Final Report Evaluation of Small Hydro Power (SHP) Programme of MNRE Ministry of New & Renewable Energy (MNRE), Government of India 2017
Final Report
Evaluation of Small Hydro Power
(SHP) Programme of MNRE
Ministry of New & Renewable Energy (MNRE),
Government of India
2017
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
i
TABLE OF CONTENTS
EXECUTIVE SUMMARY ........................................................................................................................ 6
1 INTRODUCTION ............................................................................................................................ 14
1.1 SHP IN INDIA ............................................................................................................................. 14 1.2 KEY OBJECTIVE OF THE ASSIGNMENT ........................................................................................... 14
2 SMALL HYDRO POWER SECTOR IN INDIA ............................................................................... 15
2.1 SHP CAPACITY DEVELOPMENT ................................................................................................... 15 2.2 SHP POTENTIAL IN INDIA ............................................................................................................ 16 2.3 KEY DRIVERS FOR SHP PROJECTS IN INDIA.................................................................................. 18 2.4 KEY ISSUES IN SMALL HYDRO SECTOR ......................................................................................... 20
3 SHP POLICY & REGULATORY REVIEW ..................................................................................... 22
3.1 NATIONAL LEVEL POLICY REVIEW ................................................................................................ 22
4 ANALYSIS - KEY FINDINGS FROM PROJECT SURVEY & REVIEW ........................................ 24
4.1 APPROACH FOR SURVEY............................................................................................................. 24 4.2 TECHNICAL ANALYSIS ................................................................................................................. 25 4.3 POLICY FRAMEWORK .................................................................................................................. 32 4.4 COMMERCIAL ............................................................................................................................. 48 4.5 REGULATORY ............................................................................................................................. 51 4.6 FINANCIAL ASPECTS ................................................................................................................... 53 4.7 EMPLOYMENT AND ECONOMIC BENEFITS ..................................................................................... 57 4.8 R&D AND HUMAN RESOURCE DEVELOPMENT ............................................................................... 58 4.9 WATER MILLS PROJECTS ............................................................................................................. 65
5 RECOMMENDATIONS / LEARNINGS SPECIFIC TO PROGRAMME IMPLEMENTATION ON SHP SCHEME ...................................................................................................................................... 70
5.1 POLICY TARGETS & PLANNING .................................................................................................... 70 5.2 INCENTIVE SCHEME FOR SHP ..................................................................................................... 70 5.3 INSTITUTIONAL STRENGTHENING ................................................................................................. 74 5.4 SCHEME FOR WATER MILLS ........................................................................................................ 76 5.5 RESOURCE ASSESSMENT ........................................................................................................... 77 5.6 R&D AND HUMAN RESOURCE DEVELOPMENT .............................................................................. 78 5.7 REGULATORY INTERVENTIONS .................................................................................................... 79
6 ANNEXURE 1 : PROJECT SURVEY DETAILS ............................................................................ 80
6.1 LIST OF SHP PROJECTS SURVEYED ............................................................................................ 80 6.2 LIST OF SHP PROJECTS SURVEYED ............................................................................................ 83
7 ANNEXURE 2 : APPROVAL TIMELINES ..................................................................................... 84
LIST OF FIGURES
Figure 1 : RE Capacity addition trend ..................................................................... 15 Figure 2: SHP annual capacity additions ................................................................. 16 Figure 3 : Geographic spread of field visits ............................................................. 24 Figure 4 : Power Evacuation issues ........................................................................ 27 Figure 5 : AHEC Capital Cost benchmarks .............................................................. 54 Figure 6 : Capital Cost escalation issues ................................................................. 55 Figure 7 : Economic benefits of SHP ...................................................................... 57 Figure 8 Micro Turbine Testing Lab ........................................................................ 60 Figure 9 Inspection Kit Room ................................................................................ 60 Figure 10 New Turbine Testing Facility ................................................................... 60 Figure 11 Real Time Simulator for SHP Plants and Training Facility ............................ 60
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
ii
LIST OF TABLES
Table 1: SHP Projects classification in India ............................................................ 14 Table 2: Achievement status of RE projects ............................................................ 15 Table 3: Summary of Total Potential SHP Project capacities across States .................. 16 Table 4: MNRE Incentive Schemes for SHP ............................................................. 22 Table 5 : Resource assessment issues ................................................................... 28 Table 6 : Water Availability issues ......................................................................... 30 Table 7 : O&M Cost benchmark - CERC .................................................................. 31 Table 8 : O&M issues ........................................................................................... 31 Table 9: Project allocation process parameters for select States ................................ 37 Table 10: List of clearance and reference clauses for SHP project in Himachal Pradesh 43 Table 11: List of clearance and reference clauses for SHP project in Uttarakhand ........ 44 Table 12 : Approval & Clearances issue .................................................................. 45 Table 13 : Overall feedback on clearances .............................................................. 47 Table 14 : Options for public funding ..................................................................... 49 Table 15 : Preferred incentives ............................................................................. 50 Table 16 : Capital Cost & Tariff benchmark - CERC .................................................. 51 Table 17 : Capital Cost & Tariff benchmark - SERC .................................................. 51 Table 18 : Capital Cost break-up ........................................................................... 54 Table 19 : Capital Cost escalation .......................................................................... 55 Table 20 : Survey feedback – cost over-run ........................................................... 56 Table 21 : Current scheme of MNRE ...................................................................... 58 Table 22 : Facilities at AHEC ................................................................................. 59 Table 23: Technology Commercialization Mechanism ............................................... 61 Table 24 : Training Programs offered by AHEC ........................................................ 62 Table 25 : List of standards for SHP projects .......................................................... 63 Table 26 : Feedback from AHEC on Issues .............................................................. 65 Table 27 : Various Issues as identified during the survey- Watermills ........................ 67
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
iii
Abbreviations
Abbreviation Details
AHEC Alternate Hydro Energy Centre
APEDA Arunachal Pradesh Energy Development Agency
CAGR Compound Annual Growth Rate
CB Canal Based
CDM Clean Development Mechanism
CEA Central Electricity Authority
CERC Central Electricity Regulatory Commission
CFA Central Financial Assistance
COD Commercial Operation Date
CPP Captive Power Producer
CUF Capacity Utilization Factor
CWC Central Water Commission
DB Dam Based
DC District Collector
DHPD Department of Hydro Power Development
DoE Directorate of Energy
DPR Detailed Project Report
DSI Detailed Survey and Investigation
E&M Electrical & Mechanical
EA Electricity Act
EMC Energy Management Centre
EPC Engineering, Procurement & Construction
FCA Forest Conservation Act
FI Financial Institution
FIT Feed In Tariff
FR Feasibility Report
FY Financial Year
GBI Generation Based Incentive
GEF Global Environment Facility
GoUK Government of Uttarakhand
GW Giga Watts
HH House Holds
HIMURJA Himachal Pradesh Energy Development Agency
HP Himachal Pradesh
HPERC Himachal Pradesh Electricity Regulatory Commission
IA Implementation Agreement
INR Indian Rupee
IPP Independent Power Producer
IREDA Indian Renewable Energy Development Agency
ISTS inter-state transmission on system
IT Information Technology
J&K Jammu and Kashmir
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
iv
Abbreviation Details
KBJNL Krishna Bhagya Jala Nigam Limited
KPCL Karnataka Power Corporation Limited
KREDL Karnataka Renewable Energy Development Limited
kW Kilo Watt
LCOE Levelized Cost of Energy
LOA Letter of Allotment
LoC Line of Credit
MHP Micro Hydel Project
MNRE Ministry of New and Renewable Energy
MOEFCC Ministry of Environment, Forest and Climate Change
MOEFCC Ministry of Environment and Forest
MOP Ministry Of Power
MUs Million Units
MW Mega Watt
NE North East
NGO Non Government Organization
NOC No Objection Certificate
NPA Non Performing Asset
NREDCAP New and Renewable Energy Development Corporation of Andhra
Pradesh
O&M Operation and Maintenance
OA Open Access
PAC Project Approval Committee
PCB Pollution Control Board
PEDA Punjab Energy Development Agency
PFR Pre Feasibility Report
PLF Plant Load Factor
PPA Power Purchase Agreement
PSERC Punjab State Electricity Regulatory Commission
PSU Public Sector Undertaking
PWD Public Works Department
R&D Research and Development
RD&D Research Design and Development
RE Renewable Energy
REC Rural Electrification Corporation
ROR Run of River
ROR Run of River
SEB State Electricity Board
SECI Solar Energy Corporation of India
SERC State Electricity Regulatory Commission
SHP Small Hydro Power
SNA State Nodal Agency
SPCB State Pollution Control Board
STU State Transmission Utility
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
v
Abbreviation Details
TAC Technical Appraisal Committee
TC Technical Concurrence
TEC Techno-Economic Clearance
UJVNL Uttarakhand Jal Vidyut Nigam Limited
UNDP United Nations Development Project
UREDA Uttarakhand Renewable Energy Development Agency
UT Uttarakhand
VGF Viability Gap Funding
WM Water Mill
WRDO Water Resources Development Organization
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
6
Executive Summary
INTRODUCTION
With energy security and climate change concerns taking center stage in the policy arena,
Renewable Energy (RE) has become an important part of the energy sector initiatives in
India. To this effect the government has set aggressive targets and has put in place several
incentives and policy initiatives (for both grid connected and off-grid).
The Govt. of India targets for achieving 175 GW by year 2022. The target comprises of
100 GW of solar power, 60 GW of wind power, 10 GW of biomass power, and 5 GW of
small hydro power (SHP). The Ministry of New and Renewable Energy (MNRE) has been
entrusted with the overall responsibility of development of RE including small hydro
sector in India. MNRE has been implementing the SHP programme and under this
initiative more than 600 SHP projects (public and private) have been supported by the
Ministry.
ACHIEVEMENT OF SHP SCHEME
The potential of the small hydro projects in India is estimated at 21,135 MW. This
potential is large enough to meet the local demand both in the form of electrical power
as well through mechanical output (Water Mills, etc) in remote areas. Capacity addition
in the small hydro power sector has grown at a CAGR of 9% since FY 2008.
Source: MNRE Annual Reports, CEA Report
Ministry of New & Renewable Energy (MNRE) is providing policy support in the form of
capital subsidy, central financial assistance, & other initiatives for the SHP sector. One of
the aims of promotion of Small Hydro Power is to enhance the socio-economic status of
remote and rural areas in power generation.
The types of financial incentives principally are specific to grid connected and off grid
respectively. Some of the highlights of MNRE schemes under various categories are
indicated below.
S No Category of
Subsidy
Description Amount of subsidy
1 Resource
assessment
Scheme to support site
identification,
preparation of DPR, site
INR 6 Lakh for up to 1 MW
station capacity
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
7
S No Category of
Subsidy
Description Amount of subsidy
surveys, investigations
etc.
INR 10 Lakh for more than 1
MW and up to 25 station
capacity
2 Private sector
setting up
SHP projects
New SHP projects in
private / cooperative,
Joint sector etc.
Special Category States (NE,
HP, Uttarakhand & J&K): INR
1.5 Crore per MW
Other States: INR 1 Crore per
MW
Limited up to INR 5 Crore per
project for both categories
Capacity limits- Above 0.1 MW
and upto 25 MW
3 Government
Sector SHP
New SHP projects in
Government Sector
Category of projects – above
100 KW & upto 1 MW
Special Category States (NE,
HP, Uttarakhand & J&K): - INR
75,000 per kW
Other States: INR 35,000 per
kW
Category of projects - above 1
MW & up to 25 MW
Special Category States (NE,
HP, Uttarakhand & J&K): INR
7.5 Crore per MW
Other States: INR 3.5 Crore
per MW
Limited CFA up to INR 20 Crore
per project for both categories
4 Renovation Renovation and
modernization of existing
SHP Projects in
Government Sector
All States and UTs
Up to 1,000 KW: INR 10,000
per kW
Above 1 MW & upto 25 MW:
INR 1 Crore per MW limited to
INR 10 Crore per project
5 Water Mills
(WM) &
Micro Hydel
Projects
(MHP)
Support for development
/ modernization of Water
mills (Mechanical /
electrical output) and
setting up MHP projects
up to 100 kW
Mechanical Output only: INR
50,000 per Watermill
Electrical output or combined
mechanical/ electrical output –
INR 1,50,000 per Watermill
Maximum size of Watermill for
availing benefit – 5 kW
For MHP project upto 100 kW
capacity – INR 1,25,000 per
kW
6 Research &
Development
Financial support for
Research & Development
and Capacity Building
Upto 100% of the activity cost
for capacity building on case to
case basis
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
8
OBJECTIVE OF ASSIGNMENT & KEY OBSERVATIONS
The Ministry is in the process of revising the existing SHP program/ scheme. The
objective of this assignment was to evaluate the MNRE programme / scheme
implemented during 12th Five Year Plan period and propose changes in the design for
SHP scheme. As a part of the assignment, the overall benefits & issues related to the
SHP scheme were assessed through direct data collection through field visits and
conducting consultations with key stakeholders such as project developers, and nodal
agencies, etc. Based on discussion with MNRE, the following states were shortlisted for
undertaking the survey:
1. Arunachal Pradesh
2. Uttarakhand
3. Karnataka
4. Himachal Pradesh
5. Andhra Pradesh
6. Punjab
7. Kerala
The summary of sites (SHP & water mill) covered as a part of field survey across
different States is detailed in the figure below:
It was observed that the current MNRE SHP scheme has been pivotal in shaping the
sector. At the national level, the two main benefits that accrue from a SHP plant are
stable source of clean power and employment. Apart from these, one major positive
externality is development of infrastructure such as roads and improved accessibility in
remote rural areas. Small hydro power capacity addition is valuable in terms of grid
stability given its stable nature as a source of power. States find it beneficial to develop
small hydro resources for meeting its growing demand. Under the MNRE SHP scheme,
power plants upto 25 MW capacity have been supported in various states and thereby
assisting in achievement of the national objectives.
At a local level, small hydro and micro hydel power plants provide power to local village
communities located in remote areas, where national grid infrastructure is inadequate
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
9
such as in north east. Access to power in these areas is critical to support socio-
economic development. MNRE SHP scheme supports 100 KW micro hydel power projects
in remote areas across States such as Arunachal Pradesh and assists in bringing light
into the lives of its people.
Watermills have long been a source of livelihood in hilly areas such as Uttaranchal,
Himachal Pradesh, North East India, and Kerala. Its various applications include rice
hulling, milling of grains, electricity generation, and other mechanical applications. It
provides owners, who are residents of local villages, to maintain a traditional way of
living and maintaining a sustainable livelihood. Under the SHP scheme, MNRE works with
state nodal agencies in supporting local communities in villages to establish watermills
and increase the standard of living.
The growth of SHP sector has slowed down over the last few years. The main reason for
slow progress is the lack of private sector participation in SHP projects, difficulties with
development in complex terrain of hilly areas, getting rights to develop on private and
forest land , delayed allotment and statuary clearance approval for establishment of
SHP projects among others. The details of select issues are described in below sub
sections.
Pre-Construction
Resource assessment / lack of hydrological data: There is a lack of reliable
hydrological data required for assessing financial and technical feasibility of SHP
projects in the various regions of India. Data which can provide information on the
intermittent flow of water is vital for estimation of energy generation / CUF of the
potential SHP project site.
Inaccurate or inadequate data leads to faulty design parameters and may result in
financial losses over a lifetime of project;
Various approvals and clearances such as techno-economic clearance, land allotment
approval, Forest clearance, and Water rights by State irrigation departments, NOC
from Fisheries and State Pollution Control Board (SPCB) have been reported to have
lengthy timelines and procedures vary from State to State.
Construction
Remote location in hilly and mountainous regions pose several infrastructural
constraints, which increases the risks related to timelines in setting up SHP projects.
The hurdles due to locations further prolong the time lines required to set up SHP
projects when compared to other RE projects.
These hurdles also increase the risk of cost overruns.
Land availability
Land acquisition has been a cause of delay.
States have also given low priority to SHP due to higher focus on large scale power
plants, in select cases.
High costs of land for SHP development is an issue.
Developers have to face delays in land acquisition or petition district administration
or negotiate to bring the cost of the land down.
Power evacuation
Distributed nature of projects usually at remote locations with limited or no
evacuation infrastructure impacts harnessing the potential
Small size of projects which usually means limited economic viability for stretching
transmission lines only for the project
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
10
Transmission lines usually pass through forest areas – clearances for transmission
lines faces delays – often delaying projects
Acquiring land for transmission and other infrastructure projects proves difficult and
time consuming
Dependence on low capacity rural networks for evacuation of power
SHP developers have to incur substantial cost for evacuation of power generated
from the renewable energy based projects.
Tariff
States across India have a varying tariff structure and given the unique nature and
risks involved for each SHP project developer, tariff levels are generally insufficient to
attract investments. The SERC benchmark tariffs are much lower when compared to
CERC determined SHP tariffs.
Financing
The risks associated with SHP project results in an increase in the cost of borrowing
for developers. This makes SHP projects unattractive when compared to other RE
technologies.
Operational Issues
Old Turbines running at low load factor: Efforts of the Government is to develop new
technology and engineering solutions such as low head turbines to set up low /
ultralow head (below 3 m) SHP projects.
High silting issues in certain river basins results in high level of O&M cost for
developers.
KEY RECOMMENDATIONS
The Government of India has set a target of 5 GW of SHP installation by year 2022.
Perennial or intermittent flow of natural water streams in hilly areas of India, canals, and
dam outlets provide excellent opportunity for developers to tap into this potential and
help in meeting the energy demand of local communities residing in hilly and remote
areas.
SHP as a source is considered to be very effective way for power generation for rural
areas and creates economic potential to provide livelihoods at local level across
geographies in the Country.
The MNRE SMALL HYDRO POWER PROGRAMME (upto 25 MW Capacity) provides
incentive framework for promotion of SHP projects. The Ministry of New and Renewable
Energy (MNRE) is encouraging setting up of Small Hydro Power (SHP) projects in the
private sector, joint sector, co-operative sector, etc.
Based on the field visits undertaken and stakeholder consultations various issues were
identified, below are the set of recommendations proposed to further strengthen the
MNRE SHP Scheme:
1. The State Govt. should submit the annual SHP development plan to MNRE every
year. The annual SHP development plan to provide details on the expected new SHP
projects & capacity (in MW) proposed to be allocated, under-construction project
(with status of project), expected projects to be commissioned in the financial year,
number of sites to be selected for resource assessment/DPR preparation, projects
proposed to undertake renovation & modernization, number & capacity of water-mills
to be supported. The Ministry should examine the annual SHP development plan and
finalize the budget allocation (advance expected for current year, plan for
subsequent years) for State specific development of SHP projects.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
11
2. MNRE shall undertake detailed technical study to identify clusters having high
potential and probability of getting harnessed for achieving the year 2022 SHP
target. The study shall also identify the phase wise planning required at State and
Central level including the power infrastructure requirement for clusters with high
SHP potential.
3. Incentive scheme for SHP
a. It is recommended that MNRE should continue providing capital subsidy as
incentive to SHP projects. The capital subsidy shall be defined as a % of
actual project cost or CERC benchmark capital cost, whichever is lower. In the
scheme, MNRE should clearly define the maximum cap in the form of Rs Lakh
per MW as well as Rs Lakh per project.
b. A separate nodal agency shall be nominated by MNRE with responsibility of
evaluation of subsidy application, approval and disbursement of subsidy to
SHP projects and water mills. The key options for nodal agency can be State
Nodal Agency, IREDA, SECI etc. The nodal agency can be given a defined
service fee for subsidy management.
c. The MNRE can focus on policy design, defining guidelines and facilitating
resolution of key SHP sector issues. The schemes for resource assessment &
identification of new sites, Renovation & Modernization, Research &
Development, and Human Resource Development can be directly managed by
MNRE.
d. The capital subsidy can be disbursed under three tranches to support setting
up new SHP projects is:
i. First Installment: Disbursement of 50% capital subsidy on
disbursement of 50% of term loan & achievement of 50% progress on
the project.
ii. Second installment: Disbursement of 30% on successful completion of
the project, fulfillment of performance guarantee tests/ testing &
certification of performance, physical inspection of the project and the
commencement of commercial generation.
iii. Third installment: Disbursement of 20% when project attains 80% of
the quantum of generation for the corresponding months as envisaged
in the DPR for a minimum of three consecutive months or 80% annual
cumulative generation whichever is applicable.
iv. The total financial support, for project set-up by the developer fully
through its own resources, will be released directly after successful
commissioning of the project :
1. First installment: Disbursement of 80% on successful
completion of the project, fulfillment of performance guarantee
tests/ testing & certification of performance, physical inspection
of the project and the commencement of commercial
generation.
