Though a market for electricity does not exist in India in the strictest sense, PHS cannot count on technical viability and environmental benefits to succeed in the longer term.
This article is part of the series Comprehensive Energy Monitor: India and the World
In 1947, hydropower capacity was about 37 percent of the total power generating capacity and over 53 percent of power generation. In the late 1960s, coal-based power generation started displacing hydropower in India and hydropower’s share in both capacity and generation fell dramatically. In August 2023, hydropower capacity of about 46,865 MW (megawatt) accounted for roughly 11 percent of power generation capacity. In 2022-23, hydropower accounted for 12.5 percent of power generation in India. India had about 4745.6 MW pumped storage capacity in operation in 2023 with about 57,345 MW of pumped storage capacity under various stages of investigation and construction.
Globally, 4,250 TWh (terawatt hour) of clean electricity was generated from hydropower, one and a half times the entire electricity consumption of the EU (European Union) and more than all renewable generation combined.
Globally, hydropower is the dominant renewable energy source to date, providing over two-thirds of all renewable electricity. Global installed hydropower capacity rose by 26 GW (gigawatt) to 1360 GW in 2021. Globally, 4,250 TWh (terawatt hour) of clean electricity was generated from hydropower, one and a half times the entire electricity consumption of the EU (European Union) and more than all renewable generation combined. But this falls well short of the 45 GW of annual capacity addition that the International Energy Agency (IEA) says is required to meet net-zero goals by 2050 and keep global temperature rises to 1.5°C. To keep temperature rises to 2°C would require 30 GW annually. Around 80 percent of new hydropower capacity installed in 2021 was in China. 4.7 GW of pumped storage hydropower was added to the grid, triple the amount added in 2020. Global growth in hydropower generation capacity was just over 1.9 percent in 2021 which is close to the 2 percent annual average growth required to meet targets set by the Paris Agreement.
Large storage hydro-power projects produce low carbon electricity but they also impose huge environmental and social costs. They displace thousands of people, disrupt river ecology, result in large scale deforestation, initiate loss of aquatic and terrestrial biodiversity, negatively alter food systems, water quality and agriculture. These environmental and social costs have led to dam removals in North America and Europe that used to be big dam builders until the 1970s. Now more dams are being removed in North America and Europe than are being built. Even in developing countries where dam building continues, the pace is slowing down because most of the best sites have been taken and also because other sources of renewable energy such as solar and wind are monopolising policy attention and investment. In the fragile Himalayan mountains where most of India’s new hydro-power projects are being developed, devastating floods and landslides have raised risk levels for hydro-projects. In February 2021, sudden flooding in the Dhauliganga, Rishiganga and Alaknanda rivers in Uttarakhand’s Chamoli district in took many lives and severely damaged many hydropower projects. Heavy rains in July 2023 and the consequent shut down and damage to hydropower projects resulted in total revenue loss over INR 1.6 billion according to the central electricity authority (CEA). Though there is disagreement over the cause of the 2021 flash floods (glacier crash, avalanche, landslide), there is general agreement that carrying out development projects including hydropower projects, highways, railway lines and mining without adequate appraisals and the disregard for cumulative impact and disaster potential assessments contributed to the scale of the loss.
In the fragile Himalayan mountains where most of India’s new hydro-power projects are being developed, devastating floods and landslides have raised risk levels for hydro-projects.
