like utility-scale batteries are also expected to be a part of this energy mix to supply reliable power at an optimized cost in the future.   Similarly, as petrol/diesel in vehicles is being replaced by batteries, we need to decipher, if hydro can be replaced by competitive technologies like batteries, two shift thermal operations or distributed generation or micro-grids. However, batteries are yet to address the issues of cost, scale, and timelines. Hence, do we have a choice but to make hydro a significant part of our energy mix plan for the next 10-15 years, until we are sure that it can be replaced by another technology? As a clean source of power, it could even be classified as renewables (RE) along with solar, wind, etc.  As a clean source of energy, compared to thermal plants, efforts to increase the share of hydro in our generating capacities also has a strong demand-side argument.  Today consumers or what we call as the ‘Reflex Generation’ expect their utilities to have a bias in favor of clean energy sources.  This only strengthens any argument that favors hydropower in our overall mix of generating capacity.

Under the Government of India’s 12th Five Year Plan (2012-17), the target addition of thermal capacity was expected to be 72,340 MW while hydro was to be 10,897 MW. However, while the actual addition in thermal capacity shot past the plan target to 91,730 MW hydro achieved around only 50% of its target with an addition of 5,479 MW during the five year period. The resulting skewness in the system has forced operation of the thermal power plants at lower PLF’s (or plant load factor that indicates the efficiency of a power plant)  leading to serious efficiency losses. Hydro addition has failed to meet targets for various reasons which needs deliberation.                   

While policies like the National Electricity Policy, National Tariff Policy, R&R Policy, Hydro Power policy, Mega Power Policy have been released from time to time, to address issues like settlement of PAPs (for relocation of population affected by the project), differential Time of Day or ToD tariff and mega power plants, there are still major issues with respect to infrastructure cost, hydrology mitigation, transmission cost and free power obligation that need serious consideration to encourage hydropower. 

Emerging Scenario

As all the power generated needs to be consumed, the load demand keeps changing between peak demand and low demand during night hours, making it difficult to meet the real-time demand. With the addition of nearly 29% renewable, the load demand variation is being currently managed by the significant backing down of thermal units and hydro units that have the ability to start up quickly and vary their output as the demand changes. The cost and scarcity of gas are curtailing its role in managing demand variations. However, with RE target being  40% and above, there could be serious issues in providing continuous and reliable power, unless there are larger balancing power and easy ramp up power plants to even-out the variation in power generation from RE. Alternatively, it would require reliable, affordable and grid-scale storage of energy which is still far away from an industrial size perspective.

With a target to achieve 175 GW of installed capacity of RE by 2021-22, it is estimated that the frequency of ramping requirement will increase to 400 MW/min and even beyond. Theoretically, the ramping requirement of 400 MW/min can be achieved, if all generating stations exploit their inherent ramping capability and are flexible to operate. But, practical limitations can kick in unless we promote installations of hydro units with peaking reservoirs of a few hours.

A quicker way could be to encourage Pumped Storage Units (PSU) which can play a major role as the flexible generation resource in meeting peaking power requirements and maintaining the system stability and its inherent flexibility.  When RE generation levels are high resulting in a decrease in the net load, PSU can be put on pumping mode. Similarly, when RE generation levels are low resulting in an increase in net load, PSU can be put on generation mode. This would also enable conventional generators to maintain constant base load and the variations in net-load due to RE sources can be met by PSU. To have effective control, pumped storage plants could be also considered as ancillary services and could be under the direct control of System Operator (NLDC/ RLDC/ SLDC) but issue return on investment has to be addressed through measures enumerated later here.

