What Will It Take To Rescue 9 GW Of Private Hydropower Projects. And Why Is That Important.

Union Power Minister RK Singh has shown intent to take over the stalled hydropower projects owned by private companies. That, however, depends if lenders take these projects to the National Company Law Tribunal or states deallocate them.

Of 22,768-megawatt hydropower projects that have not started construction, 9,200 MW are private projects, according to data with the Ministry of Power. Bulk of the public sector projects are stalled in Uttarakhand because of Supreme Court's order.

For private players, however, the reasons for the delay range from environmental, forest clearances to land acquisition and funding-related issues. And these can be rescued if public sector companies take over.

Singh, in response to a parliamentary query in March, had said states have been requested to reconsider the projects allotted by them to the non-government sector and to allot them to central public sector enterprises for expeditious implementation.

Hydropower projects are still the costliest in terms of production at Rs 8–10 crore per megawatt, leading to higher tariffs on an average of Rs 5–6 per kilowatt hour for 35 years, Rupesh Sankhe, vice president and power sector analyst with Elara Securities, told BQ Prime.

"With renewable power available cheaply, electricity distribution companies had been reticent to sign power purchase agreements for hydropower projects that have a high gestation period and execution and funding risks," Sankhe said.

Assuming a cost of Rs 10 crore per MW, the stalled projects entail estimated investments worth nearly Rs 2.28 lakh crore. For private players alone, that number would be Rs 92,000 crore.

Hydel power, however, is beginning to make sense now with renewable energy as a serious option to balance the grid. Since sunlight is available during a particular hours of the day and intensity varies, solar power poses a risk to grid stability, which is addressed through battery storage.

Another way is to use hydropower as it can be backed out and started at any point in time, unlike thermal power, which needs to be operated at a technical minimum capacity of 51% all the time, said a senior power consultant with top global firm on the condition of anonymity.

Hydro can be used for four to five hours to replace the high-cost peak power sourced from the market, the consultant said.

Stalled private projects, however, can only be taken over by state-run public sector undertakings such as National Hydro Power Corp., Sutlej Jal Vidyut Nigam Ltd., Tehri Hydro Development Corp., and NEEPCO—owned by NTPC—only if they are taken to the NCLT by lenders.

In that case, PSUs can bid for the projects, said the consultant quoted earlier said.

Projects awaiting environmental and forest clearances and where investors have not made substantial investments can be deallocated and re-awarded to the PSUs, the person said.

The major private projects await forest and environmental clearances include nine in Arunachal Pradesh.

These are the 3,097 MW Etalin project; the 225 MW TalongLonda project by GMR Infrastructure; the 500 MW Hiron project; the 2,700 MW Lower Siyan project; the 1,000 MW Naying project; the 1,750 MW Demwe project; the 1,200 MW Kalai project; the 240 MW Heo project; and the 186 MW Tato-I project.

The other two projects are the 300 MW Alaknanda project in Uttarakhand and the 126 MW Chhatru project in Himachal Pradesh.

A majority of these projects are awaiting either forest or environmental clearance or both.

Separately, there are 12 projects with 3,166 MW of capacity that are held up due to funding-related issues. These include the Andhra Pradesh Generation Company's 960 MW Polavaram project.

Work on the project was stalled in July 2019 when APGENCO terminated the contract and asked the contractor, Navayuga Engineering Company Ltd., to stop all work. The writ petition filed by Navayuga was dismissed by the Andhra Pradesh High Court in December 2020. Work has yet to start on the project.

Another project is the 850 MW Ratle project in Jammu and Kashmir, a joint venture between NHPC and Jammu and Kashmir State Power Development Corporation. The project has been held up since July 2014 due to various issues related to rehabilitation, resettlement, and law and order.

Earlier, the project was partially executed by a private-sector developer, and some work was completed. However, there has been no progress since July 2014. A joint venture between the Union Territory of Jammu and Kashmir and NHPC was formed, and cabinet clearance for investment approval was provided. However, the work has not been allotted yet.

There are many projects, like India's largest hydropower project, the Subansiri Upper and Subansiri Lower in Arunachal Pradesh and Assam, respectively, that were taken from NHPC and awarded to private companies, but are now being reallocated to NHPC after the private firms failed to execute them, a senior NHPC official told BQ Prime.

According to the official, the company would be open to take on many more stressed projects; the only criteria is that they should be quality projects. Price will not be a constraint, he said.

The issue with private players arises over arriving at a transfer price or valuation that is acceptable to both sides. It is very difficult to convince them on various expenses, the official added.

Once the projects are taken over by PSUs, the issues related to procurement will not arise since power distribution companies can purchase power directly from PSUs, unlike private generators under the Electricity Act 2003.