2. Second installment: Disbursement of 20% when project attains
80% of the quantum of generation for the corresponding
months as envisaged in the DPR for a minimum of three
consecutive months or 80% annual cumulative generation
whichever is applicable.
e. Eligibility Criteria
i. The request on application form along with documentary proof, for the
grant of financial support for SHP project, complete in all respect from
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
12
the developer should be submitted to the Nodal Agency within six
months from the achievement of financial closure of the SHP project.
ii. The SHP project shall achieve the COD within a defined time limit (say
4/5 years) from the date of achievement of financial closure. In case of
failure of SHP project to achieve COD within the defined time limit, the
project shall become ineligible for capital subsidy.
iii. In case the SHP project is set-up by the developer fully through its
own resources, the SHP project shall achieve the COD within a defined
time limit (say 4/5 years) from the date of signing of implementation
agreement with the State Govt./Agency. In case of failure of SHP
project to achieve COD within the defined time limit, the project shall
become ineligible for subsidy.
f. Extension limits under scheme :
i. Grace Period: a grace period of 12 months can be provided ONLY in
case the project suffers due to natural calamities which results in
delays during execution of project.
4. MNRE can consider providing separate incentive for State agencies to encourage
timely commissioning of SHP projects. MNRE, with assistance from AHEC, can a fix
maximum time limit for commissioning a specific project after signing of
implementation agreement for eligibility of incentive. Incentive to be disbursed as
INR per MW and disbursed to State agency (SNA/Utility) after commissioning of SHP
capacity.
5. Institutional Strengthening
a. MNRE can develop a web tool/application to provide a single point integrated
platform to support SHP development across states. The tool/application shall
provide clarity on checklist and data inputs required from developers, status
of application, and instructions/alert to state agencies (SNA, Utilities, other
State & central agencies as applicable) on action required & processing,
output reports & additional information to support installation.
b. The web tool development can be funded by MNRE and adequate training &
capacity building can be provided to State agencies, SHP developer
associations, AHEC etc. For initial one year of implementation, MNRE can
support an IT cell to facilitate streamlining of the IT application roll-out. From
a sustainability perspective, MNRE can evaluate a government institution to be
responsible for maintaining and upgrading the IT tool/application.
6. Support for Water mills
a. MNRE to continue providing financial support under water mills scheme.
b. MNRE to explore better watermill runner designs which can operate efficiently
under low and variable flow conditions.
c. Training centers across different regions shall be identified in each state to
facilitate ongoing initiatives for spreading awareness and implementation of
watermill programs.
d. Encourage development of better revenue models for water mills scheme in
consultation with State agencies like net metering which can help watermill
owners create savings from surplus electricity post consumption. This can also
incentivize traditional watermill owners to upgrade to electric watermills or
install a hybrid system.
7. Support for setting up of Micro hydel projects upto 100 kW capacity
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
13
a. MNRE to continue providing financial support for micro hydel project upto 100
kW capacity
b. MNRE should give priority to rural/remote areas, especially off-grid and mini-
grid for encouraging implementation of micro hydel project upto 100 kW
capacity.
8. Resource Assessment
a. MNRE should strengthen database for resource assessment/hydrological data.
For this MNRE should reassess/evaluate the small hydro potential in the
country on regular basis (every 3 years).
b. MNRE should to create a credible online databank for hydrological data.
c. MNRE to undertake study with objective that SHP potential spread across
different regions is categorized from the perspective of its ease of harnessing
– this can be done by defining the attractiveness of potential based on:
nearest power evacuation infrastructure, access road, water availability, forest
land etc. The categorization shall result in ranking the SHP sites based on
their attractiveness.
d. MNRE to take initiative to standardize the DPR preparation process and
enhance quality of DPRs. Online tool proposed to be developed by MNRE can
be used for standardization of DPR preparation and having appropriate checks
& balances to check quality of DPR.
9. R&D and Human Resource Development
a. MNRE should develop network of Regional Centres of Excellence to support
development of SHP. At least, one institution in each region should be
identified to spearhead the R&D and training initiatives, with AHEC providing
the guiding framework.
b. MNRE through AHEC to prepare e-learning training platform with focus on
areas like DPR preparation, construction & installation, O&M, technical
standards etc. Specialized courses for technicians can be taken up to meet the
requirement of skilled manpower for field installations and O&M.
c. Online certification courses can be developed by AHEC.
d. MNRE to explore potential of providing access to e-learning modules to other
countries to enhance partnership in SHP segment.
e. MNRE to undertake a detailed study and consultations to identify the thematic
areas for R&D and training capacity building. MNRE should prepare a detailed
roadmap for undertaking activities in the next 3 years.
10. Regulatory Interventions
a. National Tariff Policy (amendment) has provided waiver in inter-state
transmission charges and energy losses for transmission of Solar and Wind
Power. SHP projects are reliable RE source and encouraging inter-state trade
shall assist SHP developers. It is proposed that MNRE should initiate review of
the same to provide similar benefit to SHP projects.
b. Capital cost considered by a number of SERCs is lower than CERC values. It is
important to ensure regulatory push to consider the cost variations while
determining tariff for SHP projects.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
14
1 Introduction
1.1 SHP in India
The Ministry of New and Renewable Energy (MNRE) has been entrusted with the overall
responsibility of development of small hydro sector in India. Small Hydro Power (SHP)
projects are classified into different categories as per installed capacity. The following
table provides details of the SHP projects classification.
Table 1: SHP Projects classification in India
Grid connection mode Category of projects Installed capacity limits
Grid Connected Micro Hydro Projects Up to 100 kW
Mini Hydro Projects 101 kW to 2,000 kW
Small Hydro Projects 2,001 KW to 25,000 kW
Off-Grid Mode Micro hydel projects
(MHP) – Off grid mode
Up to 100 kW (as per MNRE
subsidy scheme for SHP)
Water Mills (WM) – Off
grid modes (mechanical /
electrical output)
Up to 5 kW (as per MNRE
subsidy scheme for SHP)
1.2 Key objective of the assignment
MNRE has been implementing the SHP Program and under this program, around 600
SHP projects (public and private) have been supported by the ministry.
The Ministry is now in the process of evolving the program/ scheme for the next five
year period. It would like to evaluate the current status of the SHP Program and
schemes for their effectiveness in achieving the stated objectives during the 12th Plan
period and make appropriate changes for the roll out during the next five year period.
This assignment was undertaken to undertake evaluation of MNRE programme / scheme
implementation during 12th Five Year Plan period and propose changes in the design for
SHP Program. This included primary surveys of the SHP projects across states which are
under implementation/ completed.
The overall objective is to provide recommendations pertaining to changes in existing
models, redesign policy and programme evaluation measures for MNRE SHP programme
with a short term and long term perspective.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
15
2 Small Hydro Power sector in India
2.1 SHP Capacity development
With energy security and climate change concerns taking center stage in the policy arena,
Renewable Energy (RE) has become an important part of the energy sector initiatives in
India. To this effect the government has set aggressive targets and has put in place several
incentives and policy initiatives (for both grid connected and off-grid).
The installed capacity mix for electricity generation has undergone significant change in
recent years, with the share of RE capacity reaching 18% by March 2017. Growth of
renewable energy across different technologies is given in the figure below:
Figure 1 : RE Capacity addition trend
Source: CEA/MNRE
It can be observed that growth of renewable energy technologies has been exponential
mainly led by two technologies viz solar and wind power. Wind energy continues have
higher rate of capacity installation within RE sources.
The current progress of the RE target is as below:
Table 2: Achievement status of RE projects
Source: MNRE
The Govt. of India targets achieving 175 GW by the year 2022. The target comprises of
100 GW of solar power, 60 GW of wind power, 10 GW of biomass power, and 5 GW of
small hydro power (SHP).
0
10000
20000
30000
40000
50000
60000
FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17
Insta
lled C
apacity (
MW
)
YearWind Solar Bio- Mass WTE SHP
Sr. No. RE technology Cumulative Achievement in MW
(as on 31.03.2017)
1 Grid Interactive Solar Power 12,288
2 Grid Interactive Wind Power 32,279
3 Bio Power 8,181
4 Waste to Power 114
5 Small Hydro Power 4,379
Total 57,244
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
16
The capacity additions for the small hydro power sector has grown at a CAGR of 9%
since FY 2008. However, the growth has slowed down over the last few years as shown
in the graph below. The main reason for slow progress is the lack of private sector
participation in SHP projects, developing on difficult terrain in hilly areas, involvement of
private and forest land in the SHP boundary, inability to fix a proper boundary by project
developers for SHP projects, allotment and obtaining statuary clearances for
establishment of SHP projects among others.
Figure 2: SHP annual capacity additions
Source: MNRE Annual Reports, CEA Report
2.2 SHP Potential in India
The potential of the small hydro projects in India as per MNRE data (as on June 2016) is
estimated at 21,135.37 MW. This potential is large enough to meet the local demand
both in the form of electrical power as well thorough mechanical outputs (Water Mills,
etc) in remote areas.
State wise distribution of SHP potential is listed as per table below.
Table 3: Summary of Total Potential SHP Project capacities across States
S No.
State/ UT
Run of River Dam Based Canal Based Total
No. MW No. MW No. MW No. MW
1 Andhra Pradesh
1 0.2 15 88.95 437 422.51 453 511.57
2 Arunachal Pradesh
800 2064.91 0 0 0 0 800 2064.92
3 Assam 103 196.99 0 0 3 5 106 201.99
4 Bihar 2 0.42 5 7.5 132 519.06 139 526.98
5 Chhattisgarh 130 892.91 36 89.72 33 115.57 199 1098.2
6 Goa 0 0 7 4.7 0 0 7 4.7
7 Gujarat 21 42.55 3 18 268 141.42 292 201.97
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
17
S No.
State/ UT
Run of River Dam Based Canal Based Total
No. MW No. MW No. MW No. MW
8 Haryana 0 0 0 0 33 107.4 33 107.4
9 Himachal Pradesh
1049 3,460.34 0 0 0 0 1049 3460.34
10 Jammu & Kashmir
302 1707.45 0 0 0 0 302 1707.45
11 Jharkhand 76 89.2 1 1 44 137.76 121 227.96
12 Karnataka 387 2,667.41 17 122.5 214 936.59 618 3726.49
13 Kerala 209 431.42 17 152.13 12 63.6 238 647.15
14 Madhya Pradesh
112 302.53 109 405.2 78 112.72 299 820.44
15 Maharashtra 94 252.02 44 277.43 132 257.01 270 786.46
16 Manipur 110 99.95 0 0 0 0 110 99.95
17 Meghalaya 97 230.05 0 0 0 0 97 230.05
18 Mizoram 71 160.9 1 8 0 0 72 168.9
19 Nagaland 92 115.18 6 67 0 0 98 182.18
20 Orissa 63 84.54 9 36.31 148 165.37 220 286.22
21 Punjab 38 56.9 11 0.51 326 520.87 375 578.28
22 Rajasthan 0 0 9 4.87 55 46.8 64 51.67
23 Sikkim 88 266.64 0 0 0 0 88 266.64
24 Tamil Nadu 101 438.9 37 125 53 40.56 191 604.46
25 Tripura 6 38.01 2 5.5 5 3.35 13 46.86
26 Andaman & Nicobar
Islands (UT)
7 7.27 0 0 0 0 7 7.27
27 Uttar Pradesh 2 3.05 30 142.23 220 316.97 251 460.75
28 Uttarakhand 434 1,655.31 0 0 8 9.01 442 1664.31
29 West Bengal 95 272.04 5 1.62 79 118.41 179 393.81
TOTAL 4,490 15,537.07 364 1,558.16 2281 4,040.14 7135 21,135.37
Source: MNRE Data
The following 6 states having SHP potential of more than 1 GW contributes close to 65%
of the total SHP potential in the country.
Arunachal Pradesh
Chhattisgarh
Himachal Pradesh
Jammu and Kashmir
Karnataka
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
18
Uttarakhand
The potential of Run of River (ROR), Dam based (DB) and Canal Based (CB) type of
projects are distributed across geographies with most ROR is in Northern / NE region of
hilly areas while Dam based and canal based projects potential in the Southern / other
States (Punjab etc.) having relatively flat terrain in India.
2.3 Key drivers for SHP projects in India
One of the important drivers for SHP project development has been the support of MNRE
incentives for developing SHP projects. SHP is also a part of the 175 GW RE target set up
by MNRE for the year 2022. Various states also provide incentives to developers of SHP
as such projects benefit local communities through access to electricity and livelihood
generation.
Historically development of SHP in
India has been also supported by
international organizations such
as the World Bank. States also
encourage SHP as a part of their
renewable purchase obligation
targets. Government provides
various incentives to developers
such as tax holidays, duty
exemptions, and facilitation for
creation of evacuation
infrastructure.
The small hydro sector
development has been influenced
by a number of events or
initiatives of policy makers and development institutions. This following summarizes
these initiatives and events:
The UNDP GEF Programme for Small Hydro – The UNDP-GEF Indian Hilly Hydro
Project was launched in 1994 with the objective of developing a national strategy and
master plan for optimum utilization of small hydro resources of Himalayan and sub
Himalayan region. The project was aimed at developing 20 demonstration projects
including management and ownership structure models for these plants. The project
was successful in developing and promoting the concept of community participation
and management of SHP and watermills for rural electrification. Another end result of
the project was the development of a firm programme for small hydro promotion in
India.
The MNRE Renewable Energy Tariff – The MNRE, as a precursor to the Feed in Tariffs
being offered by the various State Electricity Regulatory Commissions (SERC’s)
today, had offered a tariff of Rs 2.25 per unit in 1993-94. This tariff had a 5%
escalation factor for the first five years and was valid for period of 20 years. The
presence of this tariff allowed a number of private sector developers to set up their
own small hydro power plants in the absence of a large tax incentive or a huge
subsidy programme.
Electricity Act 2003 and consequent changes in industry structure – The Electricity
Act, 2003, which came into force on 10 June 2003, brought about wide-ranging
changes to the structure and operation of the industry. Generation was liberalised
and the techno-economic clearance of CEA was no longer mandatory except for
hydro generating schemes with very high capital expenditure. The introduction of
Open Access, provisions for trading and power market development altered the
feasibility of generation capacity addition from a wide variety of sources in the
country including small and large hydro.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
19
State Hydro Policies – A number of states (such as Himachal Pradesh and
Uttarakhand) devised their own hydro promotion policies, specifically to encourage
private participation in the sector, in line with recommendations in the National
Electricity Policy. In these policies, these states introduced centralized procedures for
land acquisition and other approvals/clearances for speedy implementation of
hydroelectric projects. Till now States namely, HP, Uttarakhand, Uttar Pradesh,
Punjab, Haryana, Madhya Pradesh, Karnataka, Kerala, Andhra Pradesh, Tamil Nadu,
Orissa, West Bengal, Maharashtra and Rajasthan etc. have announced policies for
setting up commercial SHP projects through private sector participation. The facilities
covered under these policies by the states include wheeling of power produced,
banking, attractive buy-back rates, facility for third party sale, etc.
The World Banks 2nd Line of Credit (LoC) – The World Bank provided IREDA, a LoC of
US $ 135 million for the implementation of India: Second Renewable Energy Project.
The broad objectives of this LoC was to increase power supply through investments
in Small Hydro Project (SHP) schemes and mobilize private sector investments in
renewable energy especially small hydro. This LoC supported 45 projects; out of
which more than 35 projects had been commissioned till March 2008. The 2nd LoC
was responsible for facilitating the entry of a number of players into the small hydro
sector. The 2nd LoC also allowed IREDA to provide concessional financing towards the
small hydro sector which in turn allowed the sector to reach a certain amount of
critical mass.
Feed in Tariffs for Small Hydro – A Preferential Tariff / Feed-in Tariff is an instrument
used to encourage the adoption of renewable energy through government legislation
by the electricity utilities. A FIT obligates these utilities to buy renewable electricity at
rates which are guaranteed over a certain period of time and vary with technology
and level of market development. Most of the states have now issued tariff orders
detailing a feed in tariff for small hydro. Feed in tariffs are crucial for the small hydro
sectors development as no other incentive (except CDM financing) is available for
small hydro projects.
However, recent step of MNRE in releasing a competitive based bidding process (draft)
for the SHP projects is a step towards creating enabling market conditions for sector
growth. It is customary to evaluate the options at times to ensure that such measures
will lead to success of the SHP proliferation uniformly across sectors in the Country on a
large scale.
2.3.1 Value Chain in SHP
As per MNRE, the manufacturing capacity for SHP in India is close to 400 MWs1 per year.
About 27 manufacturers are equipped which can supply the full range of SHP equipment
are registered with MNRE. Manufacturing capacity in India is also directed towards
exports, with most European companies in small hydro technology also present in India.
There is a focus on turbine technology which can cater to geographies with low head
such as canals, fall structures, dam outlets, and small streams.
New technology such as permanent magnet generator which can manage variability of
discharge in streams has become available along with improvements in control system
for SHP. Considering that the potential for growth in small hydro is also high at a global
level, policy measures can be implemented which enables SHP turbine manufacturing in
India to also aim for export opportunities.
1 MNRE
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
20
2.4 Key issues in small hydro Sector
Issues such as construction in difficult terrains, land availability, power evacuation, tariff
levels, financing, and lack of hydrological data can be considered as central to the SHP
sector today. The details of these issues are described in below sub sections.
2.4.1 Pre-Construction
Resource assessment / lack of hydrological data: There is a lack of reliable
hydrological data required for assessing financial and technical feasibility of SHP
projects in the various regions of India. Data which can provide information on the
intermittent flow of water is vital for estimation of energy generation / CUF of the
potential SHP project site.
Inaccurate or inadequate data leads to faulty design parameters and may result in
financial losses over a lifetime of project;
Various approvals and clearances such as techno-economic clearance, land allotment
approval, Forest clearance, and Water rights by State irrigation departments, NOC
from Fisheries and State Pollution Control Board (SPCB) have been reported to have
lengthy timelines and procedures vary from State to State.
2.4.2 Construction
Remote location in hilly and mountainous regions pose several infrastructural
constraints, which increases the risks related to timelines in setting up SHP projects.
The hurdles due to locations further prolong the time lines required to set up SHP
projects when compared to other RE projects.
These hurdles also increase the risk of cost overruns.
2.4.3 Land availability
Land acquisition has been a cause of delay.
States have also give low priority to SHP due to higher focus on large scale power
plants.
High costs of land for SHP development is an issue.
Developers have to face delays in land acquisition or petition district administration
or negotiate to bring the cost of the land down.
2.4.4 Power evacuation
Distributed nature of projects usually at remote locations with limited or no
evacuation infrastructure.
Small size of projects which usually means limited economic viability for stretching
transmission lines only for the project
Transmission lines usually pass through forest areas – clearances for transmission
lines faces delays – often delaying projects
Acquiring land for transmission and other infrastructure projects proves difficult and
time consuming
Lack of guarantee from transmission companies for performance of evacuation
infrastructure
Dependence on low capacity rural networks for evacuation of power
SHP developers have to incur substantial cost for evacuation of power generated
from the renewable energy based projects.
2.4.5 Tariff
States across India have a varying tariff structure and given the unique nature and
risks involved for each SHP project developer, tariff levels are generally insufficient to
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
21
attract investments. The SERC benchmark tariffs are much lower when compared to
CERC determined SHP tariffs.
2.4.6 Financing
The risks associated with SHP project results in an increase in the cost of borrowing
for developers. This makes SHP projects unattractive when compared to other RE
technologies.
2.4.7 Operational Issues
Old Turbines running at low load factor: Efforts of the Government is to develop new
technology and engineering solutions such as low head turbines to set up low / ultralow
head (below 3 m) SHP projects.
High silting issues in certain river basins results in high level of O&M cost for developers.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
22
3 SHP Policy & Regulatory Review
3.1 National level Policy review
The Government of India has set a target of 5 GW of SHP installation by year 2022.
Perennial or intermittent flow of natural water streams in hilly areas of India as well
canals and other types of small flow capacity streams from dam outlets provides
excellent opportunity for Small Hydro Projects to tap this untouched potential to meet
the demand of local communities residing in hilly and remote areas.
SHP is considered to be a very effective way of power generation for these rural far flung
areas and have potential to transform the livelihood and economic opportunities at local
level across geographies in the Country. Considering the need of the remote and rural
areas economic / livelihood remote electrification, Government (MNRE) is aiming towards
generating competitively priced Small Hydro Power (SHP).
