(Seminar on Private Sector Participation in Hydropower Development, 7-9 May 2002, pp. RM 9-22)
Globally, the development of hydropower plant has lagged thermal power plant, with the exception of Central America. Though the power consumption in the developing countries will be growing at more than 55% of the world average, most of the additional power required is expected be coming through thermal plants and not through hydropower plant. The trend in India is not different with significant coal based and gas based addition having being made in the last two decades and the 150,000 MW potential of hydropower left untapped. The present state of the power sector with large SEBs receivables. significant transmission and distribution losses and poor evacuation facility in the northeastern sector further reduce the economic viability of large private investment in the, hydropower sector.
The long gestation period and high construction risk nature of the hydropower project clubbed with the emphasis of the private sector to currently invest in quick-return low-risk power projects, has reduced private participation in the hydropower sector, On a levelized cost basis, a hydropower generation cost Rs. 1.74 kwh is comparable to a coal fired plant at pithead and 20-200% cheaper than ail other thermal based options. However, the risk in the hydropower project is significantly higher when the same cost is compared across a shorter life span of 10 years. The slow pace of reform in the power sector further aggravates the risks that a hydropower plant faces. The private participation can only improve if risk mitigation steps are taken by the government to reduce the overall economic risk of hydropower plant through site specific options, pricing and tariff restructuring sharing of hydrological, geographic and environmental risk, hybrid project models etc.
