By Vritika Mathur
India is considering to lower tariffs for new hydroelectric power projects to help them compete against cheaper forms of electricity. Wind and solar power are rapidly growing technologies, which aim to increase electricity generation in the coming years. Being the 7th largest producer of hydroelectric power, India is attempting to bring down the taxes imposed to help hydroelectric plants attain parity with these levels.
Importance of hydroelectric plants
While other sources of energy such as solar and wind are fast developing, hydroelectric power continues to hold the largest share of global electricity. Not only is it a renewable source of energy due to the continuously revitalised water cycle, but it also acts as a clean source of energy. There is no emission of air pollutants and toxic byproducts. The only source of contamination can be traced to the construction process. Further, they prove to be great future investments and can support many generations with an average lifetime of 50-100 years. These plants prove to be an economically and environmentally viable option for sustainable development.
Obstructions to development
However, the rate at which India has come to witness hydroelectric power plant development has been snail-paced, owing to a number of hurdles. These include huge time and cost overruns, exorbitant establishment fees, drawn-out procedures for clearance, additional taxes imposed by governments, high tariffs, and a reluctance of states to sign power purchase agreements, as mentioned by the Joint Secretary of the Ministry of Power, Archana Agrawal. According to her report, the condition is dire with about 18 hydro projects of 6.2 GW capacities being stalled midway or delayed. Additional burdens such as water disputes affect any progress, as is the case of four hydro projectsShivasamudram, Mekadatu, Hogenekkal and Rasimanal.
A fresh approach
In an effort to combat the multiple derailments in the development of these projects, proposals have been made to consider lowering the tariffs for new hydroelectric power projects. This is to aid them in competing against cheaper forms of electricity. The Power Ministry also suggested insulating costs of building infrastructure such as roads and bridges from tariffs to make new hydropower projects more viable. These costs are incurred in the process of ferrying construction materials, as most projects are located in the hills, and can be quite large. They have a high utility value for states where the projects are located and they should consider bearing these costs, said K.M. Singh, the retired chairman of NHPC Ltd., Indias largest hydropower producer.
Owing to high tariffs, nearly 100 gigawatts of electricity generation potential is lying untapped in the Indian rivers. Hydropower projects are often located in remote regions and are crucial to stabilising the grid, as India looks to add 175 gigawatts of renewable capacity. These plants can be easily turned on and off, which helps the grid withstand fluctuations caused by intermittent supplies from solar and wind sources. It was also proposed that both federal and state governments handle infrastructure costs.
Strategic significance and cheaper alternatives
Besides being a greatly reliable source of electricity, hydropower is also strategically important for the country. It can boost economic expansion in states-bordering countries such as China and Pakistan. There is great hydroelectricity potential in Arunachal Pradesh, a part of which remains claimed by China.
The proposals will also include a clause making it mandatory for power retailers to include a share of hydroelectricity in their purchases. It would also make a mention of providing longer-term loans for these projects to even out tariffs over time. These recommendations have been sent to other ministries for consultation. Once finalized, the power ministry will seek approval from the cabinet. Under pressure, state electricity retailers have been asked to shore up their finances. This will allow them to invest in new infrastructure and buy more electricity. However, there has been hesitancy on their behalf as they are unwilling to buy high-cost supplies.
New costs expected
Tariffs on the new hydro projects will work out to be about ?6/kilowatt-hour or more. Moreover, the cost will be below ?5/kilowatt-hour for most power retailers according to Sambitosh Mohapatra, a partner at Pricewaterhouse Coopers India. He also added that it is doubtful that distribution utilities would sign up for such high-priced power as they already have cheaper electricity available from thermal and renewable sources.
Wind and solar power tariffs plunged to a record low last year, while the average spot price of electricity in India was ?3.37/kilowatt hour until 19th January 2018. India has installed hydropower capacity of about 45 gigawatts, compared with a potential of almost 149 gigawatts, according to the Central Electricity Authority, the planning wing of the power ministry.
Untapped potential
India has been blessed with a large number of unending rivers. These rivers provide the country with plenty opportunities to help generate electricity. Despite being a major contributor as a source of electricity, efforts must be made to ensure the resolution of any environmental concern. Moreover, proposed alternatives should ensure that market competitiveness is kept in check and does not cave into basic utility. There lies immense potential for power generation in river basins such as the Godavari, Mahanadi, Nagavali, Vamsadhara, and Narmada. However, no development has taken placed due to potential opposition from the tribal population. In the long run, public partnership is the most needed measure to ensure that strategies involving lowering tariffs work, keeping citizen rights and demands in mind.
Featured Image Source: Visual Hunt