Ministry of New & Renewable Energy (MNRE) is providing policy support in the form of
capital subsidy, central financial assistance & other initiatives for the SHP sector. One of
the aims of promotion of Small Hydro Power of the Government of India and State
Governments is to enrich socio-economic status of remote and rural areas in power
generation.
The types of financial incentives principally are divided into incentives for grid connected
and off grid respectively. Some of the highlights of MNRE schemes under various
categories are indicated below.
Table 4: MNRE Incentive Schemes for SHP2
S No Category of
Subsidy
Description Amount of subsidy
1 Resource
assessment
Scheme to support site
identification, preparation of
DPR, site surveys,
investigations etc.
INR 6 Lakh for up to 1 MW
station capacity
INR 10 Lakh for more than
1 MW and up to 25 station
capacity
2 Private sector
setting up
SHP projects
New SHP projects in private
/ cooperative, Joint sector
etc.
Special Category States
(NE, HP, Uttarakhand &
J&K): INR 1.5 Crore per MW
Other States: INR 1 Crore
per MW
Limited up to INR 5 Crore
per project for both
categories
Capacity limits- Above 0.1
MW and upto 25 MW
3 Government
Sector SHP
New SHP projects in
Government Sector
Category of projects –
above 100 KW & upto 1 MW
Special Category States
(NE, HP, Uttarakhand &
J&K): - INR 75,000 per kW
Other States: INR 35,000
per kW
Category of projects -
above 1 MW & up to 25 MW
2 MNRE SHP Programme, subsidy scheme for SHP
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
23
S No Category of
Subsidy
Description Amount of subsidy
Special Category States
(NE, HP, Uttarakhand &
J&K): INR 7.5 Crore per MW
Other States: INR 3.5 Crore
per MW
Limited CFA up to INR 20
Crore per project for both
categories
4 Renovation Renovation and
modernization of existing
SHP Projects in Government
Sector
All States and UTs
Up to 1,000 KW: INR
10,000 per kW
Above 1 MW & upto 25 MW:
INR 1 Crore per MW limited
to INR 10 Crore per project
5 Water Mills
(WM) &
Micro Hydel
Projects
(MHP)
Support for development /
modernization of Water mills
(Mechanical / electrical
output) and setting up MHP
projects up to 100 kW
Mechanical Output only:
INR 50,000 per Watermill
Electrical output or
combined mechanical/
electrical output – INR
1,50,000 per Watermill
Maximum size of Watermill
for availing benefit – 5 kW
For MHP project upto 100
kW capacity – INR 1,25,000
per kW
6 Research &
Development
Financial support for
Research & Development
and Capacity Building
Upto 100% of the activity
cost for capacity building on
case to case basis
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
24
4 Analysis - Key findings from Project
Survey & Review
4.1 Approach for Survey
As per the scope of work of this assignment, the overall impact of the SHP scheme was
assessed through direct data collection from the field visits and conducting consultations
with key stakeholders like the project developers, nodal agencies, etc. The scope
required undertaking sample for the proposed 50 field visits covering small hydro as well
as water mills. Based on discussion with MNRE, the following states were shortlisted for
undertaking the survey:
8. Arunachal Pradesh
9. Uttarakhand
10. Karnataka
11. Himachal Pradesh
12. Andhra Pradesh
13. Punjab
14. Kerala
The objective was to have geographical coverage and cover different types of SHP sites.
The summary of sites (SHP & water mill) covered across different States is detailed in
the figure below:
Figure 3 : Geographic spread of field visits
For undertaking the survey, a structured questionnaire and formats were prepared for
the collection of data from various stakeholders. The templates were discussed with
MNRE to ensure the coverage and to draw clear outcomes from the field visits. The list
of projects covered under field survey is detailed in Annexure 1.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
25
The site survey was completed across the shortlisted states and this section highlights
the key findings of the survey covering technical, commercial, financial, policy, training &
capacity building, R&D etc. related aspects. The objective is to highlight the learnings
which will provide guidance on identifying the key support areas required under the
MNRE scheme.
The summary of key findings is detailed below.
4.2 Technical Analysis
4.2.1 Power Evacuation
Development of adequate power evacuation infrastructure especially for SHP’s - One of
the most crucial issues/ barriers in the up-scaling of small hydro is interconnection
between the plant and the nearest grid substation. In a number of cases it has been
seen that SHP plants are situated in locations far away from the grid. Therefore
providing grid extension up to the SHP plants to off-take the power puts additional
financial burden either on the licensee or the developer and in cases where funds for
development of such infrastructure us limited, this impedes the process of hydro
development in the region and state.
Essentially evacuation infrastructure availability is among major issues faced by SHP
projects due to the following reasons:
Distributed nature of projects usually at remote locations with limited or no
evacuation infrastructure.
Small size of projects which usually means limited economic viability for stretching
transmission lines only for the project
Transmission lines usually pass through forest areas – clearances for transmission
lines faces delays – often delaying projects
Acquiring land for transmission and other infrastructure projects proves difficult and
time consuming
Evacuation transmission infrastructure development is delayed due to lack of efficient
engagement procedures with local communities
Lack of guarantee from transmission companies/ discoms for performance of
evacuation infrastructure
Dependence on low capacity rural networks for evacuation of power
Based on the survey feedback, the critical Factors that need addressing for evacuation
are indicated below:
Lack of adequate transmission capacity – Lack of adequate transmission capacity is a
generic issue across the Northern and North Eastern states ranging from HP,
Uttarakhand and Arunachal Pradesh.
In case of Himachal Pradesh, areas such as Kullu, Lahaul & Spiti, Kinnaur,
Pangi and Chamba Valley are currently facing evacuation problems with the
rest of the state having adequate capacity for the moment. This lack of
adequate evacuation infrastructure has impacted the development plans of a
number of developers.
In the North East, the problem of lack of adequate evacuation infrastructure is
very acute. Developers have to lay transmission infrastructure for long
distance, which increases the land cost.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
26
Lack of adequate and optimal planning for future SHP potential: Transmission
planning undertaken usually with only large hydro projects in mind and as a result
small and medium hydro projects suffer. The main reason for this is that no state
level plans were available for the development of adequate evacuation infrastructure,
especially integrated plan for developing RE potential in the state including with a
focus on SHP. With development of resources in a specific region, SHPs face issues
with congestion since region’s transmission capacity does not keep pace with SHP
installations.
Lack of synergy between project site allocations and transmission development:
Limited consultation or planning takes place between the state transmission company
and the State Nodal or Development Agency for sites that are in the process of
development or are likely to be bid out in the near future. Often lack of adequate
evacuation infrastructure or delays in evacuation infrastructure development forces a
number of players to delay their projects. There is a need to bid out new sites based
on a joint plan between the State Nodal Agency and the state transmission company.
Site allocation independent of state transmission plan – focus on self-identification of
sites can at times further complicate matters.
Delay in Transmission Projects – Delay in transmission plans due to factors such as
lack of funds with the State Transmission Utilities (STU) can also impact SHP
development. A number of agencies also face delays in obtaining clearances from
forest authorities for development of evacuation infrastructure.
Evacuation Infrastructure might be an issue for self-identified projects - If the project
is a developer identified project and is located in an area where the evacuation
infrastructure is either not available or is inadequate, it would become an issue for
the state transmission company to provide this infrastructure, especially for a small
hydro project. In case of state allocated projects, the state agencies can consult and
allot projects keeping in mind the present and future evacuation infrastructure
development.
Some of the examples related to power evacuation in Himachal Pradesh are
below:
Substation and the grid has not been strengthened to accommodate new capacity which
results in overloading and curtailment of generation. Sai Engineering Foundation (TOSS
SHP) - grid outages results in lower PLF (40%) – no compensation framework
Kapil Mohan & Associates (Beas Kund & Jirah SHP) mentioned that the substation
charges are to be paid extra however there is no commitment of availability.
Non-availability of power evacuation resulted in COD delay by 1 year (Baragaon 24 MW
SHP – Kullu).
Heavy snowfall results in breakage of transmission lines resulting in power evacuation –
at times 2-3 months in a year (not regular)
Generation Back Down and Line Loading During Peak Season
SHP connected to Low voltage levels 11 kV are facing issues of generation back
downs from DISCOMs during low demand in near by areas.
Power evacuation line loading issues has been observed in beas kund, Jirah and
Aleo II projects in Himachal Pradesh (back-down upto 10%)
Binva IV developers states that in peak season such as December and January,
plant has to shutdown for 1-2 hours daily due to low production and high
demand resulting in voltage issues
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
27
Arunachal Pradesh
Due to lack of appropriate grid infrastructure across the state, most SHP power
plants function in isolation mode. Frequency fluctuations are also very high. Both
these factors results in high wear and tear of machines.
Grid breakdown is very frequent due to issues related to terrain and weather
The figure below provides an overview of typical distance of SHP projects to the nearest
sub-station as well as key evacuation issues faced by developers.
Figure 4 : Power Evacuation issues
Some of the examples related to power evacuation in Uttarakhand are below:
Heavy snowfall results in breakage of transmission lines resulting in power
evacuation issue for continuous 1-2 months in a year (not regular)
Issue of power evacuation is more prevalent in Garhwal range projects (Gangani
and Badyar) in Uttarkashi belt
Regulator does not charge for line capacity usage proportionately. Bhilangana III
SHP developers stated that regulator is charging the full line capacity charges
incurred for setup from them since other plants which are planned in the valley
have not come up yet.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
28
4.2.2 Resource assessment
Available flow is the major input parameter, besides hydraulic head, that is responsible
for the amount of energy that can be produced by a SHP. It is determined through a
hydrological study that considers flow measurements, catchment area, precipitation, and
flow distribution during the year. Statistical analysis of the hydrology of potential sites
requires sufficient period of flow monitoring or precipitation monitoring.
Development of SHP requires having good hydrological data and promotion of initiatives
to support the same. MNRE has a dedicated scheme “FINANCIAL SUPPORT FOR
IDENTIFICATION OF NEW POTENTIAL SHP SITES AND PREPARATION OF PLAN AND
PREPARATION OF DPR”. Some of the key features of the scheme are:
The Ministry will provide financial support for the overall estimation of potential of
SHP projects in a State, identification of new potential SHP sites and for the
preparation of Plan for systematic SHP development including environment impact
assessment etc., in the State. The Ministry would also support specialized studies for
remote / border areas to prepare plans for setting up Micro Hydel Projects (MHPs) in
such areas and strengthening of data base for potential SHP sites. These studies will
be supported on case to case basis.
The financial support of ' 6.00 lakh for each project upto 1.00 MW capacity and 10.00
lakhs for each project with more than 1.00 MW & upto 25 MW capacity to the
State Govt. dept./agencies/local bodies will be provided for preparation of Detailed
Project Report (DPR) including detailed survey & investigation (DSI), or actual cost
incurred in this regard, whichever is less.
The DPRs for run-off-river projects are required to actually carry out all types of
detailed investigation studies at the project sites including collection of daily
discharge data for a period of 18 months inclusive of a minimum period of two lean
seasons, after submission of proposal including pre-feasibility report to the Ministry.
However, in case the project sites are located at irrigation canals, dam toe etc. where
the discharge is generally being measured by the Irrigation or other Govt.
organizations on regular basis, the implementing agencies may use the available
discharge data of two lean seasons which should have been collected within the
preceding five years, in preparation of DPR. Actual measurement of discharge data is
exempted in these cases, if not required.
DPR shall have provision of release of State Government specified mandatory
Environment Flow (minimum flow) throughout the year. In the States where such
recommended value does not exist, 15% of average flow of three (3) lean months
shall be released at the diversion part as Environment Flow (minimum flow).
A number of developers have highlighted regarding the importance of hydrological data
and in certain cases it has been pointed that the hydrological data has changed over the
years. Irregular perennial or intermittent flow of water data is a vital information for
estimation of energy generation / CUF of the potential SHP project site. Inaccurate or
inadequate data leads to faulty design parameters and may result in financial losses at a
later stage of the project.
Some of the inputs regarding this issue is indicated in table below:
Table 5 : Resource assessment issues
State Description of issue
Himachal
Pradesh • Baragaon SHP project (24 MW) has observed with a
hydrological changes impacting water availability
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
29
State Description of issue
Uttarakhand
• Actual output variation from the approved DPR due to limited
data on resource assessment
• Sarju 3 developers indicated absence of standard guidelines for
investigation of resource
• Bhilangana III (UT) developers stated that such deviations
which are out of the control of developers should be considered
in the Tariff since revenue is directly linked to such variations.
Kerala
• Iruttukanam(Kerala) project developer indicated that their
generation goes down to 19 MUs during a poor monsoon from
24.8 MUs which is an average annual generation. Resource
variability needs to be captured appropriately.
It has been emphasized that hydrological data is not upto mark and impacts the viability
of the project. Also, it’s pointed out that State agencies need capacity building to have
the requisite capability to provide credible data. Limited credible data bank is available
for developers.
From MNRE perspective, the identification of new potential sites is an ongoing
process and with a view to induct efficient and new technologies.
It is important that MNRE initiate the process to reassess/evaluate the hydro
potential in the country to harness the hydro potential, clearly detailing low head
and ultra-low head sites including existing SHP Projects.
Development of credible hydrology database will assist developers.
State agencies to prepare a plan for undertaking re-assessment of SHP potential.
MNRE and State agencies can evaluate adopting cluster based potential
assessment.
Change in hydrology is a risk faced by developers. It is important that MNRE to
evaluate this issue mainly from the perspective of already installed SHPs and
develop an approach to quantify the financial impact on developers &
methodology to adjust it under regulatory framework. This can be discussed with
SERCs to evaluate inclusion of specific provisions in SHP PPAs to mitigate risk
related to change in hydrology.
Limited awareness of first time developers for significance of a quality DPR &
good potential assessment has been an issue. In a number of cases, the
developers have indicated increase in cost during construction due to poor quality
of DPR. Also, lack of awareness towards standard operating process for
preparation of DPRs limits their ability.
4.2.3 Availability of Water
Available flow is of utmost importance for site selection of SHP project. The amount of
water and its annual distribution affects SHP project viability. When selecting a site and
estimating energy generation, it is crucial to consider hydrological flow and other factors
that may impact flow available for generation, including minimum flow (a combination of
environmental and social requirements, such as ecological requirements, irrigation usage
and water supply), leakage, and evaporation.
During the stakeholder interaction, water availability as a constraint was highlighted by
developers in Punjab & Karnataka.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
30
Table 6 : Water Availability issues
State Description of issue
Punjab
Water availability in Canal: Select canal projects on Abhor
Bhatinda Branch canal projects are suffering from contracted
capacity of available water in the canal since during high demand
seasons water availability for the SHP is only 50-60% of the rated
capacity.
Head design : SHP Projects have been identified with operating
at lesser output as compared to rated due to unavailability of
head in actual operation as compared to DPR values
Impact of Agriculture pattern : SHP Project outputs varies to
a great extent on the cropping pattern (wheat, sugarcane, paddy
etc)
Karnataka
Aramedanhalli MHS has not generated any electricity due to lack
of sufficient availability of water in the canal in the last two years.
This has adversely affected the profitability of the project. Some
form of capacity availability fixed tariff would have helped.
It is important that these factors are considered while preparing the DPR of the SHP
projects.
4.2.4 O&M cost of SHP projects
Experience of running hydropower station reveals that even after detailed project
planning/quality control measures taken at various stages from inception to
commissioning, several unforeseen problems do take place during the operation and
maintenance resulting in forced outages/low generation and load shedding etc. causing
economic loss. Given the nature of a SHP project, there is a significant amount of
customization that feeds into design, manufacturing, erection, commissioning, and O&M.
The equipment some time cannot be fully assembled or tested at Manufacturer’s Shop.
Maintenance exercise at predetermined time interval is therefore, planned to ensure the
following objectives are met:
i) Quality and reliable operation of equipment on long term basis through identified
periodic inspection/checking of components and subsequent replacement
/rectification of worn out/defective parts, wherever required.
ii) Maximum availability of equipment with least number of shut downs by ensuring
that the rate of deterioration of any component does not exceed the life
expectancy of the equipment at any stage. Periodic/planned shut downs should
be arranged to avoid long term forced outages.
iii) Eradication /non-repetition of operational problems by timely analysis of the
cause of faults/problems and replacement of short term solutions by long lasting
and permanent ones.
The O&M cost for SHP project is an important element of the tariff analysis and from the
below table it can be seen that the O&M cost for SHP projects have increase over the
years.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
31
Table 7 : O&M Cost benchmark - CERC
Project
Size
O&M Cost
FY 2012-13
(Rs
lakhs/MW)
O&M Cost
FY 2016-17
(Rs
lakhs/MW)
O&M Cost
FY 2017 -
18
(Rs
lakhs/MW
Himachal Pradesh,
Uttarakhand, WB
& North-Eastern
States
Below 5 MW 25 31 36
5 MW to 25
MW 18 22 27
Other States
Below 5 MW 20 24 29
5 MW to 25
MW 14 17 21
Source: CERC
The inputs from survey indicates that the O&M cost varies across regions and depending
on river basis, some projects may have to incur higher O&M cost due to high silting in
the river. Some of the inputs collected from survey are summarized in the table below.
Table 8 : O&M issues
State Description of issue
Himachal
Pradesh • Many projects from parts of Toss river basin are found to have
issues of silting causing damage of the turbine blades / unit
Uttarakhand • Projects from parts of Saryu river basin are found to have
issues of silting
Punjab • SHP projects have been identified with huge operation cost 5-
6% of the total capital due to high maintenance requirements
in turbine bearing
Arunachal
Pradesh
• High maintenance cost due to uses of frequent landslides near
the forebay area.
• Frequent breakdown of machines due to functioning in
isolation mode.
• Spare parts for replacement are unavailable in Arunachal and
have to be imported from outside the state which raises cost
and time.
• Accessibility to remote sites is poor which also leads to high
cost and time overruns.
4.2.5 Geological Surprises have impacted projects
The geological situation at a potential SHP site is of crucial importance for power plant
construction and operation. Costs can rise substantially depending on site geological
conditions. First, the foundations of all SHP structures must be adapted to existing
geological conditions, especially those of the powerhouse.
Geological surprises impact development of SHP projects and also result in delay of
project commissioning, as noted in a number of cases.
A number of projects have faced geological surprises:
Sarju 2 (UT) developers faced several geological surprises during tunneling in their
project.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
32
limited expertise to undertake proper geological investigation an issue
Similar experience regarding low design expertise was communicated by
project developers of Dikleri.
Assessment also needs to include impacts due to possible natural calamities.
One of the projects situated in Loharkhet of Bageshwar district (UT) has incurred
heavy loss due to flooding in last two years, complete head race pipe works is
damaged and reconstructed.
In Arunachal Pradesh, landslides are a major source of risk during and post
implementation of the project.
Despite detailed assessment, project development in the Himalayan Region is prone to
geological surprises during construction. This can at times cause delay and add to
estimated project cost. It is necessary to ensure that commercial agreements, such as
the Project Implementation Agreement, signed with the State Government recognize
such surprises and provide for consequent extension of Commercial Operation Date in
case such surprises emerge during the construction period.
4.3 Policy framework
Ministry of New & Renewable Energy has been entrusted with the responsibility of
developing small, micro and mini hydro power upto 25 MW capacity. Water being a
subject in the State List gives the States a decisive say in matters of small hydro power
projects. As the State Governments do not involve themselves directly in the
development of small hydro power projects, the participation of private developers
becomes essential for the development of the sector.
Since 1993-94, the thrust of the MNRE SHP programme has been development of SHP
projects through public as well as private sector investments. Now a large part of
capacity addition is being achieved through private investment. State Nodal Agencies
provide assistance for obtaining necessary clearances, in allotment of land and potential
sites.
As per the Electricity Act, 2003, the State Electricity Regulatory Commissions (SERCs)
have been empowered to decide on various components of the policy such as tariff,
wheeling, banking and third party sale for grid interactive renewable energy based
power projects, in their respective States. The State Electricity Regulatory Commissions
(SERCs) have been deciding tariff in their respective States. These States are: Andhra
Pradesh, Arunachal Pradesh, Assam, Bihar, Chhattisgargh, Gujarat, Haryana, Himachal
Pradesh, J&K, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Manipur, Meghalaya,
Mizoram, Odisha, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, Uttarakhand and West
Bengal.
The policy for Small Hydro Power (SHP) and private sector participation therein, is
governed by the Electricity Act, 2003, the National Electricity Policy, 2005 and Tariff
Policy 2006 announced by the Government of India. Power is a concurrent subject.