Cost Comparison of Cyclic Thermal and Pump Storage Units:

Thermal Generating Units Fixed Cost Variable Cost Total cost
Thermal Units @ 85 % PLF 2.5 2 4.5
Thermal Units Cyclic Operation @ 50 % PLF 4.25 2.12* 6.37

* Increased variable cost on account of 6% increase in heat rate

Pump Storage Generating Units Fixed Cost Variable Cost Total cost
Cost of generation considering 30% loss between Pumping and generation modes 3.50 2.60 6.10

The cost of generation from pump storage units is slightly lower than the cost of cyclic operation of thermal plants as indicated above. However, pump storage units have an advantage of fast ramp up and ramp down capabilities to meet the system demand. Thus, the energy generated is not likely to cause an impact on overall tariffs due to inefficient operations of thermal plants being reduced. Further, it will also help in avoiding economic shut down of thermal units during low demand periods where even the load equivalent to a technical minimum of 55% capacity will not be available.

Removing bottlenecks

Delay in acquisition of land is one of the bottlenecks in the execution of hydro plants with peaking reservoir. Like the set-up of Industrial Development Corporations (IDC) whose main role is to identify locations suitable for industrial development and create industrial estates with infrastructure such as roads, drainage, electricity, water supply, street lights, and ready-to-occupy factory sheds, it seems prudent to set up Hydro Development Corporations (HDCs) at the state level, to reduce the lead time in setting up hydro units. This could also facilitate effective and efficient settlement of R&R measures ie rehabilitation and resettlement of displaced population.

Forest and other related clearances take an inordinate amount of time. Therefore a single window clearance for all hydro projects will enable their speedy approvals. Further, the inclusion of Natural Capital Valuation and mitigation measures although a right measure, adds to the project cost but could be addressed through government support. Green cess on coal could be utilized efficiently to bring in clean energy.

The infrastructural development of a state is considered to be the backbone for its economic growth and the well-being of its people. It is prudent that this cost is not passed on to the hydro projects, but, state HDCs take the ownership of developing infrastructure to facilitate economic and hydro sector growth. The full use of water resources by any state, in the long run, is going to bring economic growth for the state by way of sufficiency in nervy resources.

Hydro plants have long operational life beyond 50 years and hence, it is prudent that measures like provision of loans with longer tenure say, 30 years decelerated depreciation for 40 years, tax holidays for initial 5 years, 0% interest rates, cess benefits, and reduction in other statutory fees would considerably help in improving the outlook of Hydro.

Clean Power Obligation (CPO): 

We have seen that extraordinary measures for a few years help in promoting additions of a particular type of energy source as seen in the case of wind and solar. Hence, it could be most suitable to introduce a CPO, to include hydropower in the current Renewable Power Obligations and make it mandatory for distribution companies or discoms to tie up with hydro generators for their survival.

Also, Pump Storage Units need to be given priority and the same can be treated as an asset of the grid rather than a generation asset. The measure is not likely to increase the tariff while improving the grid stability.

The share of the generation that is allocated at zero cost for the parent states needs to be limited to the power requirement of the population in the specific surrounding area. This area could be defined within a 10 km radius allocated with the maximum power which is capped at a maximum of 5% of the total capacity from the existing 12% and even higher.

There is also a need to introduce ToD tariff for hydro stations when it supplies peak power as well.

Water management involves tackling an array of complex factors that are a part of the science of natural resource management. There are multiple stakeholders involved, rendering decision making difficult. It, therefore, necessitates to come up with innovative solutions to overcome the water distribution challenges in India.

With the right expectation of exploiting/maximizing renewable energy as a step towards energy security and climate change, the backing down of thermal plants for the grid integration of renewables cannot be considered as a prudent step. The lower PLFs of thermal will cause thermal units to operate at significantly lower efficiencies. Also, battery technology on utility-scale is still some time away and only hydro energy being the only option can ensure reliable and cost-effective supply to meet grid demand variations. Peaking hydro plants will also facilitate renewable energy resource to be exploited fully to ensure energy security and mitigation of climate worsening.  Hence, a ‘draught’ in the hydro generation cannot be allowed to grow thereby leading to an urgent need to address all the issues and provide policy encouragement for the hydro sector to grow.