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Issues in hydro power development

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Mr. Jayant Kawale …

Mr. Jayant Kawale
MD, Hydro & Renewable,
Jindal Power Ltd.
at RPR 2012, 23-26 August, Goa, India

Published in: Technology, Business

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  • 1. Issues in hydro power developmentIPPAI Regulators’ and Policy Makers’Retreat, Goa, August 2012
  • 2. BENEFITS OF HYDRO POWER• Renewable: energy security, no fuel shortage• Clean: no CO2 emissions• Yet predictable (as against wind)• Peaking support (as against other renewables): even RoR schemes provide peaking support Very cheap in the long run• Development of remote areas.• Source of revenue for States without other natural resources, and with locational disadvantages• IN INDIA, THERMAL:HYDRO RATION OF 60:40 CONSIDEREDIDEAL Copyright © 2010 Jindal Steel & Power Ltd.
  • 3. HYDRO POWER DEVELOPMENT OVER THE YEARSPlan Period Hydro Installed Capacity % of Total IC1st Plan (1951-56) 1061 36.782nd Plan (1956-61) 1916 41.193rd Plan (1961-66) 4123 45.683 annual Plans 1966-69 5906 45.584th Plan (1969-74) 6965 41.805th Plan (1974-79) 10833 40.60Annual Plan (1979-80) 11383 40.016th Plan (1980-85) 14460 33.967th Plan (1985-90) 18307 28.772 Annual Plans (1990-92) 19194 27.798th Plan (1992-97) 21644 25.469th Plan (1997-02) 26261 25.4010th Plan (2002-07) 33485 26.1911th Plan (2007-12) 38748 20 Copyright © 2010 Jindal Steel & Power Ltd.
  • 4. 11TH FIVE YEAR PLAN Central State Private TotalHydro Target 8654 3482 3491 15627Mid Term 2922 2854 2461 8237AppraisalHydro 6111AchievementThermal 24840 23301 11552 59693TargetThermal Mid 14920 18501 17336 50756termAppraisalThermal 43073Achievement Copyright © 2010 Jindal Steel & Power Ltd.
  • 5. 12TH AND 13TH PLANS 12th Plan 13th Plan Hydro 9204 12000 Nuclear 2800 18000 Thermal 67686 49200 Total 79690 79200 Wind 11000 11000 Solar 4000 16000 Other RES 3500 3500 Total RES 18500 30500Hydro plan less than what is technically feasible “due to issues of water rights,resettlement and environmental concerns” as well as due to “naturalcalamities, geological surprises etc. “(CEA) Copyright © 2010 Jindal Steel & Power Ltd.
  • 6. .• PERCENTAGE OF HYDRO HAS COME DOWN FROM 45% IN 1970 TO 20% IN 2012.• A number of hydro players have announced withdrawal• 11th Five Year Plan achievement 6111 MW against target of 15,627 MW• UTILISATION OF POTENTIAL IS ONLY 44,859 MW OUT OF 1,57,000 (28%) (China: almost 50%)• IN ADDITION, 90,000 MW OF PUMPED STORAGE YET TO BE TAPPEDWHAT IS WORSE, WE ARE NOT EVEN PLANNING FORCORRECTING THIS Copyright © 2010 Jindal Steel & Power Ltd.
  • 7. PEAKING BENEFITS OF HYDRO Haryana Energy Requirement 120 Energy Requirment (MU/day) 100 80 60 40 20 0 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Aug- Sep- Nov- Dec- Feb- Mar- May- Jun-10 Jul-10 Oct-10 Jan-11 Apr-11 10 10 10 10 11 11 11Energy demand 101.58 108.09 112.82 95.31 98.93 84.5 90.09 99.61 83.8 89.9 75.81 91.25Etalin Energy 45.1 50.3 57.2 42.9 26.7 22.3 19.3 16.7 14.4 15.4 30.1 25.9Shortage 4.5 5.61 5.57 3.57 3.69 5.26 5.31 6.81 2.21 2.66 2.21 2.17 Copyright © 2010 Jindal Steel & Power Ltd.
  • 8. PEAKING BENEFITS OF HYDRO Punjab Energy Requirement 180 160 Energy Requirment (MU/day) 140 120 100 80 60 40 20 0 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11Energy Demand 153.19 159.99 168.47 143.11 116.19 91.67 94.99 96.17 91.99 104.21 97.97 128.73Etalin Energy 45.1 50.3 57.2 42.9 26.7 22.3 19.3 16.7 14.4 15.4 30.1 25.9Shortage 8.35 9.09 10.47 4.21 3.91 6.75 3.79 5.22 4.98 3.64 2.41 1.96 Copyright © 2010 Jindal Steel & Power Ltd.
  • 9. Peaking – a neglected area• Recent Grid disturbances have shown importance of peaking power, both seasonal as well as di- urnal• Gas: Dependent on imorts Wild fluctuations in availability, tariff Already a large capacity is stranded• Oil: Most expensive, but today most prevalent: generators9 Copyright © 2010 Jindal Steel & Power Ltd.