Around 23 State Governments have so far announced policy for private sector
participation for the development of SHP projects.
A review of policy framework for SHP indicates an important role played by MNRE as well
as State Governments. The MNRE schemes aim to provide the required support for
implementation of SHP projects across different States through incentive, resource
assessment, initiatives on training, R&D etc. The role of State Government is important
as all the SHP project allocation happens at State level including taking approval &
clearances. This section details the National and State level policy framework and key
issued highlighted during the field survey.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
33
4.3.1 National Level – MNRE SHP Subsidy disbursement framework
CURRENT PROCESS
The MNRE SMALL HYDRO POWER PROGRAMME (upto 25 MW Capacity) provides
incentive framework for promotion of SHP projects. The Ministry of New and Renewable
Energy (MNRE) is encouraging setting up of Small Hydro Power (SHP) projects in the
private sector, joint sector, co-operative sector etc.
The Ministry provides financial support (in the form of capital subsidy) for the new SHP
projects up to 25 MW capacity. The financial support is released in two installments. The
first installment of 50% of financial support is proposed to be released to the financial
institution/bank, after placement of order for electro-mechanical equipment and
disbursement of 50% loan during execution of the project and the balance 50% of
financial support after successful commissioning of project, commercial generation &
performance testing. In case a project is set up by a developer (such as tea garden,
captive power projects etc.) fully through its own financial resources. The total financial
support will be released directly to developer after successful commissioning of the
project & performance testing.
Some of the key steps involved in the current capital subsidy disbursement adopted by
MNRE are:
Developer submits the application form along with all the necessary documents such
as DPR, Allotment letter from state gov./agency, MOU, PPA, Date schedule for
commencement and completion, loan sanction letter, loan agreement letter, and loan
installment release letter.
State gov. dept./agency forwards its recommendation and verifications on the details
given in the application.
FIs/banks will also forward their recommendations & verifications on the details of
the application along with present and proposed financial disbursement.
After completion of project and performance guarantee tests, the developer has to
undertake physical inspection/testing & certification of performance of the project
from AHEC-IIT Roorkee.
Ministry then examines the request and issues “in-principle” approval subject to
fulfilling of all eligibility conditions for the grant of financial support.
OBSERVATION
The survey feedback clearly emphasizes the active role played by MNRE in promotion of
SHP, especially in cases where States have limited capacity. The incentive (capital
subsidy) is indicated as important for the viability of SHP projects as it results in
lowering the tariff and enhances attractiveness of SHP towards PPA signing with Utility.
It has also been pointed out that the capital cost of the projects have increased over the
time, however increase in tariff has not happened in same proportion. Also, capital
subsidy is important considering a number of SERCs separately account for reduction in
tariff on account of capital subsidy provided by MNRE.
A number of developers have clearly indicated requirement for restructuring of the MNRE
subsidy disbursement framework to make it more efficient and speedy. Some of the key
issues/observations are highlighted below:
Procedure to avail Subsidy: The current provision provides that the State Govt.
dept./agency to forward their recommendations & verifications on the details given in
the application with respect to the allotment of project along with present progress &
expected date of commissioning. Recommendations & verifications on the details also
required from FIs/banks. The details requested under the current MNRE scheme are :
Detailed Project Report.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
34
Copy of Allotment letter from the State Govt./Agency.
Copy of MOU with State Govt.
Copy of the Power Purchase Agreement.
Scheduled date of commencement of works.
Scheduled date of completion of project.
Expected monthly and annual generation as per approved DPR.
Copy of the loan sanction letter of the Fl / bank.
Copy of the loan agreement between the Fl / bank and the developer.
Copy of the loan installment release letter certificate.
It is pointed out that above information is verified by multiple agencies (mainly State
agencies) and in certain cases it results in delay. To streamline the process, the
feasibility of subsidy disbursement process & verification to directly handled by State
Govt./agency or financial institutions can be evaluated to reduce the time delay in
the process. MNRE can explore providing upfront capital subsidy to State agency/FIs
based on expected annual SHP development in the State.
Developers indicated that since bank guarantee is taken as a collateral, there should
be relaxation in the list of documents required while availing subsidy.
Pattern of subsidy release: It is observed that the pattern of subsidy disbursement
can be reviewed. Currently, the below is adopted :
The developer is required to inform the Ministry about placement of orders for
electro-mechanical equipment, disbursement of 50% of term loan &
achievement of 50% progress on the project to consider for release of first
installment of financial support.
For release of second installment of financial support, the developer would
further inform the Ministry of successful completion of the project, fulfillment
of performance guarantee tests/ testing & certification of performance,
physical inspection of the project and the commencement of commercial
generation.
The developer would send monthly generation report to the Ministry
after start of commercial generation till the time the project attains
80% of the quantum of generation for the corresponding months as
envisaged in the DPR for a minimum of three consecutive months or
80% annual cumulative generation whichever is applicable. The
developer would also provide proof of energy generation such as
certificate from SEB/Power Transmission Corporation/Company etc.
regarding purchase/wheeling of power. In case of grid failure, the
documentary proof from the SEB/Power Transmission
Corp./Company/Utility should be attached.
At this stage, the Fl would submit a certificate to the Ministry that the
project is not a "non-performing asset" (NPA) and the developer is not
a defaulter. In case, the developer is a defaulter/NPA as per the Fl
norm, he will not be eligible for the financial support.
For the release of second installment, it is observed that due to uncertainty in
resource availability on annual and monthly basis, several developers have requested
to review the requirement for 80% generation for the corresponding months for
three consecutive months. Unavailability of water (even on annual basis) results in
delay for undertaking performance testing, which further delays subsidy
disbursement.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
35
Given the fact that the developer has fulfilled requirement of performance guarantee
tests/ testing & certification of performance, physical inspection of the project, the
commencement of commercial generation; tranche of subsidy can be released on
achievement of these requirement as the project meets the technical requirements
specified by MNRE. On achievement of 80% of the quantum of generation
requirement, a third tranche of subsidy can be released separately without linking it
with satisfying the technical standards requirement at the stage of COD.
Extension limits under scheme: The current scheme provides: “a grace period of 12
months will be available for the commissioning of project from the original schedule
date of commissioning as indicated by the developer in his application due to natural
calamities and for any other unforeseen reasons for delays during execution of
project.
o For any further delay, the financial support would be reduced @ 5% for every
quarter delay in commissioning of the project. The developers should regularly
inform the Ministry if the project is getting delayed along with detailed
reasons.
The current scheme does not provide on maximum time limit to which the extension
can be provided. The inputs from stakeholder consultations emphasize on the need
for penalize non-serious developers.
Process related issues: Developers feel that there is a need to provide clarification on
the documents required for availing a subsidy. Proper guidance on preparation of
documents will also prove to be beneficial. To provide clarity on the approval process,
there should be an online tracking mechanism for pending and under construction
project. The developer should be mandated to provide details on project status
regularly so that same information is available for MNRE and State agencies for
review.
Eligibility Criteria: Under the current scheme, “the request on application form along
with documentary proof, for the grant of financial support for SHP project, complete
in all respect from the developer should be submitted to the Ministry within six
months from the commencement of project work at the site or within six months
from the date of first disbursement of loan from the Financial Institution / Bank
whichever is earlier.
The scheme links the eligibility with commencement of project work at site. It
is proposed that either this milestone should be clearly defined for providing
clarity on conditions resulting in achievement of this milestone or the
milestone can be linked only with date of first disbursement of loan from the
Financial Institution / Bank.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
36
4.3.2 State level – Implementation process
A. Project Allotment and Development
Small Hydro sites across the country are generally identified through two routes. The
first route is where the state agency identifies the site. This can be done either by its
officers posted at the district level, consultants hired by the state or through officers of
the state utilities. In the business as usual scenario the state nodal agencies identify the
sites. The second route is that of identification of site by the developers themselves. The
mechanism for the allotment of the site differs based on the route used for identification
of the site.
The State SHP policies allows for project allotment under different routes. Typically these
are:
Self-Identified Projects –For sites below 2 MW or 5 MW, the project is allocated to
the project identifier. However for projects larger than 5 MW, a bid is invited for the
project and after the bid the project identifier has the option of making or matching
the highest bid and getting the project allocated. In case of self-identified projects,
developers are responsible for developing the Pre-feasibility Report (PFR), requesting
for allotment and once allotted preparing the Detailed Project Report (DPR) and
commissioning the project.
State Identified Projects – In case of state identified project sites, the state or the
state sponsored agencies may identify projects of any size, prepare the PFR and
allocate the site based on the following criteria:
MoU Route – Under this route the state agency invites applications for sites.
The allotment is then undertaken on the basis of the technical and financial
capability of the developer. Based on a technical and financial ranking of
developers, the state agency allocates the project to the most suitable
developer. For example, in case of Himachal Pradesh, the project allotment is
undertaken by marking and then ranking developers (who have applied for a
site) on a scale of 100. The basic issue in this allotment procedure lies in the
fact that it is not as transparent as a competitive bidding process. However
this route does have the advantage of being simpler and easies to implement.
Adjustment of Capital Subsidy in Tariff & related issue
Bonafide Himachalies Hydro Power Developer’s Association have stated that all the
Small Hydro Projects do not get subsidy. It has been mentioned that out of 64
commissioned SHPs, 56% of the Commissioned projects received zero subsidy,
16% have received just fifty percent subsidy and only 28% of the Commissioned
Projects could get full subsidy albeit with deductions for delayed implementation of
the projects.
Reasons include lapse on compliance to the stipulation for timely application to
MNRE (requirement : 6 months from COD or 1st installment of Term loan)
Maintaining 3 Consecutive months for 80% of the generation is difficult (required
for PG test)
HPERC Observation
The statement that 56% of SHPs have not received even the first installment of the
subsidy leads to an observation that either timely applications are not being made
or conditions relating to healthiness of bank accounts are not being complied with.
Himachal Pradesh Electricity Regulatory Commission (HPERC) Order for adjustment of
Capital Subsidy by MNRE (2015)
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
37
Bidding route - Under this process, states invite bids for particular projects
or sites with bidding parameters Free Power, Upfront Premium, Tariff or State
Equity. Under this process the Pre-feasibility Report is available for project or
the site to prospective developers. Developers usually undertake a PFR before
deciding and making a bid. The project site is transferred to the bidder who
quotes the maximum number above the base case for the identified
parameters.
State wise details of allocation process, premium charged, charges levied by States is
given as under.
Table 9: Project allocation process parameters for select States
Sr.
No. State
Allocation
Process
Threshold
Premium
Charges levied by
State government
1 Uttarakhand
Allocation
through bidding
route for above
2 MW projects
Based on highest bid
over and above a
threshold premium
defined as below.
i. 1 lakh per
MW (between
2 to 5 MW)
ii. 5 Lakh per
MW for above
5 MW
i. Charges on
18% of energy
generated
would be
charged by
State
government
from 16th year
onwards for
projects above
2 MW capacity
ii. In Addition one
time
processing fee:
Rs 50000 and
1 lakh Rs
security
payment
2 Himachal
Pradesh
Allocation
through bidding
route for above
5 MW projects
Projects shall be
allotted through
competitive bidding
route. Bidders are
required to quote
fixed charge of 20
lakh per MW and
additional power at
uniform rate in all
three bands on of
royalty charges over
and above the
royalty charges:
i. Royalty in the
form of free
power as 12%
of delivered
energy @12
years
ii. 18% of
delivered
energy for
next 18 years
Fixed charge of 20
lakh per MW as
royalty
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
38
Sr.
No. State
Allocation
Process
Threshold
Premium
Charges levied by
State government
iii. 30% of
delivered
energy for the
balance
agreement
period beyond
30 years
3 Arunachal
Pradesh
The Developers
may approach
the State
Government
with self-
identified
projects with
full pre-
feasibility
report (PFR) for
development
on concept to
commissioning
basis
Project allotment
process takes place
based on individual
case to case basis
after scrutinizing a
number of
applications from
various IPP / CPP
developers
Free power charges:
i. Up to 1 MW –
Nil
ii. 1-5 MW -5%
iii. 5-10 MW-8%
iv. 10-25 MW-
10%
4 Kerala
Project shall be
assigned to
private
developers as
independent
power projects
or captive
power project
only through
the competitive
bidding route
on Build Own
Operate
Transfer mode
i. The short‐listed
applicant will
be required to
quote for a
premium per
MW, payable
upfront, to
the
Government.
ii. The minimum
threshold
premium shall
be Rs.15
Lakhs per MW
Not mentioned in the
policy document
5 Karnataka
Self-identified
sites shall be
allocated on
first come first
serve basis
Project allotment
process takes place
based on individual
case to case basis
after scrutinizing a
number of
applications from
various IPP / CPP
developers
One time Processing
fee of INR 2 Lacs/MW.
6 Telangana
Self-identified
sites shall be
allocated on
first come first
serve basis.
Government
identified sites
Project allotment
process takes place
based on individual
case to case basis
after scrutinizing a
number of
applications from
Developer has to pay
one time sanction fee
of INR 1,50,000 and
Security deposit of
INR 1,00,000 per
M.W.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
39
Sr.
No. State
Allocation
Process
Threshold
Premium
Charges levied by
State government
shall allocated
through
reverse bidding
process.
various IPP / CPP
developers
7 Punjab
Shall be
allotted
through
competitive
bidding by
PEDA
Project developer
who will provide
maximum discount
on prevailing PSERC
regulated tariff shall
be the selected
bidder for defined
capacity allotment
under SHP scheme
i. One time
charge: 0.5%
project cost as
facilitation
charge
ii. 1.5 paisa per
unit from SHP
site for
Irrigation
department
and
iii. 1.5 lakh per
site per annum
land lease
charges
irrigation
Source: State SHP Policies, Secondary Sources.
B. Approval & Clearances
SHP projects are governed by the State policies and the potential sites are allotted by
the State Governments to private developers. One of the main reasons for the slow
progress can be attributed to the difficult locations where SHP projects are normally set
up, short working season in hilly areas and involvement of private and forest land in
setting up of SHP projects. Implementation of SHP project require undertaking a number
of approval & clearance such as
• techno-economic clearance/technical concurrence,
• land allotment approval
• Forest clearance, and
• Water rights by State irrigation departments,
• NOC from Fisheries and State Pollution Control Board (SPCB),
• Approval from PWD for construction related activities,
Given the allotment and implementation of SHP project is driven by State policies, the
implementation process also varies from State to State. The figures below details the
implementation process adopted by some of the key States attracting SHP investment in
the country. The process mapping is done based on State policies, interaction with
stakeholders.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
40
i) Process Flow – Himachal Pradesh
ii) Process Flow – Uttarakhand
* Indicative, discussion with State agencies & developers
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
41
iii) Process flow for Arunachal Pradesh
iv) Process Flow for Kerala & Andhra Pradesh
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
42
v) Process Flow – Karnataka
For the purpose of clearances and approvals required to be obtained for SHP, these are
typically categorized into two types namely micro/mini and small hydro categories. In a
number of cases small capacity projects (micro/mini) are being developed by respective
state nodal agencies while small hydro projects (small hydro category) falls under the
mandate of identified agencies by directorate/department of energy in respective States.
List of clearances also vary for small capacity (micro/ mini – projects up to 2 MW
capacity) projects as well for small hydro category (up to 25 MW). Since small capacity
project approvals facilitation as well responsibility is taken up by respective SNAs
(UREDA, HIMURJA) therefore such projects are found to have less impact on time
overruns due to approval / clearance delays. Most delays in approvals and clearances
happen in small category projects having more than 2 MW capacities. Critical list of
clearances are mentioned in the list below.
Forest Clearance
Power evacuation approval and point of interconnection fixation
Revenue land (EC) as there is no timeline has been fixed for Patwari for revenue
record check
Irrigation / Minor irrigation approval
Gram panchayat Approval
Jal Nigam approval
Environmental clearance
Below is the present mandate on state orders on clearances to be obtained for projects
installed in the state of Himachal Pradesh and Uttarakhand. A recent amendment of
HPERC (Himachal Pradesh Electricity Regulatory Commission), policy guidelines taken
from UJVNL3 and discussion provide clarity on these master list of approvals and
clearance as below.
3 UJVNL: Uttarakhand Jal Vidyut Nigam Limited having Head Office in Dehradun, Uttarakhand
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
43
Table 10: List of clearance and reference clauses for SHP project in Himachal Pradesh
Clearance Description
Upto 5 MW Above 5 MW
Irrigation and Physical Health
These NOCs not required, Clearances and compliance of norms and conditions shall be
ensured by the developer before and during execution
Developer to submit proposal to DC for obtaining all approvals/
NOCs from different departments.
DC to forward the proposal to concerned Dept within 7 days of submission of proposal and convene a meeting of all concerned dept within 30 days to clear the
approval
PWD Clearance
These NOCs not required,
Clearances and compliance of norms and conditions shall be ensured by the developer before and during execution
Revenue Dept Clearance
These NOCs not required,
Clearances and compliance of norms and conditions shall be
ensured by the developer before and during execution
Fisheries Dept
Clearance
These NOCs not required, Clearances and compliance of norms and conditions shall be ensured by the developer before and during execution
Wildlife Dept Approval
These NOCs not required,
Clearances and compliance of norms and conditions shall be ensured by the developer before and during execution
Gram Panchayat
Clearance
Effective consultations shall be done with Gram Panchayat and their objections and suggestions
shall be heard and decided by SDM by way of a reasoned speaking order.
Developer to submit proposal to
DC for obtaining all approvals/ NOCs from different departments. DC to forward the proposal to concerned Dept within 7 days of submission of proposal and convene a meeting of all concerned dept within 30 days to clear the
approval
Essentiality Certificate (EC) for
land lease
This clearance is not required. EC
should be only for maximum quantum of land required for the purpose at project site without mentioning Khasra No. Actual land at project site to be decided
by Forest and revenue dept based
on ceiling under EC
The Essentiality Certificate for land required for the project shall be issued by Directorate of Energy as per actual land requirement on the basis of Joint Inspection Report
duly submitted after carrying out
site inspection by revenue and Forest authorities in consonance with provisions provide in the DPR.
Clearance timeline
for Patwari / Kanoongo
Timeline for issuance will be two
months from date of complete application with fee.
After freezing of components and
submission of PFR, EC for land acquisition, NOC for processing case for diversion of forest land, final environmental clearance, for freezing hydrology and power potential by the authority granting the TC and applying for various
statuary clearances will be issued to IPP.
Source: MPP & Power Department, GoHP Notification Dt. 17/8/2016, SHP Policy of Himachal Pradesh
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
44
Table 11: List of clearance and reference clauses for SHP project in Uttarakhand
Clearance
description
Reference
Power
Evacuation /
ROW
Permission
The private developer will not be required to obtain Government
permission for the right of way for construction of transmission line
and associated works linking with small hydro power plant with state
grid substation.
However, developer will be required to intimate the owner, the State
Government or Local bodies, as the case may be, in advance for
construction of overhead lines or laying of underground cables
provided the land is filled with earth and properly levelled.
Minor
Irrigation
Clearance
No clearance will be required from the Irrigation Department/Minor
Irrigation Department for Implementation of small hydro power
projects allocated under this Policy, however the Developer will
ensure that the designed water supply to the existing canals/Hydram
schemes in the project area is maintained during the construction
and operation period of the hydro power project.
The selected developer will have to submit a declaration/
affidavit in this regard to the Energy Department / Irrigation / Minor
Irrigation department prior to the construction of the project
Public Works
Department
Clearance
No clearance will be required from Public Works Department for
Implementation of small hydro power projects allocated under this
Policy; however the Developer will ensure that the State Highway /
National Highway roads in the project area and in the vicinity of the
project are properly maintained by the developers at his own cost.
Fisheries
Dept
Clearance
Clearance from fisheries the department will not be required
provided the developer is complying with the provisions of the
Uttarakhand Fisheries Act 2013. The selected developer will have to
submit a declaration/ affidavit in this regard to the Energy
Department / Fisheries Department
Pey Jal
Nigam/Jal
Sansthan
Clearance
Clearance from the Pey Jal Nigam/Jal Sansthan will not be required,
either, if any of the existing water supply project is not being
affected by the proposed hydro project, or if any water supply
scheme is coming in the hydro power project area, the Developer
undertakes to maintain/ rehabilitate the water supply scheme at his
own cost and submit such an undertaking to the Energy Department
and Pey Jal Nigam/Jal Sansthan prior to the construction of the
project.
