Introduction

Small Hydro is environmentally most benign, operationally flexible, technically proven and commercially viable options for generation of electricity among the renewable sources of energy. Apart from CO_₂ abatement, small hydro is also known for its advantages like short gestation period, limited investment affordable by the private sector, socially friendly, thereby quicker electricity generation and economic returns.

Small Hydro Power is one of the earliest known renewable energy sources being used in India and elsewhere in the world in various forms like water wheels for grinding, water lifting wheels etc. India had installed its first hydroelectric power project of 130 KW capacity in the year 1897 in Darjeeling district, West Bengal, just 15 years after world's first hydroelectric project was installed at Appleton, in USA 1882. The Sivasamudram Project of 2000 kW was the next to come up in Mysore district of Karnataka in 1902 for supply of power to the Kolar Gold Mines.

IREDA Financed 25 MW Middle Kolab SHP, Orissa

Department of Non-Conventional Energy Sources (DNES) was created in 1982, with the mandate to develop renewable energy including small hydro. With the focus to tap large potential of small hydropower in the country, the electricity generation from small hydro project for capacity upto 3 MW station capacity was transferred from Ministry of Power to DNES in February 1989. The installed capacity of small hydro with capacity upto 3 MW was just 76 MW at that time.

Initially, the department had supported demonstration projects throughout the country for various types of small hydro projects and extended subsidy up to 50% of total project cost under state sectors apart from financial support for detailed survey and investigations and Detailed Project Report preparation.

The Department of Non-Conventional Energy Sources was later on converted into a full-fledged Ministry of New and Renewable Energy (MNRE) (Formerly Ministry of Non-Conventional Energy Sources) in 1992. Subsequently, the Ministry announced its scheme to support private sector small hydro projects by providing interest subsidy and also continue to provide other fiscal and financial support for both private & state sector. Table 1

State Wise Details of SHP Projects (upto 25 MW) setup & under Implementation

S. No	State	Total Identified Sites		Projects set-up		Projects under Implementation

		Nos.	Capacity (MW)	Nos.	Capacity (MW)	Nos.	Capacity (MW)

1	Andhra Pradesh	489	552.29	58	179.10	11	17.50
2	Arunachal Pradesh	566	1333.04	68	45.24	56	41.82
3	Assam	60	213.84	3	2.11	4	15.00
4	Bihar	94	213.75	7	50.40	9	7.60
5	Chhattisgarh	164	706.62	5	18.050	1	1.0
6	Goa	9	9.10	1	0.05	–	–
7	Gujarat	292	196.97	2	7.00	–	–
8	Haryana	33	110.05	5	62.70	1	6.00
9	Himachal Pradesh	547	2268.41	61	141.615	13	64.00
10	J&K	246	1411.72	32	111.830	5	5.91
11	Jharkhand	103	208.95	6	4.05	8	34.85
12	Karnataka	128	643.16	70	441.250	16	78.75
13	Kerala	247	708.10	16	98.12	5	39.55
14	Madhya Pradesh	99	400.58	9	51.16	5	30.90
15	Maharashtra	253	762.58	29	209.33	3	13.50
16	Manipur	113	109.10	8	5.45	3	2.75
17	Meghalaya	102	229.81	4	31.03	3	1.70
18	Mizoram	75	166.94	16	17.47	3	15.50
19	Nagaland	99	196.98	10	28.67	4	4.20
20	Orissa	222	295.47	6	7.30	8	60.93
21	Punjab	234	390.02	29	123.90	–	–
22	Rajasthan	67	63.17	10	23.85	–	–
23	Sikkim	91	265.54	14	39.11	4	13.20
24	Tamil Nadu	176	499.31	14	89.70	4	13.00
25	Tripura	13	46.86	3	16.01	–	–
26	Uttar Pradesh	220	292.16	9	25.10	–	–
27	Uttarakhand	458	1609.25	88	80.67	34	56.25
28	West Bengal	203	393.79	23	98.40	16	79.25
29	A & N Islands	12	7.91	1	5.25	–	–
	TOTAL	5,403	14,292.24	607	2013.915	216	612.16

Potentials & Achievement

India has an estimated small hydro potential of about 15000 MW with perennial rivers, streams and large numbers of irrigation canal network with dams. Of this potential, 5403 sites with an aggregate capacity of 14,293 MW have been identified by MNRE. It is contemplated that there could be a potential of about two to three times of the identified potential considering the sites identified by private parties and also unexplored sites across the country.

In India, hydro project with station installed capacity upto 25 MW is categorized as small hydro project (SHP), it is further classified as below:

Micro Hydro: station installed capacity upto 100 KW

Mini Hydro: station installed capacity from 101 to 2000 KW

Small Hydro: station installed capacity from 2001 to 25000 KW

The growth of small hydropower has been an encouraging with the capacity addition of about 100 MW every year since last few years and the total capacity addition during the period 2002–2007 is about 537 MW. The target for capacity addition of small hydro project for eleventh plan period (2007–2012) has been fixed for about 1400 MW.

