Hydro power with FDI may hold key to India’s energy security

NEW DELHI: With coal supply and prices being erratic and ever increasing controversies over nuclear energy, hydro power holds a big promise for ensuring energy security to India while bringing in FDI, experts say.

"Given India's tight domestic coal supply and increasing reliance on imported coal, hydro capacity provides the country with greater energy security,” says a latest report by HSBC Global Research.

One the one hand, thermal power producers are yet to come to terms with Coal India Limited for uninterrupted fuel supply, while on the other nuclear power projects in Maharashtra and Tamil Nadu are faces with prolonged uncertainties, power sector analysts say.

Hydel projects could also attract FDI as demonstrated at the 1200 MW Teesta-III Hydel project on the river Teesta in Sikkim where in six PE players have invested Rs 750 crores. As much as 70% of the project work has been completed in a record time of five years and the first unit from Teesta-III may start generating power in a year, an official associated with the project said.

Leading analyst Mr. Sudip  Bandyopadhyay, MD and CEO of Destimony Securities, said: “With potential FDI availability, including possible World Bank support, many similar projects can be successfully established along the Himalayan rivers.”

Mr. Nilesh H Karani, Head of Research at Magnum Equity Broking, pointed out: “Himalayan glaciers melt in summer and the rivers supply adequate water for hydel projects in the region. Teesta stands out as good example of harnessing the hydro power.”

Mr Bandyopadhyay explained that “Hydro-electricity is one of the leading sources of clean energy.  For an energy starved nation like India which has been blessed with enough rivers, the potential of generating hydro-electricity in a cost effective manner is significant.

“At present with only 40% of Hydel power potential being tapped, India as a country has a huge scope of exponentially increasing hydel power capacity and reduce pollution through this clean and green power, he pointed out.

On harnessing hydro power, Minister of State for Power Mr K.C. Venugopal recently said in a written reply to a question in the Lok Sabha, out of the identified capacity, 33320.8 MW i.e. 22.93% has so far been developed and another 15130 MW i.e.10.41% of is under development.

He admitted that about 66.66% of the identified potential is yet to be developed.

A World Bank report said that severe power shortage is one of the greatest obstacles to India’s development. Over 40 percent of the country’s people -- most living in the rural areas -- do not have access to electricity and one-third of Indian businesses cite expensive and unreliable power as one of their main business constraints.

“Poor electricity supply thus stifles economic growth by increasing the costs of doing business in India, reducing productivity, and hampering the development of industry and commerce which are the major creators of employment in the country,” it said.

On assisting India in Hydel projects, the World Bank said it aims to assist the Government of India in meeting its targets for hydropower expansion in a sustainable manner. This entails not just ensuring financial, economical, and technical soundness but also meeting social practices which have been developed by the industry in recent years, and safeguarding environmental assets for future generations.

The Bank has been engaged in hydropower in India since the late 1950s. Several of its past engagements have been difficult, with Bank support for a number of potential hydropower projects, including the Sardar Sarovar project on the river Narmada, being cancelled before they were commissioned. The two most recent Bank engagements, the Nathpa Jhakri and Koyna IV projects which were completed in 2002 and 1998 respectively, have benefited from the lessons (FAQs) of earlier hydropower development, including more socially and environmentally sensitive safeguard policies.

At the request of the Government of India, the World Bank is supporting one hydropower project in the country -- the Rampur Hydropower Project downstream from Nathpa Jhakri on the River Satluj in Himachal Pradesh and is currently evaluating proposals for supporting two more hydropower projects in the country - the Vishnugad Pipalkoti Hydropower Project on the River Alaknanda in Uttarakhand and the Luhri Hydro Electric Project on the River Sutlej in Himachal Pradesh. While the Rampur Project is under construction, the Vishnugad-Pipalkoti and Luhri Projects are in varying stages of preparation.

The World Bank is also assisting the state governments of Himachal Pradesh and Uttarakhand adopt a river-basin approach in the planning and development of cascaded hydropower systems. The two mountain states that have made hydropower generation a significant development priority, had asked for Bank assistance in initiating a River Basin Development Optimization Study that uses the Satluj and Alaknanda rivers as case studies which has been completed and discussions are ongoing on how to take this work forward. The Study also aimed at forging effective and equitable systems of cost-and benefit-sharing among all stakeholders, including developers and operators, affected local communities, and host states.