Forest
Clearance
Required to be undertaken
Environment
Clearance
Exempted for small hydro project of capacity below 2 MW
Gram
Panchayat
Approval
Required to be undertaken based on selective consultations with
Gram Pradhan and Village level committee
Source: UJVNL, Policy for SHP above 5 MW dated. 31/1/2015, RE Policy 2007-08
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
45
vi) Observations based on field visit and stakeholder consultations on
approval & clearances at State level
The SHP scheme is implemented through the State Government Departments, State
Electricity Board, State Nodal Agencies (SNAs), private developers, individual
entrepreneurs, Non-Governmental Organizations (NGOs), Financial Institutions/ banks
etc. SHP projects have high construction time in comparison to other RE sources. The
implementation involved approval & clearances from different agencies. Recently, a
number of States like Himachal Pradesh, Uttarakhand have provided greater clarity on
approval & clearances, with some relaxation to smaller capacity SHP projects (say upto 2
MW).
To achieve the target in full, the MNRE also undertakes regular consultative/review
meetings are being held with the State Nodal Depts. & Developers. The Ministry is also
trying to get resolved the issues responsible for retarding the pace of implementation of
SHP Projects. This Ministry is also in touch with Ministry of Environment, Forests and
Climate Change for solving the issue related to forest clearances for SHP Projects and
also with State Governments to ease the process of obtaining statutory clearances.
From the perspective of SHP projects, there are delays and problems in according
technical approvals to Detailed Project Reports, allotment of projects, acquiring land for
setting up projects and obtaining forest and environmental clearances, several projects
could not be taken up and completed in time. The table below highlights some of the
issues highlighted across States:
Table 12 : Approval & Clearances issue
State Description of issue
Uttarakhand
• Almost all projects in Uttarakhand under primary surveys
have been identified for delayed forest clearance.
• SHP project developers consulted (Gangani, Uttar Bharat,
Polyplex, Parvatiya power) have requested for single window
clearance options for SHP development in Uttarakhand
Himachal
Pradesh
• Forest clearance is also a major issue in Himachal Pradesh.
Delay in forest clearance (Aleo II SHP) was a major issue
Punjab
• Projects in Punjab specifically in Bathinda region shows very
less forest area along canals and hence request Centre to
introduce relaxed substitute mechanism which suits SHP
development in Punjab
Telangana
• State tariffs are perceived to be low which results in delays
in signing PPA since many project developers then opt for
open access for sale to third party.
• All three projects in Telangana area which were surveyed
namely Bravo, Kalavapally, and Malyalappaiah sell energy
through open access
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
46
Forest Clearance issues: Given the fact that a majority of SHP potential is in States
with high forest cover, forest clearance is an important requirement. Developers
consider getting forest clearance as a significant milestone in the process since its
time consuming. Some of the issues highlighted by developer, which can be reviewed
by MNRE to facilitate speedy approval of forest clearance for SHP projects are:
Developers pointed to delays in clearances for forest land allocation. One of
the main reasons for this delay is the processing of application which includes
checks back and forth through a hierarchy starting from the conservator of
forest rights down to the ranger.
Although forest approval guidelines are quite clear, they are cumbersome. All
the guidelines have to be adhered to, and in case of some missing data or
information or clarifications, the whole cycle is repeated. This can result in a
delay of 6 months to an year. Therefore developers need to be very clear and
thorough while filling out the forest clearance forms. Some developers have
over time mastered this subject, however new developers face this issue.
Right of Way issue: Right of Way width of transmission line has been
increased from minimum to maximum. For instance, minimum requirement
of 33 KV transmission line is 3.66 mtr. which has been increased to 15 mtr.
Instead of 3.66 mtr. Right of Way is not required to be acquired. However,
only one time compensation @ 15% of land value has to be paid as per
provision laid down in Government of India letter No.372015 Trans dated 15
Oct., 2015 (Guidelines for Payment of Compensation towards Damage in
regard to Right of Way for Transmission Lines). Based on stakeholder
consultations, it has come out that the Ministry of Environment and Forest is
stressing the developers to get the land diverted for the construction of
transmission lines for which the corridor specified is many times more than
the actual requirement. Many Projects are not getting clearance on this
account.
In several cases, forest rights committee has not been formed in the villages -
approval of which is a necessary pre condition for forest clearance in case the
land is a community or individual forest land. The delay in formation of these
committees also results in delayed clearances.
Issue of non-linear project: SHP projects are not considered as linear projects
for the purpose of forest clearance.
• SHP projects involve construction of roads, transmission lines, and water
canals laying of pipelines, which may involve several villages, and these
activities are declared as linear in nature by the Government of India.
• FCA committee approval not required for linear projects [hydel currently
not indicated under this exemption]. Hence, if SHP projects are defined as
lineasr projects, this requirement will be exempted.
Development of the Pre-feasibility Report – Some states use the state
utility/agencies (as they are a part of the same government set up) to develop the
PFR. For these utilities, development of the PFR is not a priority and gets delayed
which in turn delays the allocation of the project. Secondly most utilities/agencies
undertake the development of PFR’s using very conventional norms which do not
incorporate all possible innovations from the perspective of cost reduction or capacity
enhancement. Therefore developers usually do not depend on this PFR and get their
own PFR made.
Delays in Allotment of Projects – These delays often take place due to ambiguity in
policy, government transitions or change in management at the State Nodal
Agencies. As SHP implementation is driven by the policy framework at State level,
any delay results in lowering of overall capacity addition.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
47
Private Land Allocation – After DPR preparation, land acquisition becomes critical as
any change in site specifications would need a rework of the DPR. This may result in
delays of upto 2 years. Private land owners (especially in HP and Uttarakhand) have
realized the critical importance of land in SHP development and seek out higher than
normal market returns. As a result developers have to resort to taking steps such as
delaying land acquisition, petitioning the district administration and negotiating to
bring the cost of land down. Although, these are business risks to be borne by
developer, however these issues also result in project delay.
Lack of adequate capacity in Project Engineering and Construction & quality of DPR:
In India, especially in the hydro sector, there are limited integrated Engineering,
Procurement and Construction (EPC) contractors. Contracts are mostly split between
civil construction and plant and machinery installation, which makes negotiation of
EPC contracts relatively complex. There is a need to address functional, technical and
price related aspects across contracts, else developers may face the risk of time and
cost overruns and lower profitability. Also, it has been seen that poor quality DPR can
also result in significant delays during construction.
Multiple approvals & NOCs: SHP project allotment involves multiple approvals and
NOCs. In general, for each key milestone the State agencies have defined the
extensions allowed. The basic design of project allocation and approval process in
certain cases results in delay.
As per the “REPORT OF COMMITTEE ON EXPEDITIOUS HARNESSING OF
SMALL HYDRO POWER POTENTIAL IN HIMACHAL PRADESH” (Nov 2013): “It is
apparent from above that inefficiencies are inherent in the preparatory
requirements and the consequent time lines specified in the Power Policy.
These leads to avoidable time and cost overrun and make SHPs non-
competitive. Therefore, there is a need for resetting the time lines and review
the attendant procedures and processes. Ordinarily the NOCs, if at all
required, should be obtained before allotment of project. Once the project is
allotted by the Govt. after prior approval of Cabinet, only the compliance of
statutory provisions, norms and terms and conditions should be provided.
Solutions are very easy to be found, because these are administrative in
nature and are in the hands of Power Department only and also within the
competence of the State Govt. and its functionaries”
It is important for State governments to review the SHP policy regularly and
ensure NOCs, if required, available before the allotment of the SHP project.
This will reduce the delay experienced in the implementation of SHP projects.
During the field visits and stakeholder consultations, the feedback was taken on different
clearance required and extent of delay (if any) experienced by developers. The feedback
indicates environmental/forest clearance as a major milestone in the overall approval &
clearances list. Apart from that, preparation of DPR also take significant time given the
multiple seasons required to capture water flow details. In certain cases, delay in singing
of PPA has also been highlighted. The table below details the average rating (based on
the extent of delay/on-time) for different clearance.
Table 13 : Overall feedback on clearances
Clearance Average rating Expected Time
1- Significant Delays, 3-Neutral, 5-On Time
1 Environmental/forest 2.7 1-3 Years
2 Allotment letter 3.4 <1 Year
3 DPR Preparation 3 2 years
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
48
Clearance Average rating Expected Time
4 MOU with State Government 3.5 <1 Year
5 Power Purchase Agreement 3 1-2 Years
6 Subsidy Sanction and Disbursement 4 <1 Year
7 Performance testing 3.6 <1 Year
4.4 Commercial
4.4.1 Incentive Options for promotions of SHP project
The choice of public funding instrument should be viewed in the context of the life-cycle
of SHP development in the country, in particular the distance the technology has to
transition to be purely commercial in nature and to achieve grid parity, as this
determines the extent of public funding support required over the entire program cycle.
The figure below indicates such a roadmap and outlines the role of public funding in this
developmental life-cycle of a technology.
Capital subsidy, interest subventions, etc., typically make sense early in the life-cycle of
a technology where the program’s scale and viability are not completely established.
Once the viability is established, market mechanisms should take over with public
funding then switching to a role of facilitating access to private finance by addressing
residual risks and barriers. This is the most economical basis for promoting market
development of a renewable energy technology.
Governments will also need to guard against excessive continuance of public funding in
the commercial phase, as it tends to crowd out commercial sources of financing.
Similarly, lack of public funding in the early stages of development of a technology can
simply impede its deployment and diffusion, irrespective of the long-term economic
benefits.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
49
Given the current state of SHP, it is important for MNRE to support the sector through
continued financial support. The key options available for MNRE to support SHP are:
Table 14 : Options for public funding
Public
Funding
Instrument
Pros Cons
Capital
Subsidy
One-time and easy to disburse
for the Government.
Investors & Financiers find it
attractive as it limits exposure of
lenders and lowers tariff of
projects – reduces risk of
defaults and opens up option for
third party sale in case of
defaults.
Project once funded is no longer
dependent on government
budget in the future.
Not linked to output and
hence does not create a
positive bias for performance.
Risk of compromises in O&M
and asset replacements.
Seen as going back in time,
as the focus in other
renewable segments (e.g.,
wind) has moved from capital
based incentives (accelerated
depreciation) to generation
based incentives.
Interest
Subsidy
More efficient than direct
payment schemes as credit is
recoverable.
Government benefits from the
due diligence of commercial
banks, which are the senior
lenders to the project.
Directly reduces the cost of
financing.
Dedicated lines of credit for SHP
projects can prompt commercial
banks to lend to SHP with a
positive externality in building
capacity of such institutions in
appraising SHP projects.
Concessional finance is
limited and unless leveraged
properly, has the effect of
simply crowding out
commercial finance. There
may also be the propensity of
banks to stop lending when
such lines of credit are
exhausted.
Generation-
based
Incentive
Output linked; creates a bias for
performance.
Incentivizes not only developers
but also more efficient equipment
suppliers.
Outflow from the Government
likely to be cumulatively
higher than in the capital
subsidy mode because of
impact of taxes and time
value considerations.
Dependent over a substantive
period on government
funding
Viability Gap
Funding in
tranches up
to one year
post
Commissioni
ng
Front loaded public funding
makes it easy to administer and
disburse.
Like in the case of capital
subsidy, investors & financiers
find it attractive as it limits
exposure of lenders and lowers
tariff of projects – reduces risk of
defaults and opens up option for
third party sale in case of
defaults.
Not linked to output and
hence does not create a
positive bias for performance.
Risk of compromises in O&M
and asset replacements.
VGF scheme in infrastructure
was designed for
economically necessary
projects which were not
commercially affordable.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
50
Survey feedback -Preferred Incentives
The field visit and stakeholder consultations indicate that capital subsidy and FIT remain
the preferred incentives. Some developers have shown preference for interest subsidy
also. The table below details the response compiled based on the inputs of field visits.
Table 15 : Preferred incentives
Least
Preferred Neutral
Most
Preferred
Incentive 1 2 3 4 5
VGF 25
FiT 18 7
Capital Subsidy 10 15
GBI 24 1
Interest Subsidy 7 12 6
Some of the key concerns related to incentives are:
Developers consider subsidy as a good source of support. Developers have indicated
that subsidy proves important in getting through the initial phase of loan repayment.
(Binva IV).
Unlike in other renewable energy technologies such as solar and wind wherein
variation in annual resource availability is low, it is high in small hydro power plants.
Cost of power plants also varies given the terrain and ground conditions in specific
states. Due to this reason, direct subsidy and appropriate tariffs linked to specific
states is the best mode of support. Incentives such as GBI and VGF are less
preferred by the developers.
Private developers in Punjab are not interested to avail subsidy due to subsidy is
deducted from the tariff.
Developers have also indicated that subsidy should not result in reduction of tariff.
Developers also indicated that interest subsidy for SHP project can become a great
driver for investment in SHP project and help in keeping the rate of returns from SHP
competitive when compared to other RE technologies.
Further, developers also indicate that subsidy can directly be transferred to bank and
timelines can be reduces given that bank guarantee has to be submitted in any case.
In places like Arunachal Pradesh, developers have indicated that the cost of
construction is as high as 15-20 Crores/MW due to factors such as transporting
material to remote areas, high cost of labor, and high cost of evacuation. North
eastern states require higher subsidy compared to other states due to these factors.
In case of SHP, the sector has seen reduction in investment in the last few years. The
sector is facing issues related to time and cost overrun, increase in capital cost over the
years & the tariff has not been increased at the same rate of capital cost increase. The
SHP projects also offer advantage of enhancing rural economy and infrastructure
development.
The Ministry is giving special emphasis to promote use of new and efficient designs of
water mills for mechanical as well as electricity generation and setting up of micro hydel
projects up to 100 KW for remote village electrification. These projects are taken up with
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
51
the involvement of local organizations such as the Water Mills Associations, cooperative
societies, registered NGOs, village energy cooperatives, and State Nodal Agencies.
Given the nature of SHP project & benefits offered, it is important that appropriate
incentives are provided to reduce the burden of developers. The incentives by MNRE can
also be used to test new business models at state level or provide additional incentives
to State agencies to reduce the bottlenecks faced by SHP developers.
4.5 Regulatory
The Electricity Act 2003, enables and enjoins the State Electricity Regulators to promote
renewables by providing suitable measures for connectivity with the grid, open access to
enable producer to sell power to any person and specify minimum purchase obligation
from renewable sources and consequent regulations for tariff also. SERCs across states
have been fixing feed-in tariff, OA charges and other aspects for grid connected SHP
projects.
Some of the key regulatory issues faced by SHP projects are:
1. Adequacy of Capital cost
Feed-in Tariff remains an important regulatory instrument for promotion of SHP projects.
States across India have a varying tariff structure and given the unique nature and risks
involved for each, SHP project developers find these tariffs unattractive. Generic tariffs
do not cover the capital cost associated with project specific cost factors for SHP project.
Differing regulatory cost benchmarks across states lead to clubbing of projects in states
which have the most investor friendly framework. The cost benchmarks differ
significantly. CERC as a part of its regulatory process provides capital cost and tariff
benchmarks for different States. A comparison with the State regulator determined
tariffs indicates that the SERC adopted cost benchmarks are on lower side.
The tables below details the capital cost and feed-in tariff calculated by CERC:
Table 16 : Capital Cost & Tariff benchmark - CERC
State Category Capital Cost,
Rs Lakh/MW
CUF, in % LCOE,
Rs/kWh
CERC (NE States,
HP, UK, West
Bengal)
Below 5 MW 1,000 45 5.07
5 MW to 25
MW
900 45 4.29
CERC (Other
States)
Below 5 MW 779 30 6.00
5 MW to 25
MW
707 30 5.04
The below table details the capital cost and tariff benchmarks determined by different
SERCs:
Table 17 : Capital Cost & Tariff benchmark - SERC
State Category Capital
Cost, Rs
lakh/MW
CUF% Gross
Tariff,
Rs/Unit
AD,
Rs/Unit
Net
Tariff,
Rs/Unit
Himachal
Pradesh
100 kW to 2
MW
780 55 3.34 0.14 3.20
2 MW to 5
MW
750 55 3.27 0.14 3.13
5 MW to 25
MW
700 55 3.17 0.13 3.04
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
52
Uttarakhand Up to 5 MW 785 45 4.22 0.30 3.92
5 MW to 15
MW
750 45 4.02 0.30 3.72
5 MW to 25
MW
715 45 3.74 0.30 3.44
Punjab* Up to 5 MW 779 30 5.54 - -
5 MW to 25
MW
707 30 4.69 - -
Kerala Up to 5 MW 630 30 5.25 - -
5 MW to 25
MW
577 30 4.47 - -
Karnataka Mini hydel 620 30 4.16 - -
Telangana All sizes 450 45 3.63
Arunachal
Pradesh
Below 5 MW 700 37.64 - - 2.46
* PSERC, Discussion paper, Punjab to follow CERC norm
The above table clearly indicates the variation in capital cost and final FIT considered at
State level when compared with CERC benchmarks.
2. Inter-State open access Charges
Pursuant to the mandate of EA 2003, and in line with the National Electricity Policy and
Tariff policy notified by the Central Government, the Hon’ble Central Electricity
Regulatory Commission has framed various regulations for promotion of RE sources viz.
RE tariff Regulations, REC Regulations etc., and also waived the transmission charges
and energy losses for transmission of Solar and Wind Power throughout the life of the
project, in its various Regulations.
The Ministry of Power (MOP) Order “Waiver of inter-State transmission charges and losses
on transmission of the electricity generated from solar and wind sources of energy under
Para 6.4(6) of the revised Tariff Policy” dated 30 Sept. 2016 had the below provision (Para
3.0 (iii):
“For generation projects based on solar resources, no inter-State transmission
charges and losses will be charged for use of inter-state transmission on system
(ISTS) network by such projects commissioned till 30.6.2017 as per the CERC
(Sharing of Inter-State Transmission Charges and Losses) (Third Amendment)
Regulations, 2015.
Provided that this waiver will be available for a period of 25 years from the date of
commissioning of such projects. “
The Ministry of Power through the order dated 14th June 2017 has extended the
exemption on inter-state transmission charges & losses to solar projects commissioned
till 31.12.2019.
However, the Small Hydro Power renewable has not been provided any relief in the
transmission charges/losses for inter‐State transfer of power. The same benefit can be
provided to SHP projects also.
3. Restructuring levelised tariff to ease liquidity
When utility and IPP agree to enter into PPA, they have an option, to be exercised at the
time of signing PPA, to go for generic levelised tariff for 40 years fixed by Commission or
determination of project specific tariff, levelised for 40 years. The SERCs can consider
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
53
providing higher level of tariff in the initial years to developer to assist them in having
higher liquidity and repay loans
4.6 Financial Aspects
Developing SHP projects require developers to address site, policy, regulatory etc related
risk which impact the financial viability of the project. Geological surprises can have
large impact. Some of the financial aspects related to SHP projects are:
High Investment costs: Hydro is one of the most expensive renewable energy
technologies to develop due to its high upfront costs from detailed engineering
requirements, remote locations, synergizing civil and electromechanical works and
also the high risks of Force Majeure events which sometimes further drive up the
costs making these projects all the more unattractive for private developers.
Difficulties in availability of finance: Lack of adequate financing also discourages
developers especially the first generation entrepreneurs in the development of Small
Hydro Projects. Financing organizations, such as banks and other financing agencies
are still by and large not confident of the success of small renewable energy
interventions like Small Hydro.
Most financial institutions are likely to finance only well-established corporates
developing large scale projects and as a result small first time developers who cannot
put up enough collateral are not in a position to get enough funds. In Himachal,
Small Hydro Projects have been reserved for bona-fides residents of the state only.
With an approximate cost of about Rs 7-10 crore a Megawatt, developing a 5 MW
plant would entail an expenditure of anywhere between Rs 35-50 Crores of which a
minimum equity an entrepreneur would have to put up would be Rs 15 Crores. Most
banks request developers to either furnish guarantees or provide adequate collateral
which very few are able to accomplish.
Further, large pre-investment costs related to the costs of due diligence, bidding,
contracting, and information collection drive potential investors away from the sector.
In case of the small hydro sites the capital costs of setting up the project were divided
into four main components that have been indicated below:
Civil costs.
Electromechanical equipment costs
Cost of the penstock
Transmission and distribution costs
Installation charges.
The civil costs for the construction of SHP sites cover the cost of the construction of most
of the project components with the exception of the penstock. Thus this cost includes the
cost of setting up of the room that would house the generator, turbine and the control
equipment, cost of the construction of the weir; for the tank, power channel and de-
silting basin. The cost of construction for each of these is estimated based on the local
conditions, terrain and the kind of material as well as infrastructure available at the sites
for the construction of the said components.