Hydro power is the second main source of power generation in India, the installed power generating capacity of hydro power is about 33,711 MW out of the total installed generating capacity of about 1,34,942 MW in India. Of this, the contributions from the small hydropower projects below 25 MW station capacity is about 2014 MW (i.e about 6.0% of total installed capacity of hydro power)

Government of India policy & incentives

3 MW Lodhama SHP in Darjeeling District, West Bengal. Inset Shows Turbine of the Power Project

The Government of India announced the Electricity Act in 2003, which mainly deals with the laws relating to generation, transmission, distribution, trading and use of electricity. The Act has specific provision for the promotion of renewable energy including hydropower and cogeneration. It has been made mandatory that every state would specify a percentage of electricity to be purchased from renewable energy by a distribution licensee.

Capital subsidy of MNRE detailed

	Special Category States (NE Region, Sikkim, J&K, HP & Uttarakhand)	Other States

Small Hydro Power Projects	Rs.2.25 crore X (C* MW) ^0.646	Rs.1.50 crore X (C MW) ^0.646

* Where C is the capacity of the project in MW.

The National Electricity Policy announced in 2005 aims at access of electricity by all households and per capita availability of electricity to be increased to 1000 units by 2012. The policy underlines that renewable energy potential needs to be exploited and private sector would be encouraged through suitable promotional measures. The government has announced a Tariff Policy in 2006 wherein the State Electricity Regulatory Commission (SERCs) are required to fix tariff in their respective state and also decide about the renewable purchase obligation. Small hydropower projects are now governed by these policies and the tariff is decided by the SERCs as per the Tariff Policy.

Presently 19 states namely, Andhra Pradesh, Assam, Bihar, Haryana, Himachal Pradesh, Jammu and Kashmir, Jharkand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Mizoram, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttarakhand, Uttar Pradesh and West Bengal have announced policies for setting up commercial small hydro projects through private sector participations.

The MNRE continued to provide financial incentives to the small hydro developers by way of capital subsidy for the commercial projects which have certainly boost the growth of the sector in the last few years.

Small hydro development through independent power producer

Consequent to Energy Sector Management Assistance Program (ESMAP) jointly supported by UNDP and World Bank with the objective to prepare an investment program to develop irrigation/canal based hydro schemes. Ministry of Non-Conventional Energy Sources (MNES) (Now Ministry of New and Renewable Energy) had offered fiscal incentives for small hydro developers as detailed below:

Schemes involving capital upto Rs 100 crores need no Environmental Clearance from Ministry of Environment & Forests (MoE&F).

Ten years Tax holiday on grid interactive power generation projects.

Term loans through IREDA for schemes upto 25 MW.

Customs duty exemption for Electro-mechanical Equipment under World Bank source of funding.

Excise duty exemption for Electro-mechanical Equipment Electro-mechanical Equipment under World Bank source of funding.

Promotional incentive Scheme to carry out Detailed Survey & Investigation (DSI) and preparation of Detailed Project Report (DPR).

Interest Subsidy scheme for setting up of commercial small hydro power projects especially in the private sector.

Capital subsidy scheme for setting up of small hydro power projects in the State sector in state sector.

Scheme for Renovation, Modernisation and capacity uprating of small hydro power projects.

Promotional incentive scheme for development and upgradation of water mills.

In addition to the above fiscal incentives, MNES has issued broad guidelines for off-take of power from renewables on concessional terms by the State Electricity Boards in respect of power wheeling, banking and buy-back. Accordingly, several states have announced their Private Sector Policy, based on MNES guidelines.

Subsequently, World Bank offered a first line of credit about US $ 70 million to IREDA to be utilized to support SHP projects on irrigation dams and canals for a target capacity of 100 MW. The credit line moved successfully and IREDA had successfully implemented first line and sanction 47 projects with an aggregate capacity of 145.16 MW, exceeding the target one year ahead of schedule.

IREDA financed 2.2 MW Birsinghpur Small Hydro Project in Madhya Pradesh Inset Shows View of the Power House

The programme had shown the enthusiasm among private promoters and the understanding that the small hydro power projects is an attractive investment for selling power at commercial rates. Having satisfied by the progress made in implementation of the first line of credit, the World Bank has extended an additional line of credit (second line of credit) amounting to US$ 110 million for development of Small Hydro Power. Under this line of credits 45 number of SHP projects have been sanctioned, out of which 33 projects have been successfully commissioned with total installed capacity 90.65 MW and the remaining projects are under various stages of implementation and likely to be commissioned before the closing date of line of credit. Apart from the World Bank source of funding, IREDA has also funded large number of small hydro projects from their on sources in the past and continue to provide loans at attractive terms and rate as comparable to other banks/FIs.