Widespread indifference for environmental concerns among project developers and the absence of credible monitoring and compliance from regulatory bodies have considerably increased exposure to risks. But this does not mean hydropower projects must be abandoned. There are examples of hydropower projects in India that have met the best international standards. The Teesta-V hydropower station, located in Sikkim was rated as an example of international good practice in hydropower sustainability in 2019. The 510 MW power station, owned and operated by NHPC Limited (National Hydropower Corporation), met or exceeded international good practice across all 20 performance criteria. For hydropower planning to become sustainable in India the government and industry must prioritize transparency by engaging the civil society, especially those who are directly affected by the project. Research suggests that modular solutions that combine wind, solar, and hydropower provide alternative energy sources that are environmentally, socially, and financially desirable. Instream turbine parks are a much less disruptive alternative to dams and produce energy at a much lower cost. Large, ‘smart’ hydropower projects may be developed, taking into account the economic, environmental and social concerns of local and downstream communities, in addition to national economic benefits. Technical provisions in smart projects can minimize the impacts on aquatic life and terrestrial ecosystems. To support hydropower projects, the government of India has included large projects above 25 MW under renewable energy category and has notified hydropower purchase obligation (HPO) as a non-solar renewable purchase obligation (RPO). To facilitate viability, tariff rationalisation with backloading of tariff after increasing project life to 40 years, increasing debt repayment period to 18 years and introducing escalating tariff of 2 percent, budgetary support to building enabling Infrastructure such as roads and bridges and also for flood moderation services have been introduced.
The most important advantage of hydropower in contrast to other renewable energy sources, like wind and solar, is that it can be dispatched quickly at any time, enabling utilities to balance load variations on the electric distribution system. In India, hydropower’s flexibility was best demonstrated on 5 April 2020 when the country’s operators restored grid stability following a 31-GW (gigawatt) plunge in demand when most households switched off electrical lights for nine minutes from 21.00 hours to 21.09 hrs. As the event unfolded, generation from hydropower decreased by over 68 percent in a short period without which grid stability would have been compromised.
To support hydropower projects, the government of India has included large projects above 25 MW under renewable energy category and has notified hydropower purchase obligation (HPO) as a non-solar renewable purchase obligation (RPO).
Pumped hydro storage (PHS) facilities store energy in the form of water in an upper reservoir, pumped from another reservoir at a lower elevation. During periods of high electricity demand, power is generated by releasing the stored water through turbines in the same manner as a conventional hydropower station. During periods of low demand, the upper reservoir is recharged by using lower-cost electricity from the grid to pump the water back to the upper reservoir. PHS projects are unlike traditional hydroelectric stations in that they are a net consumer of electricity, due to hydraulic and electrical losses incurred in the cycle of pumping from lower to upper reservoirs. However, these plants are typically highly efficient and can prove very beneficial in terms of balancing load within the overall power system. Pumped-storage facilities can be very economical due to peak and off-peak price differentials and their potential to provide critical ancillary grid services. Globally, about 161 GW of PHS acts as the world’s largest ‘water battery’ accounting for over 94 per cent of installed global energy storage capacity. It supports grid stability, reduces overall system costs and sector emissions. India has eight PHS plants with a combined capacity of 4,745 MW, and four PHS plants of 2,780 MW are under construction. Currently out of the total 4,745 MW capacity, only five plants with combined capacity of around 2,600 MW, are being operated in pumping mode. 63 sites have been identified for PHS with total potential of about 96,500 MW. In 2020 the Solar Energy Corporation of India (SECI) concluded the world’s largest renewable-cum-energy storage power purchase tender through a reverse auction method. Greenko Group won the auction with a peak power tariff rate of INR 6.12/kWh (kilowatt hour) pairing solar power with PHS.
No energy solution can exist outside of the real and competitive pressures of the market. Though a market for electricity does not exist in India in the strictest sense, PHS cannot count on technical viability and environmental benefits to succeed in the longer term. The traditional revenue source for PHS is arbitrage: Making the most of generating when the price is high, and pumping when the price is low. But this relies on a certain level of predictable variability in the electricity market, and for that variability to continue into the future. PHS provides network support services such as frequency control, inertia and fault level control that have increasing value in a grid with significant amounts of non-synchronous solar and wind generation. As of now there are no markets for these network support services in India but, in the future, the need for such services is likely to increase to the point where the market is willing to pay for it.
Source: International Hydropower Association
Lydia Powell is a Distinguished Fellow at the Observer Research Foundation.
Akhilesh Sati is a Program Manager at the Observer Research Foundation.
Vinod Kumar Tomar is a Assistant Manager at the Observer Research Foundation.
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