The electromechanical costs include the cost of the generator, turbine, the control
equipment and other subsidiary equipment required for the operationalizing the plant.
This also includes the cost of installation of the equipment and its testing as well as
monitoring during the initial period of the project. Cost of the penstock includes the
material costs, cost of transportation and the civil costs associated with its installation.
The terrain and the site characteristics call for long penstocks at most of the sites that
have necessitated this separate accounting exercise.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
54
The transmission and distribution costs consist of extending a grid from the site to the
villages and these costs consist of material costs of the poles, wires and routers as well
as other equipment and the installation and civil costs. The final costs for each were
computed by taking into account the total cost of material, transportation charges and
installation charges.
The capital cost of projects varies with scale of the projects and impact the financing
requirement. AHEC has undertaken comprehensive study (year 2015) of the trends of
cost of small hydro power projects and to update/establish nomograms costing of
canal/dam toe and run of river based SHP projects upto 25 MW capacity and comparing
with large hydropower project. The objective was to provide clarity financial institutions,
regulators, developers, policy makers on the capital cost benchmarking. The study
revealed the reduction of capital cost in per MW basis with increase in scale of project.
Figure 5 : AHEC Capital Cost benchmarks
The project cost is higher in the states of Arunachal Pradesh, Himachal Pradesh,
Uttarakhand, Andhra Pradesh, and Punjab as compared to Kerala and Karnataka. The
typical break-up of different cost components are indicated below:
Table 18 : Capital Cost break-up
State Per MW Cost (Lacs) Civil E&M T&D Other
Himachal Pradesh 966 49% 28% 5% 18%
Uttarakhand 1037 50% 16% 4% 31%
Andhra Pradesh 904 48% 32% 1% 18%
Kerala 748 59% 39% 1% 1%
Karnataka 705 48% 37% 6% 9%
Punjab 913 40% 56% 2% 2%
Source: AHEC Benchmark Cost report- Aug, 2015
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
55
Key issues resulting in cost
over-run
SHP projects are prone to cost and
time over-run which further results
in increase the overall project cost.
One of the main reasons for
difference in cost of DPR and actual
cost is the escalation in the civil
costs.
The table below details some of the project where cost over-runs have occurred:
Table 19 : Capital Cost escalation
Project Commissio
ning Year
DPR (INR
Cr)
Actual
(INR CR)
Capacit
y (MW)
Per
MW
Cost
(DPR)
Per MW
Cost
(Actual)
Escalati
on
UK-
BhilanganaIII/1/24MW/
ROR
2013 36 60 4.9 6.00 10.00 67%
UK-
Regency/5/8MW/ROR 2014 38.4 51.2 8 4.80 6.40 33%
Ker-
Adyanpara/1/3.5MW/RO
R
2015 26.81 28.56 3.5 7.66 8.16 7%
Ker-
Raniperunad/3/4MW/RO
R
2012 21.3 35.81 4 5.33 8.95 68%
Ker-
Vellathoval/5/3.6MW/R
OR
2016 32.32 36.54 3.6 8.98 10.15 13%
Tel-
Bravo/1/1.2MW/Canal 2013 7.75 11 1.2 6.46 9.17 42%
Tel-
Kalavapally/2/0.75MW/
Canal
2016 6.393 10 0.75 8.52 13.33 56%
Tel-
Malyalappaiah/3/0.9MW
/Canal
2014 6.826 10 0.9 7.58 11.11 46%
ArunPra-Nuranag
Yet to be
commissione
d
14.73 18.43 1 14.73 18.43 25%
ArunPra-Khajalong
Yet to be
commissione
d
24.36 29.95 2 12.18 14.97 22%
Figure 6 : Capital Cost escalation issues
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
56
Project Commissio
ning Year
DPR (INR
Cr)
Actual
(INR CR)
Capacit
y (MW)
Per
MW
Cost
(DPR)
Per MW
Cost
(Actual)
Escalati
on
ArunPra-Zhandongron
Yet to be
commissione
d
14.06 15.40 1 14.06 15.4 10%
ArunPra-Payu
Yet to be
commissione
d
9.36 22.48 1 9.36 22.48 140%
Source: Stakeholder Consultation
The key reasons for cost over-runs are as follows:
Table 20 : Survey feedback – cost over-run
State Description of issue
Himachal
Pradesh
• Geological surprises associated with tunnel boring and shed
strengthening. (Beas Kund, Iqu II)
• Inflation in civil cost due to project implementation delays. (Hurla)
• Flooding during construction which leads to damages leads to cost
escalation. (Dikleri)
• There is uncertainty in cost of land acquisition due to local issues
which can result in cost escalation. (Neogal – Kangra)
Uttarakhand
• Cost impacts of geological surprises (i.e. Tunneling, transportation,
accidents, and flooding) faced during project construction such as
the one seen in (Bhilangana III).
• Cost impacts of adverse weather conditions faced during project
construction. i.e. Cloud bursts and floods. (Loharkhet).
• Design failures associated with various factors.
• Cost associated with land acquisition.
• Normal increase in cement and construction material cost over the
years with significant time lapse between DPR preparation and
project construction.
Kerala • High cost associated with procuring land and managing difficulties
associated with terrain. (Adyanpara and Meenvallom)
Andhra
Pradesh
(Telangana)
• Cost escalation related to flooding and channeling(Bravo and
Kalavapally).
Arunachal
Pradesh
• Developers indicate that cost of transporting material can go up by
80 to 150% due to difficulty in accessing remote sites.
• Cost overrun also occurs in creating evacuation infrastructure due
to poor grid infrastructure.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
57
Karnataka
• Similar to other states, construction of Aramdanahalli project faced
various geological surprises e.g. additional rock excavation which
was not envisaged in previous designs.
Inflation due to delays in project implementation is a major reason for cost
escalation followed by geological surprises
Most projects report a cost escalation of 20-25% from DPR due to inflation.
Geological surprises not detected during design for tunneling and boring impact
project cost increase
Natural events such as due to rains and flooding and uncertainties in land prices.
Several developers indicate there should more flexibility in cost and time
considerations.
4.7 Employment and Economic Benefits
Investment in SHP project offer employment and economic benefits for rural area.
Various activities for rural development through small hydro power such as efficient
water mills, livelihood activities using small hydro power illumination of remote villages,
electrification, etc. can be of great benefit.
Some of the key socio-economic benefits from small hydro are detailed below.
SHP project has positive impact on local employment as well as overall rural economy.
The field visits and stakeholder consultations indicate the increased infrastructure
development in terms of roads, electricity etc. in the area where the SHP projects have
been implemented. Some of the key findings of the field visits from the perspective of
their impact on rural economy are:
Given the nature of sites for small hydro power plants, most projects have been able
to generate local employment in that area. Except for jobs which require high
qualification, most of the workforce is hired from the local area.
Figure 7 : Economic benefits of SHP
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
58
Power plants employ 8-10 people/MW on an average. This figure can vary depending
on the scale of the power plant and their specific requirements. During the
construction period the level of man-power requirement is high.
Apart from jobs, several projects take more active interest in engaging with local
communities by providing financial assistance to local schools, libraries, and taking
part in cultural events.
Many rural areas which did have access to electricity near these power plants faced
issues with low voltage. The low voltage situation has improved since the
construction of small hydro power plants in surrounding areas.
Several power plants also provide free electricity to local communities by reimbursing
their electricity bills(Toss SHP project (Himachal Pradesh) reimburses electricity bills
of villagers with a cap of INR 500 per Month only for domestic connections)
Water levels have also improved in regions surrounding small hydropower plants
(select projects).
4.8 R&D and Human resource development
MNRE provides financial support to industry and government institutions for undertaking
research and development, training & capacity building in the field of small hydro power
on project case to case basis. The MNRE current scheme ranges from providing direct
funding for creating labs to capacity building of personals. The table below details the
key features of current MNRE scheme.
Table 21 : Current scheme of MNRE
Particular Details
1 Objective of the
scheme
The strengthening of technical institutions, setting up of
turbine laboratory, business meets, training
programmes/courses, fellowships etc., monitoring of
SHP projects, consultancy and/or any other activity felt
necessary for the SHP development will also be
considered under the scheme.
2 Selection
procedure and
level of financial
assistance
a) The financial assistance for R&D proposals will be
considered on cases to case basis on the RD&D scheme
of the ministry.
b) The financial assistance upto 100% of the activity
cost will be considered for capacity building on case to
case basis.
3 Eligible institutions
for R&D
Government departments/ agencies/ PSUs/ institutions
and industry which have adequate infrastructure can
apply for R&D
4 Eligible institutions
for capacity
building
a) State governments departments/ State Nodal
Agency/ Local bodies/ co-operatives/ Autonomous
institutions like AHEC, etc. & NGOs
b)Channel partners appointed by state government/
state nodal agency/Dept./MNRE can also apply
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
59
5 Activities allowed
under capacity
building
a) Capacity building proposals shall only cover human
resource development.
b) Infrastructure development or asset building will be
considered except for development of water mill center.
6 Pattern of release a) Financial support for RD&D projects would be
released as per the RD&D policy of the ministry
b) For capacity building, 70% of incentive with sanction
and 30% on submission of completion report.
The Alternate Hydro Energy Centre (AHEC) at the Indian Institute of Technology,
Roorkee, was established in the year 1982 with initial sponsorship of the Ministry of New
and Renewable Energy. AHEC has been providing professional support in the field of
Small Hydropower Development covering planning, Detailed Project Reports, Detailed
Engineering Designs and Construction drawings, Technical Specifications of Turn Key
execution/equipment Supply, Renovation and Modernization of SHP Stations, and
Techno-Economic Appraisal.
4.8.2 Research & Development
The Alternate Hydro Energy Centre (AHEC) has led the research and development
activity in the small hydro sector in India. AHEC is an academic center based out of IIT-
Roorkee which provides professional support for R&D, Monitoring of projects, Remote
sensing and GIS based application, and technical support to various private, state
government, and central government agencies.
AHEC houses various facilities in its campus to undertake these activities.
Table 22 : Facilities at AHEC
Labs Features
International
Level Hydraulic
Turbine Lab
R&D, testing & certification for hydro turbine
Developing human resource for SHP in respect of
entrepreneurs, plant operators and researchers
Generating data, building expertise & providing facility
for SHP projects.
Validating designs of small hydro turbine and layouts
using CFD technique
Providing calibration fac damages to plant
Provides instruments used for field-testing and power-
plant operation.
Real time
simulator for SHP
Realistic simulation of SHP, it’s control
environment(hardwired & soft panels)
Reduces O&M costs, training time and damage to plants
Increases generation and plant life
Can be quickly initialized, modular system and updating
is possible
Uses long term dynamic model to simulate prime
movers, generators, governors etc
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
60
Other Labs GIS Lab
Biomass System Lab
Electrical Machines Lab
Control Systems Lab
Hydro-mechanical System Lab
Instrumentation Lab
Civil Engg. Lab
Sediment Monitoring and Impact Analysis Lab
The data bank for small hydro projects developed at AHEC has been very useful to
various stakeholder in public and private sector. AHEC has also developed two new
designs of water mills for grain grinding and for mechanical/electricity generation
purpose for the hilly regions of the country.
Installed facility at AHEC available for testing and training purposes
Figure 10 New Turbine Testing Facility
Figure 8 Micro Turbine Testing Lab Figure 9 Inspection Kit Room
Figure 11 Real Time Simulator for SHP Plants and Training Facility
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
61
Case study
Research Institutions like NREL, USA have dedicated programs for assisting the
commercialization of technologies.
The NREL Commercialization Assistance Program (NCAP) helps emerging companies
overcome technical barriers to commercializing clean energy technology. The program
provides free assistance or information to help small businesses with specific technology
questions or needs. Examples of assistance include short term access to technical
expertise and facilities such as:
Test and measurement of systems or components
Analytical testing of materials
Insights on existing or emerging technologies
Assistance in addressing technological performance and market analysis
Addressing general technology problems.
Additionally, businesses that use NCAP can get a royalty-free, non-exclusive license for
any inventions made during the course of technology assistance. Also, intellectual
property associated with a pre-existing product or invention remains the property of the
business.
The table below summarizes the different types of mechanisms/models for
commercialization:
Table 23: Technology Commercialization Mechanism
Focus Area Key Elements
1 Technology
Incubators
Specialized incubation facilities to assist
entrepreneurs on supporting technology based start-
up firms.
Provide supportive framework and access to R&D
facilities, administrative, management guidance and
logistic support for specific technology projects
Targets to support incubation & start-ups to promote
the commercialization of technologies
2 Technology Transfer
Involve transfer of intellectual property and licensing
as well as those that do not involve the transfer of
intellectual property
Includes assignment of patent rights, patent
licensing, and transfer of know-how or other
technology.
3 Cluster Formation Focused on setting up of clusters to promote the
development of RE technology
4
Govt. & private
Collaboration
Structures
Government/ public agencies collaboration:
Collaboration with government/public agencies as
well as departments is one of the common structures
adopted by research institutions and universities for
promotion of solar energy
Public Private Partnership (PPP): technology is
developed by a government funded research center
or university, and then transferred and
commercialized by the private sector
5 Dedicated funding Dedicated funding for commercialization of
technologies has been supported by different
countries.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
62
Generally, the government provides such funds and
is utilized by the research institutions and
universities for commercialization by involvement of
the private entities.
4.8.3 Training & Capacity Building
Efficient functioning of a small hydro power plant is critical for maintaining the
profitability of the project. Frequent downtimes due to operational issues which can be
avoided through proper training and capacity building of plant personals can reduce a
projects’ payback period directly. This can also help maintain plant quality which can
generate cost savings across the plant over a long term and increase profitability.
MNRE provides funding to AHEC to conduct training programs on regular basis. AHEC has
been imparting training to field engineers and technologists through short-term training
courses. AHEC offers a four semester Master of Technology (M.Tech.) programme in
"Alternate Hydro Energy Systems". The table below details some of the trainings
provided by AHEC:
Table 24 : Training Programs offered by AHEC
S.No. Name of Course Schedule
No. of
Participan
t
Funded by
1. Small Hydropower
Development
Mar 20-24,
2017 15
MNRE, New
Delhi
2.
Performance Testing
and Evaluation for SHP
Stations
Dec 19-23,
2016 16
MNRE, New
Delhi
3.
Hydropower
Development for the
officers of Water
Resources Department,
Maharashtra
Dec 12-24,
2016 36
Water
Resources
Department,
Maharashtra
4.
Selection & Design of
Electro-Mechanical
Equipment for SHP
Nov 21-25,
2016 11
MNRE, New
Delhi
5.
Operation &
Maintenance of SHP
Stations
Sep 19-22,
2016 9
MNRE, New
Delhi
6. Small Hydropower
Development
Aug 29-Sep
02, 2016 15
MNRE, New
Delhi
7.
DPR Preparation and
Evaluation for SHP
Projects
May 31-Jun
03, 2016 21
MNRE, New
Delhi
8. Small Hydropower
Development
Feb 15-19,
2016 19
MNRE, New
Delhi
9.
Performance Testing
and Evaluation for SHP
Stations
Dec 14-18,
2015 16
MNRE, New
Delhi
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
63
The infrastructure developed at AHEC is used for providing training in SHP segment. A
real time digital simulator for small hydropower plants has been established with the
support from the Ministry for providing efficient initial and advanced training to operators
and engineering staff of different types of small hydroelectric plants.
4.8.4 Technical Standards & Manuals
Standards, manuals and guidelines for various aspects of small hydropower development
are being prepared by AHEC through consultative process with the sponsorship of MNRE.
The standards play an important role in providing clarity to developers, financial
institutions, technical institutions etc, towards the best practices for implementation of
SHP projects.
Below is the list of standards developed by AHEC, which covers the complete life cycle of
SHP projects.
Table 25 : List of standards for SHP projects
1 General
1.1 Small Hydro Power Definitions and Glossary of Terms, List and Scope of
Different Indian and International Standards / Guidelines / Manuals
1.2 & 2.1 Planning and Layout
1.3 Project Hydrology and Installed Capacity
1.4 Reports Preparation: Reconnaissance, Prefeasibility, Feasibility / Detailed
Project Report and As Built Report
1.5 Project Cost Estimation
1.6 Economic and Financial Analysis and Tariff Calculation
1.7 Model Contracts for Execution and Supplies of Civil and E&M Works
1.8 Project Management of Small Hydroelectric Projects
1.9 Environment Impact Assessment
1.1 Performance Evaluation of Small Hydro Power plants
1.11 Renovation, Modernization and Uprating
1.12 Site Investigations
2 Civil Works
2.2 & 2.3 Hydraulic and Structural Design
10.
Selection & Design of
Electro-Mechanical
Equipment for SHP
Nov 16-20,
2015 23
MNRE, New
Delhi
11.
DPR Preparation and
Evaluation for SHP
Projects
Aug 24-27,
2015 21
MNRE, New
Delhi
12.
Operation &
Maintenance of SHP
Stations
Jul 13-16,
2015 16
MNRE, New
Delhi
13. Small Hydropower
Development
May 25-29,
2015 24
MNRE, New
Delhi
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
64
2.4 Maintenance of Civil Works (Including HydroMechanical)
2.5 Technical Specifications for Hydro-Mechanical Works
3 Electro Mechanical works
3.1 Selection of Turbine and Governing System
3.2 Selection of Generator and Excitation Systems
3.3 Design of Switchyard and Selection of Equipment main SLD and Layout
3.4 Selection of Control, Automation, Protection and Monitoring System
3.5 Design of Auxiliary Systems and Selection of Equipment
3.6 Technical Specifications for Procurement of Generating Equipment
3.7 Technical Specifications for Procurement of Auxiliaries
3.8 Technical Specifications for Procurement and Installation of Switchyard
Equipment
3.9 Technical Specifications for Procurement of Control, Automation,
Protection and Monitoring Systems
3.1 Power Evacuation and Interconnections with Grid
3.11 Operation and Maintenance
3.12 Erection, Testing and Commissioning
4.8.5 Key observations
SHP projects are installed in remote areas and face issues related to increasing capital
cost. It is important that the research & development activities, standardization results
in enhancing efficiency and reducing the overall cost of SHP project implementation.
Some of the issues identified during the field study and stakeholder consultations are:
Operating staff at power plants indicated that they face difficulties in managing
situations wherein there is high silt depositions. Training in silt management required
to boost the efficiency of power plants.
Need to study the impacts of climate change on the hydrology of existing and
upcoming small hydro projects on a broad scale.
This would mean analyzing the natural variability of resource cycle as well as
the increase in variability that will be caused due to climate change. Several
developers indicated that consistency in resource availability year on year is
an issue. Evaluating climate change impacts on small hydro projects will
become critical for understanding economic sustainability of projects and long
term growth of the sector as well.
Developers indicate that there is sufficient potential to generate additional energy
from the tail race of their power plants and availability of ultra-low hydel turbine can
help them in addressing this.
Several developers also indicated that the quality of their DPR in terms of yield
estimates was very poor. One of the main reasons stated was the availability of site
specific granular data.
AHEC has provided its feedback on its ongoing research, development, and capacity
building activities as well as the road for the future ahead.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
65
Table 26 : Feedback from AHEC on Issues
Sr. No. AHEC Feedback on various issues
1
Streamlining funding for training and development of personals in the
sector is central to various activities undertaken by AHEC. AHEC undertakes
10-15 various training programs. Usually, the clearance for funding from
MNRE for these annual programs comes in by march. The support from
MNRE has been vital in shaping these programs however the amount of
funding fluctuated from year to year. Consistency in amount of annual
funding will help AHEC to better manage capacity building in the country.
Further, there is a need for increasing the allocation of education and
fellowship activities.
2
Timelines for project proposal approval are important: The support of
MNRE for R&D activities has proved to be beneficial. Further there is a need
for the approval process to be streamlined in terms of approval time.
It would benefit AHEC if it could receive timely communication of status of its
submitted project proposal and timely decision on the same.
3
Issues with current industry practices: AHEC has reviewed various
projects across the country for performing test and other resource
assessment activities. During their review of various projects they found that
there are issues with hiring of professional consultants for design and
construction due to which the project quality is affected. They also found
that various developers oversize the site installed capacity.
4
Future ahead: AHEC would be willing to support MNRE with a data
collection framework given the required funding is provided to help build a
hydrology database which project developers can use to accurately perform
resource assessment.
Further AHEC is working on research projects such as hydraulic turbine
simulation, sediment analysis, low head turbine testing, and methodology for
resource assessment. AHEC has stated that the support from MNRE would be
important for success of these ongoing projects.