S No.	Manufacturers	Collaboration

1	Alstom, Baroda	Alstom, France
2.	BHEL, Bhopal	Fuji, Japan
3.	Boving Fouress, Bangalore	Kvaernaener Boving Now GE UK/Norway
4.	HPP, Delhi	HPP, France
5.	Jyoti, Vadodra	Gilks, UK (now expired), Turbo Institute of Slovenia
6.	Kirloskar, Pune	Ebara Corp, Japan
7.	VA Tech Escher Wyss Flovel, Faridabad	VA Tech, Austria
8.	Flovel Mecamidi, Faridabad	Mecamidi, France
9.	Steel Industries, Trissur, Kerala	Koessler, Austria
10.	USMIL, Sahibabad	US

The Indian Renewable Energy Development Agency Ltd., has been a trendsetter for funding private sector small hydro projects in India against all odds and initial start-up difficulties & risks. Today, most of the nationalized banks, private sector banks and other financial institutions have come forward for funding small hydro project in a big way.

Manufacturing facilities of shp equipment in India

Manufacturing capacity of SHP equipment in the country is estimated at about 250 MW per year. In addition, there are about 5 manufacturers that are producing micro hydel and watermill equipment etc. Some of the major manufacturers of small hydro equipments are as below:

Areas of concerns

Inadequate information with concerned department of State Govt..

Delay in land acquisitions/transfer.

Resource assessment based on rough estimates (especially hilly hydro projects).

Higher cost/MW due to increase in steel, cement and long transmission lines.

Tariff not conducive for attracting investments for high risks small hydro projects.

Uncertainty risk like Hydrology, Power tariff, Natural calamities, Geological surprises, changes in the Govt. policies, fluctuations in the rate of the steel and cements etc.

Developers are not clear about statutory clearances and other formalities.

Inordinate delay in signing power purchase agreement & approval of tariff.

Cost restrictions due to tariff policy.

Availability of reliable Hydrological data and insufficient information and unrealistic DPR.

Insensitivity of the developers/concerned department of Govt. for time overrun.

Delay in getting clearances/approval from Govt. department.

Higher cost per MW due to long transmission lines/non availability of evacuation infrastructure near by project.

Relatively inexperience first generation entrepreneurs are coming forward for setting up the projects/no major/large corporate players.

Lack of easy and affordable access funds to support small hydro programme.

Strategies for future growth

For a multi-dimensional strategic thrust, identification of weak areas and threat perceptions have been discussed in various conferences/meetings and some of the issues transpire that India need an appropriate steps for accelerated growth of this sector, some of which are highlighted as below:

Data Bank for hydrological data and pre-investment study reports of newly identified sites across the country.

Single window clearance facility in all the States. This will enable faster processing of the projects in the pipeline.

Uniformity of Wheeling, Banking facility, water royalty charged & third party sale for all the states.

Long term consistent & conducive Government Policies on power tariff.

Pricing to be decided on win-win basis, whereby all stakeholders including consumers, government, and the hydropower project developer should be benefited.

Differential arrangement is required for fixing prices of small, medium and large Hydropower.

Discourage pseudo small hydro developers so as to control sale & re-sale of identified sites and also the cost per MW.

All stakeholders should be open to share the existing data and their experiences with each other as this would help in risk mitigations and save time & cost.

Wherever possible, the infrastructure costs should be shared between all the developers working actively on the same river basin. This will allow for equal and fair distribution of costs to all projects and help in maintaining the cost/MW.

Transparent and simple procedure for allotment of sites through open public bidding system. This would help control many issues like pricing, quality of projects and provide a safety net to the small hydropower developers against traders.

Lack of reliable hydrological and metrological data for correct technical designing of the hydropower projects is another important barrier faced by most of the developers. Universities & Research Centre should be supported for carrying out hydrological and metrological studies with modern scientific method.

Policy changes should not be made retroactively. Any change in the policy, especially, one that affects the economics of the project should not be made during the tenancy of the project. In case any such changes are made, the developer should be compensated.

Small hydropower projects should be provided protection and the utilities should be made to buy the power generated at the pre-decided rate.

A road map should be prepared which addresses all the issues discussed during the meeting in interaction with relevant and appropriate agencies as a way forward.

State Nodal Agency to develop shelf of “Bankable Projects” complete with all necessary clearances and documented hydrology data to be made available to private investors through suitable bidding mechanism.

State should take responsibility for infrastructure development, evacuation facilities and transmission etc.

Better coordination among the concerned department of the State Govt.

Capacity building of concerned department/stakeholders.

Involved Insurance company for Insurance coverage of generation shortfalls.

Special tariff structure should be given to small hydropower on account of being environmentally most benign and socially friendly technology as compare to other sources of electricity.

Apart from all above, a strong commitment is required from all stakeholders including the policy makers, regulators, political masters etc for speedy development of small hydropower industry in India. Like any other industries success stories, some of the driver for speedy development of small hydro power industry would be, a conducive policy and legislative framework suitable to the sector, accessible and affordable funds.

Small hydro power development in India