  • 10. KNOWN UNKNOWNS • Geological surprises • Land acquisition • Rehabilitation & Resettlement • Forest clearance • Environment clearance • Agitations • Poor road infrastructure • Lack of access to data e.g. hydrological dataALL THESE DIFFICULTIES MAKE HYDRO A RISKY PROPOSITION Copyright © 2010 Jindal Steel & Power Ltd.
  • 11. LARGE HYDRO – AN ORPHAN• Renewable, but yet not counted as renewable• No RPO/REC• No Feed-in Tariff• No excise/customs duty benefit (except for mega projects)• No accelerated depreciation• Why is small hydro ‘new and renewable’, but not large hydro? Because it is off-grid/de-centralised? Then why is ‘large solar’ or ‘large wind’ new and renewable? Copyright © 2010 Jindal Steel & Power Ltd.
  • 12. LARGE HYDRO AN ORPHAN: POWER PROCUREMENT• Peaking power does not figure in long term powerpurchase plans of utilities. Nor do regulators insist on it• And why should they, when they can over-draw at will?• No utility ties up power years in advance. Long gestationprojects such as hydro suffer• Consequently, hydro has to compete with thermal inpower procurement. May suffer if tariff, particularly firstyear tariff, is higher than thermal• Invariably, fuel costs rise faster than the indices forcomparison Copyright © 2010 Jindal Steel & Power Ltd.
  • 13. LARGE HYDRO – AN ORPHAN:MEGA POWER PROJECT BENEFITS• Excise/customs duty exemption only for equipment, but not for civil part• 75% of hydro project costs are for civil, whereas only 10- 15%% project costs of thermal projects are for civil• Tariff impact of this difference – 10 to 15 p Copyright © 2010 Jindal Steel & Power Ltd.
  • 14. LARGE HYDRO – AN ORPHAN: TARIFF SETTING• Construction period 4 years for thermal, but 6 to 8 years for hydro. ROE not allowed during construction: Low IRR• Many projects have to pay upfront charges to States,which carry no return• Project preparation longer and more expensive than inthermal (DPR, Land acquisition, R & R etc)• Approach road construction also a heavy initial burden• Tariffs do not reflect peaking benefits Copyright © 2010 Jindal Steel & Power Ltd.
  • 15. FINANCE• A large part of tariff of a thermal plant is fuel, whereas most of the tariff of a hydro plant is accounted for by capital cost• Longer gestation period adds to the IDC burden• Hydro projects are therefore more sensitive to terms of finance• Lack of long-term finance makes tariff front-loaded, comparing unfavourably with initial tariffs of thermal plantsThe very long life of hydro projects does not get duerecognition Copyright © 2010 Jindal Steel & Power Ltd.
  • 16. ATTITUDE OF STATE GOVT.• Allotment of projects done haphazardly• After getting upfront payment no real support from state Govt. Project developers are expected to provide many basicamenities such as schools as CSR• Next benefit to state accrues only after commercial operation starts and free power is received• There may be more than a couple of elections in between• This, in spite of the huge long-term benefit to the State Copyright © 2010 Jindal Steel & Power Ltd.
  • 17. WHAT STATES COULD DO• Be more proactive in matters of clearances• Be a more proactive interface between project developers and people• Follow a basin-wise approach• Invest in road and evacuation infrastructure planning and development• Backload tax burden Copyright © 2010 Jindal Steel & Power Ltd.
  • 18. POSITIVE DEVELOPMENTS• Point of connection transmission• 1% extra ROE proposed for reservoir schemes and pumped storage schemes (however, needs to be extended to RoR schemes too)• Discussion has started on encouraging peaking power through tariff: Committee under Chairmanship of CEA Chairman• Time of Day tariff introduced in some States• These two measures will give hydro its due Copyright © 2010 Jindal Steel & Power Ltd.
  • 19. THANK YOU!19 Copyright © 2010 Jindal Steel & Power Ltd.