AHEC further engages with various industry players to address technical
issues and help in finding the right solutions using its expertise.
5.
Installed facility in AHEC: AHEC has a well-equipped facility for providing
training & development as well as testing e.g. Turbine simulator, Ecosystem
testing lab, hydraulic turbine lab, solar lab, and an RE lab.
It is well acknowledged that MNRE through AHEC has undertaken capacity building
measures, preparing data banks on technical standards, issues etc. It is important that
MNRE should consider enhancing the scalability of the training programs through online
training courses. Also, with SHP potential dispersed across different regions, it needs
explore developing regional centres of excellence to promote SHP.
4.9 Water mills projects
Water mill as a technology dates back to the 7th century. Its various applications today
include rice hulling, milling of grains, electricity generation, and other mechanical
applications. Water mills (traditional name: ‘Gharat’) have long been a source of
livelihood in hilly areas such as Uttaranchal, Himachal Pradesh, and North East India as
well as states such as Kerala. People from nearby villages come to process their grain at
the Gharat and usually the Gharat owner either charges a payment or gets to keep a set
quantity of the processed flour i.e. 1 to 2 Kgs for every 10 KGs processed. Gharats are
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
66
also used to generate electricity for either household consumption or for feeding to local
community.
The profitability of a Gharat depends on the
amount of water flow that is available
round the year as well as efficiency of the
water wheel and cost associated with its
maintenance (INR 5k to 10K annually).
Competing and more efficient modes for
milling of grains and access to electricity
also impacts the profitability of Gharats i.e.
electric grinding mills which are must faster
and access to grid electricity reduces
dependence on Gharats. Further changes in
cropping patterns in surrounding villages
may also have an impact. Gharat owners
indicate that while profits may be reducing
or fluctuating over the years, Gharats still
help them in generating savings for
personal use.
With various factors impacting the
profitability of Gharat owners and given
that Gharat provides the opportunity to
owners for maintaining a traditional way of
life through sustainable livelihood, it makes
a strong case for capacity building through
modernization and increased engagement by central, state, and independent agencies.
Gharat(Watermill) owners across the country have benefited from the MNRE scheme for
watermills. The level of central financial assistance provided by MNRE for Watermills and
Micro Hydel Projects is as follows:
1] Watermills:
Sr. No. Category of Watermill Amount of CFA
1 Mechanical output only INR 50,000/- per watermill
2
a) Electrical output (up to 5 KW)
Or
b) Both mechanical and electrical output
INR 1,50,000/- per
watermill
2] Micro Hydel Projects up to 100 kW capacity:
Sr. No. Areas Amount of CFA
1 All states INR 1,25,000 /- per kW
A minimum contribution of 10% of project cost should be met by the
beneficiaries/project owners under the MNRE scheme. On interacting with state hydro
power development agencies or state nodal agencies (SNA), it was found that usually
the beneficiary that is the village resident would prepare the required civil work for the
setting up the watermill post which the SNA procures the required machinery and installs
it. State agencies play a critical role in empowering local population, providing
appropriate information, and being proactive in implementation of the project.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
67
MNRE provides assistance to SNA for service charges for each watermill and micro hydel
project. MNRE has also provided assistance in the past for creating of watermill
development centers for promotion, service, and increasing awareness of watermills in
Uttarakhand and Arunachal Pradesh.
Various issues were identified through the survey and interaction with state agencies and
watermill owners which needs to be addressed.
Table 27 : Various Issues as identified during the survey- Watermills
Area Description of issue
Awareness
• Water mills owners in Bageshwar, Dehradun districts were
not familiar with subsidy disbursement mechanism. Similar
issue of lack of awareness can be seen in other states as
well.
Design
effectiveness
• Project under Dehradun districts have revealed under
performance of even the improved runner design as same
cannot operate below a rated capacity if the availability of
water in the source is lesser then expected in lean seasons.
• Bandawali (Uttarakhand) water mill operator reported that
the runner is required to be replaced after the monsoon
season due to high wear and tear due to increased sediment
content in water. Watermills usually operate for over 10
hours in a day.
Plant
shutdown
• Due to inadequate design of channel diversion, water mill
owners have to shut down operation of water mills during
monsoon season (3 to 4 months) due to heavy water flow.
• On the other hand, Water mills in Himachal Pradesh face
resource constraint due to small hydro projects being setup
up-stream.
• Micro hydel turbine in Thiyamankuddy settlement in Kerala
has to undergo frequent shutdown upto a week’s time due to
circuit breakdowns due to rodents eating away into the
circuit. Maintenance engineers travel from far off places to
reach the facility which causes delays in rectification.
Difficult
terrain for
access
• Remote location of watermill from the habitat create issues
related to access.
Market
competition
• Water mill owners are facing lot of competition from
electrical based water mills/ villagers are not willing to go to
the location of water mill located in difficult terrain
Climate
variability
Impact
• Several water mill operators indicated that their output has
been reducing over the years due to lack of rainfall.
Maintenance
issues
• High cost of maintenance related to watermills puts a burden
on the watermill owners reducing the benefits that they can
receive.
From the overall survey feedback, there are issues such as awareness, capacity building
for local maintenance activities, reducing cost of maintenance, increasing
competitiveness, and improving design for reliability. These issues need to be addressed
for watermills to continue performing as a source of sustainable livelihood for their
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
68
owners and maintain a traditional way of line. Watermills and micro-hydel alike provide a
great opportunity to empower local communities. A case study on a micro hydel power
plant provides an overview of the benefits.
Case Study : Electrification of Tribal Colony in Thayamankudy settlements in
Chinnar Wildlife Sanctuary (Kerala) with the use of a 7.5 kW Pico Hydel Turbine
Case Study of Thayamankuddy settlement in Chinnar wildlife sanctuary.
A 7.5 kW micro hydel turbine at the cost of 8 Lacs was commissioned in June 2016
with the help of financial assistance from EMC Kerala and MNRE
Economic activity and safety:
• Powers the street lights in the village which makes it easier for people to
commute and perform economic activities till late in to the evening.
• It has also helped communities secure their safety from wild animals which
avoid coming near the village due to light sources.
Living standards:
• Provided ease for performing chores such as cooking in the evening and has
improved the living conditions of women in the village.
Education:
• Electricity connection in school has helped the local school improve the
attendance of students from the village.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
69
• Having light inside their house has also improved the studying conditions for
students in the village.
Health:
• Local Anganwadi has also benefited with the electricity connection. They have
now installed a weighing machine which is very essential to check weight of
new born babies and check their health.
Savings:
• Charging point provided inside each household helps the village people to
charge their torch batteries which they can use to access remote locations such
as community toilets later into the evening. This has also reduced the cost of
batteries for these households.
• In the future, the forest department is planning to add facility for electric
grinding and promote other economic activities.
The Ministry of New and Renewable Energy has focused its attention on renewable
sources and has recognized the contribution of watermills in providing a sustainable
source of energy in hilly regions. The existing talent pool of the Engineering department
and research institutions can chip in by upgrading the existing watermills and introducing
low cost designs having ease of operations. Flourishing watermills are integral part of our
agricultural economy and cultural heritage. MNRE may need to reassess the approach to
be adopted to target identified clusters for watermills. The role of state agencies is very
important.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
70
5 Recommendations / learnings specific to
programme implementation on SHP Scheme
Based on the review of key issues, field survey and stakeholder consultations, the
following recommendations are provided to MNRE.
5.1 Policy Targets & Planning
5.1.1 MNRE to prepare actionable SHP plan
The State Govt. should submit the annual SHP development plan to MNRE every year.
The annual SHP development plan to provide details on the expected new SHP projects
& capacity (in MW) proposed to be allocated, under-construction project (with status of
project), expected projects to be commissioned in the financial year, number of sites to
selected for resource assessment/DPR preparation, sites proposed to undertake
renovation & modernization, number & capacity of water-mills to be supported. The
Ministry should examine the annual SHP development plan and finalize the budget
allocation (advance expected for current year, plan for subsequent years) for State
specific development of SHP projects.
5.1.2 Cluster based power evacuation infrastructure development for regions having high SHP potential
Power evacuation infrastructure is emerging as a major issue for development of SHP
projects, mainly in hill states. Power evacuation in certain regions is impacting
operational as well as planned SHP projects. It is important that MNRE identify sites
having high SHP potential, but getting impacted by power evacuation infrastructure
issues.
For this it is proposed a detailed technical study should be undertaken to identify the
power infrastructure requirement for clusters where new installation can be encouraged
till year 2022. It is important to identify the investment requirement and preparing a
phase wise plan. Once the clusters are identified, MNRE should provide incentive in the
form of grant to state agency/utility for development of the power evacuation
infrastructure in clusters having high SHP potential.
5.2 Incentive scheme for SHP
A. Type of Incentive
SHP sector has witnessed slowdown in terms of capacity in last few years. The sector is
facing issues related to increase in capital cost. In a number of cases, the SERCs
determined capital cost (on lower side) is having high variation in comparison to the
CERC determined capital cost. It can be inferenced that the tariff increase has not
aligned with change in capital cost. The SHP projects results in development of rural
economy and is one of the focus technology segment contributing towards the
achievement of 175GW target by year 2022.
MNRE plays an important role in triggering the SHP development, given the fact that the
SHP potential is available in remote areas.
It is proposed that the incentive for the SHP projects shall be continued.
Capital subsidy shall remain the preferred option for incentive disbursement.
The capital subsidy shall be defined as a % of actual project cost or CERC
benchmark capital cost, whichever is lower. In the scheme, MNRE should clearly
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
71
define the maximum cap in the form of Rs Lakh per MW as well as Rs Lakh per
project.
B. Responsibility for subsidy management
It is proposed that MNRE should only define the guidelines for SHP and water mill
subsidy disbursement and the responsibility for subsidy application evaluation & subsidy
disbursement shall be done a government agency.
The key options than can be considered by MNRE for subsidy management are:
Option Remarks
1 State Nodal
Agency
Most of the project related approval & clearances are
undertaken at State level. Given the understanding of the
key requirement & status of SHP projects, SNAs can be a
potential option for subsidy management.
Subsidy can be allotted upfront to State Agencies based on
the annual SHP plan to be shared by States. Will provide
clarity to states and also responsibility for subsidy
disbursement.
2 IREDA
IREDA is a Public Limited Government Company established
in 1987, under the administrative control of MNRE to
promote, develop and extend financial assistance for
renewable energy and energy efficiency/conservation
projects
IREDA has required expertise in subsidy/incentive
management in RE sector. IREDA has managed wind/solar
GBI disbursement for MNRE.
3 SECI
SECI to assist the MNRE and function as the implementing
and executing arm
SECI has required expertise in subsidy/incentive
management in RE sector.
The MNRE should focus on policy design, defining guidelines, facilitating resolution of key
SHP sector issues. The subsidy disbursement/management can be given to a
government agency, reviewing application for subsidy, approval for subsidy based on the
compliance with the guidelines laid down by MNRE. Majority of the supporting required
for subsidy approval application are linked with State agencies or lenders.
It is important that MNRE should provide the subsidy upfront at the start of financial
year to the responsible nodal agency for subsidy management.
C. Pattern of subsidy release
It is proposed that MNRE may disburse subsidy in three tranches under Scheme to
support for setting up new SHP Projects in the private / co-operative /Joint sector. The
current subsidy disbursement is as below:
First Installment: The developer is required to inform the Ministry about
placement of orders for electro-mechanical equipment, disbursement of 50%
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
72
of term loan & achievement of 50% progress on the project to consider for
release of first installment of financial support.
Second Installment: For release of second installment of financial support, the
developer would further inform the Ministry of successful completion of the
project, fulfillment of performance guarantee tests/ testing & certification of
performance, physical inspection of the project and the commencement of
commercial generation.
The developer would send monthly generation report to the Ministry
after start of commercial generation till the time the project attains
80% of the quantum of generation for the corresponding months as
envisaged in the DPR for a minimum of three consecutive months or
80% annual cumulative generation whichever is applicable. The
developer would also provide proof of energy generation such as
certificate from SEB/Power Transmission Corporation/Company etc.
regarding purchase/wheeling of power. In case of grid failure, the
documentary proof from the SEB/Power Transmission
Corp./Company/Utility should be attached.
At this stage, the Fl would submit a certificate to the Ministry that the
project is not a "non-performing asset" (NPA) and the developer is not
a defaulter. In case, the developer is a defaulter/NPA as per the Fl
norm, he will not be eligible for the financial support.
For the release of second installment, it is observed that due to uncertainty in
resource availability on annual and monthly basis, several developers have requested
to review the requirement for 80% generation for the corresponding months for
three consecutive months. Unavailability of water (even on annual basis) results in
delay for undertaking performance testing, which further delays subsidy
disbursement.
Given the fact that the developer has fulfilled requirement of performance guarantee
tests/ testing & certification of performance, physical inspection of the project, the
commencement of commercial generation; tranche of subsidy can be released on
achievement of these requirement as the project meets the technical requirements
specified by MNRE. On achievement of 80% of the quantum of generation
requirement, a third tranche of subsidy can be released separately without linking it
with satisfying the technical standards requirement at the stage of COD.
The proposed recommendation for three tranche based subsidy disbursement under
Scheme to support for setting up new SHP Projects in the private / co-operative /Joint
sector is:
First Installment: Disbursement of 50% capital subsidy on disbursement of 50% of
term loan & achievement of 50% progress on the project to consider for release of
first installment of financial support.
Second installment: Disbursement of 30% on successful completion of the project,
fulfillment of performance guarantee tests/ testing & certification of performance,
physical inspection of the project and the commencement of commercial generation.
Third installment: Disbursement of 20% when project attains 80% of the quantum of
generation for the corresponding months as envisaged in the DPR for a minimum of
three consecutive months or 80% annual cumulative generation whichever is
applicable
The total financial support, for project set-up by the developer fully through its own
resources, will be released directly after successful commissioning of the project :
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
73
First installment: Disbursement of 80% on successful completion of the project,
fulfillment of performance guarantee tests/ testing & certification of performance,
physical inspection of the project and the commencement of commercial generation.
Second installment: Disbursement of 20% when project attains 80% of the quantum
of generation for the corresponding months as envisaged in the DPR for a minimum
of three consecutive months or 80% annual cumulative generation whichever is
applicable.
D. Extension limits under scheme
It is proposed that MNRE may consider the following provisions from the perspective of
extension limits under Scheme to support for setting up new SHP Projects in the private
/ co-operative /Joint sector from the perspective of its eligibility for subsidy from MNRE.
Maximum extension It is proposed that the MNRE to provide maximum time limit to
which the extension can be provided for SHP project. The below option can be
considered.
o The SHP project shall achieve the COD within a defined time limit (say 4/5
years) from the date of achievement of financial closure. In case of failure of
SHP project to achieve COD within the defined time limit, the project shall
become ineligible for capital subsidy.
o In case the SHP project is set-up by the developer fully through its own
resources, the SHP project shall achieve the COD within a defined time limit
(say 4/5 years) from the date of signing of implementation agreement with
the State Govt./Agency. In case of failure of SHP project to achieve COD
within the defined time limit, the project shall become ineligible for subsidy.
Grace Period: a grace period of 12 months can be provided for the commissioning of
project from the original schedule date of commissioning as indicated by the
developer in his application ONLY due to natural calamities and for any other
unforeseen reasons for delays during execution of project. It is proposed that MNRE
through assistance from AHEC shall clearly list the “unforeseen” reasons clearly in
the guidelines to remove any ambiguity on project eligible for grace period.
E. Eligibility Criteria
Under the current scheme, “the request on application form along with documentary
proof, for the grant of financial support for SHP project, complete in all respect from the
developer should be submitted to the Ministry within six months from the
commencement of project work at the site or within six months from the date of first
disbursement of loan from the Financial Institution / Bank whichever is earlier”.
The scheme links the eligibility with commencement of project work at site. It is
proposed that the definition of the “commencement of project work” at site shall be
clearly defined. This condition can be linked for projects not raising any loan. For
projects raising loan, the milestone can be linked only with date of first disbursement
of loan from the Financial Institution / Bank to provide greater clarity in the
guidelines.
Alternate option can be that the request on application form along with documentary
proof, for the grant of financial support for SHP project, complete in all respect from
the developer should be submitted to the Nodal Agency within six months from the
achievement of financial closure of the SHP project.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
74
F. Separate incentive for State agencies to encourage timely commissioning
of SHP projects
One of the key issues with SHP project development has been state level facilitation to
quickly close issues related to approval & clearances. In order to encourage State
agencies (SNA/Utility) to facilitate speedy investment, it is proposed that MNRE should
provide incentive to State agencies. The following can be considered in this respect:
State Agency (SNA/Utility) eligible for subsidy based on the timely installation of SHP
projects within scheduled commissioning timelines. MNRE to fix maximum time limit
for commissioning after signing of implementation agreement for eligibility of
incentive.
Incentive to be disbursed as INR per MW (can be benchmarked with evacuation cost
considered by SERCs on per MW basis).
Incentive to be disbursed to State agency (SNA/Utility) after commissioning of SHP
capacity.
MNRE to manage incentive disbursement to State agencies.
State agency should provide a comprehensive SHP yearly plan detailing project
pipelines, project specific issues, steps taken, commissioning status, cancellation of
projects allotted to non-serious players & dates.
5.3 Institutional Strengthening
One of the major issues related to the implementation of SHP projects is involvement of
multiple agencies and lack of coordination between the agencies. In absence of a
centralized monitoring system, it is difficult for MNRE to keep track of SHP project
development across different states on regular basis, identifying key issues and taking
policy decisions to resolve bottlenecks in a timely manner.
It is proposed that MNRE should develop a web tool/application to provide a single point
integrated platform to support SHP development across states.
The tool/application shall provide clarity on checklist and data inputs required from
developers, status of application, instructions/alert to state agencies (SNA, Utilities,
other State & central agencies as applicable) on action required & processing, output
reports & additional information to support installation.
The application will provide a transactional platform for all stakeholders to process
the requests from developers and aid in the implementation and monitoring of SHP
projects across different States.
Database of projects and project developers – map information related to sites
allocated, developed, status of progress –
o generate unique ID for both project developers and projects – map parent
company/owners, past history (developed, cancelled, delayed)
The tool should cater to MNRE as well as State agency requirements:
o State agencies have limited capacity, hence MNRE should support State
Agencies in development of IT tool/application to assist states in end to end
project monitoring, covering the following elements:
Project Registration
Project allocation
Status of project – implementation, approval & clearances
o To facilitate project registration for subsidy/incentive, evaluation of
application, monitoring of project status and release of subsidy/incentive
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
75
The developer should be mandated to provide details on project status regularly so
that same information is available for MNRE and State agencies for review.
The application/tool can have the following features:
o Online Submission of Application Forms: To provide interface for data entry
for registration of Applicants for installation of SHP projects
To provide interface for data entry, customized as per approved format
To validate Applicant data as per requirement.
To have add/edit, view, save, and submit, print options.
To provide login user, password for each new entry. Multiple user type
login to be provided – MNRE, SNA, Discom, STU, local agencies, AHEC,
Financial Institutions. Access levels to be defined as per user type.
To provide facility for online printing of filled application form.
To be customized for different user types with features like auto-
reminders, filter checks for data, approval/rejection.
The application service provider is required to customize as per the
requirement of State policy framework at state level. MNRE part of the
tool to be common across all States.
o Report Generation
Project Report generation covering following areas: Technical,
Financial, Approval status map for MNRE, Approval status map for
State Agencies, Subsidy disbursement status wherever applicable,
Installation, Post Installation details, AHEC performance testing status
etc. A consolidated report based on all the areas shall also be
developed.
To design Reports generation /tables/ graphs as per various
parameters. The final number, parameters, and type of reports, the
design and structure to be finalized by State agencies for aspects
related to State.
o SHP developers to provide annual generation details in the application. This
shall be made mandatory for developers availing subsidy.
o The IT application/tool shall cater to both with subsidy or without subsidy
based SHP projects.
MNRE should fund the development of the IT tool/application and adequate training &
capacity building can be provided to State agencies, SHP developer associations,
AHEC etc. For initial one year of implementation, MNRE can support an IT cell to
facilitate streamlining of the IT application roll-out. From a sustainability perspective,
MNRE can evaluate a government institution to be responsible for maintaining and
upgrading the IT tool/application.
