In recent years, there has been much debate about the appropriate size of the hydro power. Many argue that large hydro is not only environmentally damaging but that there is also a negative social impact where large imported technologies are used. Attention has been given to the development of large hydro for more than a decade now leading to the current share of 26% of the installed generation capacity in India's energy mix. However, the growing importance of environmental impacts has shifted the focus to Small Hydro.
Under the scope of climate change scenarios, the given environmental and social advantages of renewable energy over the conventional energy resources are not unknown. Realising the potential of the renewable energy market, India has kept pace with the global momentum to tap its natural resources for energy production. Of the four major renewable resources (namely: biomass, solar, wind), Small Hydro offers the most cost-effective and viable form of energy production. Further, the UNFCCC categorized stand-alone small- and micro-scale power generation projects as ''Type 1: Renewable Energy projects''
1 to assist the Small Hydro Projects in different countries. The global installed capacity of Small Hydro is around 50,000 MW against the estimated potential of 180,000 MW. Although, Small Hydro remains a fraction of installed capacity, yet India is blessed with over 15,000 MW of exploitable Small Hydro resource.
Besides the availability, the multi-dimensional aspect of Small hydro makes it even more lucrative as an energy resource for achieving sustainable development. The three broad dimensional aspects of Small Hydro are important to understand its long term functionality and sustenance.
Firstly, assessment of economic feasibility of small hydro in terms of generation and distribution has verified its precedence other renewable resources such as wind and biogas. About 3 GW of small hydro energy is attainable at the avoided cost of coal-based generation of Rs. 3.08/KW. As one of the most robust methods under the scope of Clean Development Mechanism (CDM) of energy production, small hydro plays a profitable role in the carbon emission abatement, further adding to the economic potential of the source. Also, it increases the price certainty by free hedging against price volatility of fossil fuels. However, under the current pricing regimes, Indian government will need to provide subsidies to achieve its capacity addition energy targets, but which may undergo change once renewable energy certificate market trading mechanisms evolve.
Secondly, Small hydro can be deemed valuable in achieving national priorities like rural electrification. Despite the numerous policy initiatives by Government of India, 56% of the rural households still do not have access to electricity. Decentralized and distributed power generation based on locally available small hydro resource and supply of the additional electricity into the rural electricity grid posses a probable solution to the problem of unreliable and inadequate supply of power to remote and hilly areas. Besides the direct power benefits to the local community, indirect aspects such as local capacity building, infrastructure development and support to small scale industries outweighs the costs of production.
Thirdly, the environmental impact of the energy generation has been much debated over the past few years, especially in the case of large hydro. Small Hydro has relatively low environmental impact as compared to large hydro projects. Since, most of the projects as 'run of the river', meaning that the water passing through the generator is directed back into the stream; they have relatively little impact on the surrounding ecology. Though, this decreased environmental impact depends strongly on the balance between stream flow and power production, it still remains to be one of the most environmentally benign sources of energy production.
In principle, Small hydro with its 15 GW potential may be the one of the most idealistic non-conventional resource, but the ground level reality differs majorly. With the liberalization and commercialization of the Indian economy, Small Hydro grid installed capacity did grow from the year 2002 onwards reaching the current installed capacity of about 3000 MW. The projects under implementation accounts for another 1000 MW, the remaining 11,000 MW is still untapped. The identified gap in the potential and realization of the resource may be attributed to the basic issues of regulation, governance and management.
The regulatory framework for Small Hydro evolved with the introduction of the Electricity Act 2003, National Electricity Policy, 2005 and Tariff Policy 2006. Furthermore, 23 states announced their state level regulations for making the environment more conducive for private participation. The facilities available in the states include Wheeling of power produced, banking, buy-back power, and facility for third party (TP) sale. Since then, the maximum capacity addition has been seen coming through private sector. Despite these efforts, the deterrents of the project commissioning and implementation remain unaddressed. Lack of coordination among different departments and unorganized processing of the applications result in undue delays. Also, from the developers side, required paperwork and detailed project reports impedes the project timeline, further adding to the cost of production.
Despite the additional fiscal benefits from CDM, Small Hydro project bankability has been questioned. The cost of production of Small Hydro ranges from Rs. 7-8 Crores and at times is comparable to the large hydro projects. The cost variables vary depending on location, infrastructure and connectivity to the grid. The only projects seen making any profits are the gird-connected ones. Also, the fact that REC (Renewable Energy Certificate) is not applicable to the off-grid projects, they fail to meet the financial objectives and thereby, the underlying elemental social objective of community development and rural electrification are not met.
A major factor deciding on the costs is the availability of the hydrological data. Lack of the long term reliable and proper geo-hydrological reports leads to inconsistency in planning and implementation, increasing the cost of maintenance and operation. Governance issues and the related social obstructions such as people claiming habitation in project areas and Gram Panchayat's approvals are some of the other challenges retarding project development.
The mentioned challenges may not be unique to Small Hydro, but they do require a contextual solution, if India is to meet its 'power to all by 2012 objectives'. Primarily, MNRE, should initiate a nation-wide resource mapping drive to generate more authentic detailed project reports on hydrology and geology. Secondly, environmental impact assessment incorporating cumulative impact, social impact and risk assessment with a focus on mitigation measures should be made mandatory. It will not only facilitate tedious application processes delayed due to non-reliable data but also aid in project planning and management. Evaluation of the project feasibility under one umbrella label, taking care of all other licenses like PWD, IPH, Fisheries and forests would reduce the costs as well. Thirdly, MNRE should play a role of a bank in trading CDMs and RECs, providing more financial guidance and assistance to the project development.
In comparison to large hydro, shorter gestation period, higher return on investment, easier construction and low and manageable environmental impact gives Small Hydro an edge. Although, looking at the capacity potential, large hydro far exceeds Small Hydro, but given the benefits Small Hydro fails to find its place in the national missions.
With the increasing population, depleting resources and poverty alleviation objectives, a carefully planned and managed renewable energy is now a necessity for achieving sustainable development. This is not to say that Small Hydro has a 'crucial' role in reducing the energy deficit but then it definitely offers a viable source of energy generation for meeting the demands of hydrologically endowed rural, hilly and remote areas. Our fascination with quantitatively large projects overlooks the small qualitative projects developments like Small Hydro which offers a lot more scope for sustainable socio-economic and environmental development.
(Sonali Mitra is a Research Assistant at the Centre for Resource Management, Observer Research Foundation)
1UNFCCC, 2004. Appendix B of the simplified modalities and procedures for small-scale CDM project activities; indicative simplified baseline and monitoring methodologies for selected small-scale CDM project activity categories, Version 04. October 22, 2004.
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