Tariff Design / Power Purchaseagreement for Hydropower Projectsto ensure affordability and leverageHydropower for Balancing theRenewables.

WORKSHOP ON HYDRO POWER DEVELOPMENT

Date: 17.09.2018

Venue: India Habitat Centre

Presentation By

Janardan Choudhary

Director (Tech.), NHPC

Benefits of Hydro Projects

●Quick start-stop capability.

• Highest ramping rate (typically 100 MW/min) in real time among all other sources of generation.

Hydro has more inertia and most suited for grid stability during transient faults.

• Spinning reserve.

Provides MVAr needed for voltage stability of the grid.

• Needed for black start

Primary frequency response and regulation.

Benefits of Hydro Projects

● Hydro has a very low price per megawatt hour in comparison to the battery costs over complete life cycle

• The role of Pumped storage hydropower plants is twofold –they balance the grid for demand-driven fluctuations as well as generation-driven fluctuations.

Hydro plants have a long life- Civil structures -100 years and E&M equipment -35 years.

• Hydro projects lead to development of infrastructure in remote areas and building a lot of social infrastructure like –employment generation, water security, healthcare benefits, improved education facilities etc.

Present Status of Hydro Projects in India

Total Hydro Potential

1,48,700 MW

Installed Hydro Capacity (As on 31.08.2018)

45,457 MW

Out of total 3,44,689 MW (13.18%)

6400 MW capacity stranded due to time/cost overrun, financial problems,

NGT etc

26, 460 MW DPRs cleared by CEA yet to be taken up for construction.

Most of these projects are pending due to want of Forest and

Environment clearances.

NHPC projects DPR cleared but yet to take off- 4995 MW

(Kotlibhel-IA, 195 MW, 10/2006), (Teesta-IV-520 MW (5/2010),

Tawang-I, 600 MW 10/2011), Tawang-II, 800 MW (9/2011) and Dibang,

2880 MW (9/2017)]

Existing Role of Hydro Projects

Present peak demand 160-170 GW (about 32 GW is meet through

Hydro in the high flow season. During low flow season, storage /

pondage hydro power stations contribute about 20 GW).

The current balancing requirement is being largely met through the

existing Hydro storage/ pondage power plants, Gas & Super Critical

Thermal.

Future Role & Responsibilities of Hydropower

The large-scale renewable capacity addition due to variability,

intermittency and forecasting errors, shall have impact on reliability and

stability of the Indian power system.

Planned RE integration of 175 GW by 2021-22 would require

o Balancing power of around 60 GW.

o Fast ramping: Ramping up 290 MW/min (evening) and ramping

down 210MW/min (morning).

o Sufficient spinning reserves

Hydro power plants including pumped storage schemes can be leveraged

to play very significant role in providing:

o Grid balancing power

o Improve grid reliability, stability and safety.

o Reduce RE curtailment (due to fast ramping down capability)

Bottlenecks in Development of Hydro Projects

There are many bottlenecks at pre- construction stage and during the

construction stage, which are hampering targeted capacity addition and lack

of private participation, which are as below:-

Longer gestation period

High capital cost and Interest during construction

Delay in Statutory clearances (EC, FC, FRA)

Delay In Land Acquisition

Environmental activism: Ongoing projects stuck, EC and FC challenged in NGT

Lack of Support from State Authorities though water is a state subject and the

states should primarily shoulder the responsibility for development of hydro

resources

Bottlenecks in Development of Hydro Projects

Cont..

Demand of permanent Employment for Project Affected People

High Cost of accessibility (Roads and Bridges) in remote Projects Sites

Law & Order / Militancy Problems

High Cost of Security

Royalty (free Power), Custom Duty, GST and Water cess being levied by

some states add up to the cost

Geological challenges.

Other un-foreseen technical and non-technical challenges

Policy interventions required to revive hydropower

Bringing hydro projects at par with renewables, in terms of the following

cost elements, which add to the cost of hydropower (appx Rs 2.50 per unit)

o Tax rebates (5% GST in RE vs 18% in hydro) additional 60 p/unit

o Free power to home states (12%+1% LADF) 60 to 70 p/unit

o Enabling infrastructure (from 4% to 14% in hydro) 60 p/unit

o Cost of Land, NPV, CAT, CA, R&R (negligible or low in RE vs 5-

10% in hydro) 60 p /unit

Water being state subject, states should play proactive role to enable

hydro development

Various Statutory Clearances from Central/State Government

departments are required in a time-bound manner to address the time &

cost overrun issues.

Enabling Infrastructure cost to be borne by respective sectors.

Apportioning the Flood Moderation Cost.

Long tenure affordable loans or tax free bonds

Extended Depreciation period.

The States should provide enabling environment by reviewing their

respective Hydro Policy

PAFs to get shares from LADF in form of direct benefit transfer upon

completion of project from generation income as incentive to aid project

works

Hydropower purchase obligations

Policy interventions required to revive hydropower

Capacity Charges (50%) and Energy Charges (50%) derived on the basis of

Annual Fixed Cost (AFC) with following components

Return on Equity (ROE) – 15.5% for ROR and 16.5% for

storage/pondage/PSP

Interest on loan

Depreciation

Interest on working capital

O&M expense

Energy charges beyond design energy are paid @ 90p/kwh

Existing Components of Tariff:

Tariff Design

Deferment of free power for the initial years of loan repayment.

No other levies on hydropower should be allowed

o[Water cess (J&K) 55p to 113p/unit]

Exclusion of IDC beyond original schedule in calculation of capital cost

for purpose of O&M expenses shall reduce Tariff.

Pooled tariff: Benefits of averaging out of tariff of all plants.

Increasing stipulated life of the hydropower plants: Benefit of lesser

rate of depreciation.

Infrastructure development up to project site should be with Government or

funded suitably by Govt. and cost may not be booked to project.

Suggestions for affordability:

Tariff Design

Thank You