1. The Indian power sector is one of the most critical components of an infrastructure that affects the economic growth, and it’s undergoing a major transformation. What is your take on this?
India’s power sector has grown substantially and today with an installed capacity of 3.45 GW, the country is well poised to meet energy demands for the years to come. However, having said that, it would be noteworthy to mention that the current focus is primarily on solar power. With a mammoth RE capacity addition target of 175 GW until 2021, does not unfeasible now. Solar tariff bidding had touched a low of INR 2.4/unit which was the zenith of things. Things have stabilised to an extent with the government increasing duty on Chinese photovoltaic cells.
Currently, the power sector does not contribute significantly to the economy as the sector itself is in shackles. Thermal plants have not been able to close on coal linkages while IPPs are still deep in debt. The smaller players and SPVs formed to develop and build projects have now mostly queued up at the NCLT door.
Hydro power seems to have almost fizzled out. Areas of hydropower potential still remain untapped with either lack of clearances or no fresh funds being infused in new and existing projects. 40 stressed hydro assets are yet to see reprieve from their current state of nothingness. Barring solar and wind power, the rest of the sector is pretty much looking into uncertainty unless important revival steps are taken.
2. Do you think demand of electrification in all regions and sectors will drive India’s growth?
The demand for electrification has always been on the top of the agenda for India’s growth. The current government’s Deen Dayal Upadhyaya Gram Jyoti Yojana has helped in bringing electricity to most of India’s villages. The scheme has provided feeder separation, strengthening of sub-transmission and distribution network, metering, village electrification, and setting up micro-grid and off-grid distribution networks.
With greater thrust expected from India’s manufacturing sector in the near future, electrification needs will come handy to tackle industry and specially the small and medium enterprises. However, as per recent reports, it seems that only 7.3% of India’s rural area is electrified. No doubt a massive accomplishment, but a closer look at what constitutes “electrified” reveals how much further India has to go. With high targets yet to be achieved, the demand for power is still high and it is but obvious that electrification will drive India’s growth in terms of economy, jobs and wellbeing.
3. Almost every year, several initiatives are announced to breathe new life into Indian electricity sector. Can you mention one such initiative that has proved beneficial for your sector and has been a game changer?
India’s hydropower sector has not had the much needed stimulus for the last 7-10 years now. When privatisation was meted to the sector in the 2000s, numerous inexperienced IPPs jumped in the fray to pick up projects. This led to project cost over runs, delays and over 40 stressed projects. However, there have been efforts to revive these projects through various means including front loading of equity, viability gap funding and revival through fresh funding. These initiatives however, have not gone well with the revival steps.
The hydropower industry then promulgated the idea of suggesting an amended hydro power policy to the Ministry of Power, which could well play an enhancer to revival steps. Some main key features were deferment of repayments and free power to states, waiver on local area development fees, reduction in applicable taxes for land acquisition and compensation. Additionally, there is a mitigation thought of including all hydro power projects under renewable energy, which would then attract the same sops and benefits as solar and wind power. This policy could set the tone for a calculated revival process, but only when the government passes this amendment into law.
4. How do you evaluate the role of hydropower in sustainable development and India’s economic growth?
Hydropower power is the greenest and cleanest source of electrical energy. It plays an important role in employment, local area development, providing free power to local community and in some cases also share premium with village folklore. Though India’s hydro share is only 14% of the total 3.5 GW of installed capacity, it offers the best return on equity in the long term. This can be seen from existing plants where power is sold at 60 paise/unit!
5. With low tariffs and no new policy schemes for the hydro sector, how is the hydro sector holding up?
The hydro sector is faring well below its counter energy sources like solar and wind. We do not see any movement of projects being undertaken by central government undertakings least to mention the concerned IPPs. Leaving IWT projects in J&K, there is no movement in projects in Arunachal Pradesh, Himachal Pradesh and Uttaranchal.
A lack of will, fatigue and funds has almost stalled the sector.
However, there is a market for after sales with most hydro plants being over 25 years of age. Hence, projects in the south of India are mainly undergoing modernisation, renovation and even uprating. This is the only silver lining on the horizon at the moment.
6. 2022 is approaching and so much is left to be done. What should be done to quicken the pace of achieving the power ambitions?
India could possibly achieve about 76% of the target of having 175 GW of renewable power generation capacity by 2022 according to Wood Mackenzie. 100 GW will be added through solar while 75 GW from wind. In spite of myriad challenges, this could well be managed. However, there isn’t much expectation from the thermal and hydro sectors within this period.
7. What does the future hold for the hydro sector?
As and when the Hydro Policy is in place, we could expect to see changes. With RE power capacity addition being added into the grid, the need for hydro pump storage schemes will play a major role in grid reliability and stability. We could expect movement in PSPs by mid-2019. Currently most schemes are in the PFR stage.
We expect the hydro power market to move in 2019.