The figure below details an indicative overview of the expected IT tool/application
process map:
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
76
5.4 Scheme for Water mills
From the survey analysis, it is clear that watermills provide a sustainable source of
livelihood however their competitiveness is reducing due to various factors. New scheme
must address this by building capacity at local level and target specific development
initiatives which can increase adoption of watermills and keep watermill owners
competitive.
The recommendations are as follows:
1. Enhance awareness at local level for water mill projects through increased
engagement of local state agencies and community.
2. MNRE to incentivize proactive engagement of state agencies with local community
members in disseminating information on procedures and benefits of taking up
water mill projects.
3. MNRE to explore better watermill runner designs which can operate efficiently
under low and variable flow conditions.
4. Asses best possible ways to resolve issues related to lack of resource due to SHPs
coming upstream.
5. Proposed scheme for net metering can be designed which can help watermill
owners create savings from surplus electricity post consumption. This can also
incentivize traditional watermill owners to upgrade to electric watermills or install
a hybrid system.
6. Incentives to state agencies can be provided for implementing new business
models which increase incomes of watermill operators e.g. acting as channel
partners for sale of watermill grinded flour which is usually considered as more
nutritious and has good demand in urban areas.
7. Training centers should identified in each state to facilitate ongoing initiatives for
spreading awareness and implementation of watermill programs.
8. Watermill operators reported that the cost of construction has increased over the
years. CFA for micro hydel power plant should also be increased with a
comparatively higher CFA level for north eastern states considering the high cost
of construction there.
9. Scheme should mention specific incentive to be given to state agencies for
identification of new watermill development/upgradation sites. Ministry should
further specify clear targets for state agencies in consultation with them and tag
incentives to achieving capacity milestones as well i.e. no. of watermills
commissioned from total target.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
77
10. Standard guidelines for preparation of watermill project document should be
issued for state agencies to follow. The submission process can be brought online
through IT tool implementation.
5.5 Support for setting up of Micro hydel projects upto 100 kW
capacity
MNRE to continue providing financial support for micro hydel project upto 100 kW
capacity
MNRE should give priority to rural/remote areas, especially off-grid and mini-grid for
encouraging implementation of micro hydel project upto 100 kW capacity.
5.6 Resource Assessment
Under existing scheme, the Ministry provides financial support for the overall estimation
of potential of SHP projects in a State, identification of new potential SHP sites and for
the preparation of Plan for systematic SHP development including environment impact
assessment etc., in the State. The Ministry also supports specialized studies for remote /
border areas to prepare plans for setting up Micro Hydel Projects (MHPs) in such areas
and strengthening of data base for potential SHP sites. These studies are supported on
case to case basis.
In order to further strengthen the resource assessment initiatives, the following is
proposed:
MNRE should strengthen database for resource assessment/hydrological data. For
this MNRE should reassess/evaluate the small hydro potential in the country on
regular basis (every 3 years).
Online databank: MNRE should to create a credible online databank for hydrological
data. For this, MNRE can consider the following :
Reassess/evaluate the hydro potential in the country to harness the hydro -
potential on low head and ultra-low head sites including existing SHP Projects
Tie-up with CWC to provide long term hydrological data for potential sites
Hydrological data vetted by competent authority will assist in development of
good DPR.
AHEC has shown interest in assisting with initiatives on data collection given
proper financial and institutional support through MNRE R&D or sector
capacity building initiative. Specific pockets/clusters in key states can be
targeted first under an initiative.
MNRE to use IT tool to monitor actual CUF of SHP projects – mandatory for
projects supported through subsidy
SHP Potential to be categorized for mapping the ease of harnessing the potential –
this can be done by defining the attractiveness of potential based on: nearest power
evacuation infrastructure, access road, water availability, forest land etc. The
categorization shall result in ranking the SHP sites based on their attractiveness. This
will assist MNRE in targeting clusters having high attractiveness to meet the SHP
capacity addition target.
Standardization of SHP DPR preparation: MNRE to take initiative to standardize the
DPR preparation process and enhance quality of DPRs. Online tool proposed to be
developed by MNRE can be used for standardization of DPR preparation and having
appropriate checks & balances to check quality of DPR. This can be supported by
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
78
online training modules to developers on preparation of DPRs, apart from technical
consultants.
o MNRE to develop a tracker on sites funded for DPR preparation, agency
preparing the DPR and monitoring the final parameters after commissioning in
comparison to the DPR values. This will ensure MNRE in monitoring quality of
DPR prepared by different agencies/institutions. SHP projects availing subsidy
can be mandated to provide details in the form of a checklist detailing DPR
value and actual value, after commissioning of project.
o MNRE to undertake initiative with respect to empanelment of consultants for
DPR preparation to facilitate developers.
5.7 R&D and Human Resource Development
It was observed that training and capacity building can greatly enhance profitability and
quality of a project for long term sustainability of the plant as well as the sector in
general. SHP sector if facing issues related to increased capital cost, high O&M etc. The
research and development initiatives shall support the sector in addressing the key
issues.
The recommendation to enhance R&D and capacity building efforts are as follows:
1. Develop network of regional centres of excellence to support development of SHP.
AHEC has been at the forefront of SHP research in India.
o MNRE can further assist AHEC to tap other institutions in the country to
coordinate with various Institutions/Centers of Excellence including those by
other Ministries/ Organizations, and the R&D projects funded by the Ministry
with the aim of facilitating their work, bring about synergistic networking and
explore translation of R&D work to commercial deployment. At least, one
institution in each region should be identified to spearhead the R&D and
training initiatives with AHEC providing the guiding framework.
2. Development of Online training modules & courses: Most of the trainings are carried
out at AHEC in its turbine simulation lab which provides hands on experience on
managing a power plant which is essential. Given the dispersed nature of SHP
potential across different States, other training programs such as on resource
assessment, DPR preparation, silt management etc can be provided through optional
online/e-learning training modules. E-learning modules have benefit of being
scalable, efficient and fast, maintaining consistency, saves time and money. The e-
learning modules shall be developed on dedicated platform/Learning Management
Systems.
o MNRE through AHEC shall prepare e-learning module on focus areas like DPR
preparation, construction & installation, O&M, technical standards etc.
Specialized courses for technicians can be taken up to meet the requirement
of skilled manpower for field installations and O&M.
o Online certification courses can be developed by AHEC.
o MNRE to explore potential of providing access to e-learning modules to other
countries to enhance partnership in SHP segment.
3. Clear roadmap for R&D and Capacity building: MNRE to undertake a detailed study
and consultations to identify the thematic areas for R&D and training capacity
building. MNRE should prepare a detailed roadmap for undertaking activities in the
next 3 years. The focus areas shall include the below :
Laboratory Facilities
Testing & Certification
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
79
Technology Commercialization : focus on cost reduction (capital cost , O&M),
implement pilots to assess feasibility of existing Ultra Low Head turbine
technologies at tail races of SHPs & encourage commercial models.
MNRE should support dedicated commercialization programs through
PPP route.
MNRE can also tap into the incubation cells across research &
educational institutions in India to commercialize new technologies.
Knowledge Services & Capacity building
Enhance International and National Industrial Research Collaborations
4. MNRE to support research initiatives focused on evaluating long term economic
impacts of climate change on hydrology and SHP projects.
5. AHEC may be strengthened with regard to their capacities and resources, both
human and financial, and it should be made a guiding star for the sector with
sufficient technical, financial and functional support and autonomy.
5.8 Regulatory Interventions
Inter-state transmission charges exemption
National Tariff Policy (amendment) has provided waiver in inter-state transmission
charges and energy losses for transmission of Solar and Wind Power. SHP projects are
reliable RE source and encouraging inter-state trade shall assist SHP developers. It is
proposed that MNRE shall review this with MOP to evaluate providing the same benefit to
SHP projects.
Capital Cost benchmarking
Capital cost considered by a number of SERCs is lower than CERC values and the
developers are requesting for the same. It is important to ensure regulatory push to
consider the cost variations while determining tariff for SHP projects.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
80
6 Annexure 1 : Project Survey Details
6.1 List of SHP Projects surveyed
State Project Name District Type of Power
Plant
Commissioning Year
Total (kW)
1 Uttarakhand Bhilangana-III SHP
Tehri Gharwal ROR 2011 24000
2 Uttarakhand Sarju-2 Bageshwar ROR 2016 12600
3 Uttarakhand Loharkhet Bageshwar ROR 2008 4800
4 Uttarakhand Badyar Hydro Electric Project
Uttarkashi ROR Aug-14 4900
5 Uttarakhand
Regency Gangani Energy Pvt. Ltd.
Uttarkashi ROR 2013 8000
6 Uttarakhand Sarju 3 Bageshwar ROR 2014 10500
7 Himachal Pradesh
Beas Kund Kullu ROR 2012 9000
8 Himachal
Pradesh Beas Kullu ROR
Under
Construction -
9 Himachal Pradesh
Hurla SHP Kullu ROR Under Construction
3000
10 Himachal Pradesh
Aleo - II Kullu ROR 2014 4800
11 Himachal Pradesh
Jirah SHP Kullu ROR 2011 4000
12 Himachal Pradesh
TOSS SHP Kullu ROR 2008 10000
13 Himachal Pradesh
Baragaon Kullu ROR 2015 24000
14 Himachal
Pradesh Dikleri Chamba ROR 2013 2000
15 Himachal Pradesh
BINVA IV (Bhavani Renewable
Energy Pvt. Ltd.)
Kangra ROR 2013 4000
16 Himachal Pradesh
Lower Baijnath ROR 2009 1000
17 Himachal Pradesh
Neogal II Kangra ROR 2014 4500
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
81
State Project Name District
Type of
Power Plant
Commissioning Year
Total (kW)
18 Himachal Pradesh
Neogal Kangra ROR 2013 15000
19 Himachal Pradesh
Iqu-II Kangra RoR 5000
20 Himachal Pradesh
Sumez SHP Rampur RoR 2014 14000
21 Himachal Pradesh
Ascent Hydro Rampur RoR 2012 4500
22 Himachal Pradesh
Kurmi Rampur RoR 2014 8000
23 Kerala Adyanpara Malapuram ROR 2015 3500
24 Kerala
Meenvallom
Small Hydel Projects
Palakkad ROR 2014 3000
25 Kerala Raniperunad Patthanamthita ROR 2012 4000
26 Kerala Kariyakayam Patthanamthita Dam 2013 15000
27 Kerala Vellathoval small hydro project
Idukki ROR 2016 3600
28 Kerala Iruttukanam Small Hydel Project
Idukki ROR 2012 4500
29 Telengana Bravo Suryapeta Canal 2013 1200
30 Telengana Kalavapally Suryapeta Canal 2016 750
31 Telengana Malyalappaiah Suryapeta Canal 2014 900
32 Punjab SKR Bhatinda Canal 400
33 Punjab Poohla Bhatinda Canal 2014 600
34 Punjab Bowani 1200
35 Punjab Sidhwan Hydro Ludhiana Canal 2014 700
36 Punjab Bharowal Ludhiana Canal 2013 750
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
82
State Project Name District
Type of
Power Plant
Commissioning Year
Total (kW)
37 Arunachal Pradesh
Khet MHS Tawang ROR 2012 100
38 Arunachal Pradesh
Thinbu MHS Tawang ROR 2012 100
39 Arunachal Pradesh
Tsechu MHS Tawang ROR 2012 100
40 Arunachal Pradesh
Zhangdonggrong
West Kameng ROR 2013 1000
41 Arunachal Pradesh
Rahung West Kameng ROR 750
42 Arunachal Pradesh
Dirang West Kameng ROR 2000
43 Karnataka Baje MHS Udupi ROR 2015 3800
44 Karnataka Yennahole I MHS
Udupi ROR 2014 15000
45 Karnataka Mulibettu MHS Dakshin
Kannada ROR 2015 10500
46 Karnataka Aramedanahalli MHS
Hassan Canal 2013 1500
47 Karnataka Sai Nireeha Power Project - Kattepura MHS
Hassan ROR 2013 5000
48 Karnataka Igglur MHS Ramanagara ROR 2015 1500
49 Karnataka Suvarnamukhi
MHS Ramanagara ROR 2014 2000
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
83
6.2 List of SHP Projects surveyed
S.No. State Project Type District Capacity(kW)
1 Uttarakhand Electro Mechanical Harsila 3
2 Uttarakhand Electro Mechanical Sarigad 3
3 Uttarakhand Mechanical Kyara 3
4 Uttarakhand Mechanical Bandawali 3+2
5 Himachal Pradesh Mechanical Chamba 3
6 Kerala Electrical Palakkad 2
7 Kerala Electrical Palakkad 3
8 Kerala Electrical Palakkad 3
9 Kerala Electrical Chinnar 7.5
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
84
7 Annexure 2 : Approval timelines
Case – Himachal Pradesh Approval Timelines (Upto 5 MW)
Step Details
Application for
Allocation
• Application shall be accepted on the prescribed format
and should have accompanied the application fee &
requisite documents.
• The application shall include along with the application
the information regarding, name of the stream/nallah,
estimated capacity, assessed head and assessed design
discharge, layout sketch of the Project.
Issuance of
Consent Letter
• If the project is approved for allotment to a particular
applicant, consent letter for exclusive time bound right
for preparation of Detailed Project Report (DPR) for the
Small Hydro Electric project shall be issued.
Submission of
Feasibility Report
• IPP shall submit a comprehensive Feasibility Report (FR)
to Himurja prepared by a reputed consultant within six
months of issuance of this letter along with the
credential of the consultant.
• Extension of three (3) months subject to deposition of
extension fee @ Rs 10,000/- per MW per month is
allowable. If the IPP fails to submit Feasibility Report
within extended period project is liable to be cancelled.
Feasibility Report
Approval
• Himurja will approve the Feasibility Report within two
months from its submission or within 11 months
(including extension obtained for submission of
feasibility report if any) from the issue of consent letter
Grant of
Technical
Concurrence,
preparation &
submission of
documents for
signing of
Implementation
Agreement.
• Technical Concurrence shall be accorded by Directorate
of Energy (DoE), on behalf of the Government within 45
days from the date of receipt of the Detailed Project
Report or within 28 months and 15 days from the date
of issuance of Consent Letter and also complete all
formalities for signing of IA
Confirmation of
Interconnection
Point
• Two months after the approval of FR
Signing of IA • Within 15 days of accordance of TC or within 29 months
from the issuance of Consent Letter
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
85
Achieving
Financial closure
including PPA if
required and
work started
Concurrent
action: Any
balance
clearances,
consent/approval
• IPP has to achieve the financial closure including PPA, if
required and obtain balance clearance/consent/approval,
if any and start work on site within six (6) months after
signing of IA or within 35 months
Project
Commissioning
• Project must be commissioned within 24 months from
the date of start of work - six (6) months extension in
this period is allowable for valid reasons
Source – Himurja
Case – Himachal Pradesh Approval Timelines (above 5 MW)
Step Details
Identification of site
• Either Private developer to identify else state to
identify and notify the list of potential sites across
Himachal Pradesh river beds
• Project proposal submission by perspective bidders
within a stipulated time is scrutinized by nodal
agency (Dept of Energy) and approval is from
Government of HP
Project allotment
• Project allotment follows notice inviting tender
route, department notifies about the SHP
development scheme
• Allotment on the basis of tentative installed
capacity as mentioned in NIPs through Competitive
Bidding Route
Signing of MOU
• Submitting a of 50% of fee at the time of MOU
signing
• Security deposit process to be finished within 30
days of signing of MOU
Compendium of
hydrological data,
topographic survey
and feasibility project
• One year from signing of MOU
NOCs of IPH, HPPWD, Revenue, Fisheries and Wild Life are not required. However, clearances and compliance of norms & conditions of the departments shall be ensured by the developers before and during execution.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
86
Power evacuation
• Point of interconnection, evacuation envisaged by
company to happen within one year of signing of
MOU
Submission of DPR • 24 months from signing of MOU
Signing of
Implementation
agreement (IA)
• 42 months from signing of MOU
Submission for TEC/
Statutory/Non-
statutory
Clearances/Land
Acquisition
• Within 8 months of signing of IA
Obtaining govt
approvals
• Within 10 months from date of Submission of
Proposals by Company
Financial Closure /
Signing of PPA / Start
of construction work
• Within 24 months from date of signing of IA or 6
months of obtaining Clearances/ Approvals,
whichever is earlier
Project Commissioning
• As per Techno-economic Clearance of the DPR
Handing over of
Project to Government
• 40 years after Scheduled COD
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
87
Case – Uttarakhand Approval Timelines (above 2 MW and up to 25 MW)
Step Details
Project Allocation
Process
• State government to identify and notify the
potential small hydro projects in various river
valleys
• Shall prepare the DPR and submit to GoUK for
approval (no timeline mentioned for govt approval
on DPR)
• Project developer selection based on bidding
(premium route)
Issuance of LOA
• Government to provide LOA to the perspective
selected bidder for development of SHP (no
definitive timeline mentioned)
Signing of
Implementation
Agreement
• Implementation agreement to be signed off within
45 days*
• From LOA issuance for a total period of 40 years
Approval and
clearances
• Private developer to obtain all necessary clearances
and approvals regards to Forest, Environment,
PWD, Irrigation (no clear timeline mentioned) – 20
months from signing of IA
Financial Closure • Private developer to obtain financial closure within
20 months of signing of IA
Project Commissioning
• Project Developer to obtain project commissioning
i.e. charging and performance monitoring
certificate within 5 years from the date of signing of
IA
Case – Uttarakhand Approval Timelines (upto 2 MW)
Step Details
Application for
Allocation
• The Nodal Agency shall be responsible for
identifying the potential sites and prepare the
Detail Project Report (DPR) for the development
of MHP sites.
Approval of Application
• The proposal received within stipulated time frame
from the bidder shall be scrutinize and shortlisted
by the Technical Appraisal Committee (TAC) (21
days)*
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
88
• The allotment of the project to the successful
bidder shall be done by the Project Approval
Committee (PAC)
Issuance of LOI
• Nodal Agency would issue the letter of allotment
(LOA) to the successful bidder for submission of
security amount and signing of Implementation
Agreement (IA)
Project Commissioning
• The Project shall be completed and made
operational within a period of 36 months after
financial closure of the project.
Signing of
Implementation
Agreement
• Nodal Agency/GoUK will sign the Implementation
Agreement (IA) with the successful bidder within
30 days of issue of letter of allotment (LOA). The
detail of implementation schedule, obtaining
clearances and other related information will be
defined in the IA.
Approval and clearances
• MoEF notification vide 14 Sept 2006, environment
clearance is exempted for mini/ micro projects
• Developer to obtain statuary clearance within 6
months of allotment
Financial Closure • Developer to obtain financial closure within 9
months of letter of allotment
Case – Karnataka Approval Timelines
Step Details
Application for
Allocation
• Application may be submitted in the prescribed format
(downloadable from kredlinfo.in) and should be
accompanied with the application fee (Application fee of
10,000 Rs./MW + Tax) & requisite documents.
• The application shall include along with the application the
Pre-feasibility Report, Topo sheet, information regarding
land etc.
• Net worth of the company, certified by CA, shall be at least
30% of the total project cost.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
89
Scrutiny of
application
• Initial scrutiny by KREDL against its checklist.
• Letter will be addressed to Forest Department (to ascertain
the availability of land if it is lies in Forest area), Krishna
Bhagya Jala Nigam Ltd (KBJNL) (if the project comes under
limits of KBJNL), Water Resources Development
Organization (WRDO) (if the project comes under vicinity of
Cauvery Basin) and Karnataka Power Corporation Limited
(KPCL) (if the project comes under vicinity of KPCL
projects).
• After receiving the clearances, proposal will be sent to
Government of Karnataka for placing it before the
Allotment Committee headed by The Additional Chief
Secretary/Principal Secretary, Energy Department,
Government of Karnataka.
Project
Allotment
• Govt. order for allotment issued, stipulating various terms
and conditions and timelines.
Signing of
agreement
• Signing of agreement between Developer and Govt. and the
payment of DPR processing fee (1,00,000 Rs./MW + Tax)
and refundable security deposit (1,00,000 Rs./MW + Tax)
• Agreement specifies more detailed terms and conditions of
allotment.
Obtain all
statutory
clearances
• Project Developer shall obtain all statutory clearances from
authorities such as WRD Dept., Forest, Ecology &
Environment Dept., KPTCL, KPCL, PCB, Revenue Dept. etc.
Submission of
DPR for
technical
clearance
• DPR shall be submitted within one year from date of
execution of agreement for technical clearance from
KREDL.
Financial
closure
• Financial closure to be achieved within 6 months of receipt
of technical clearance for the DPR
Project
commissioning
• The time line for implementation of the project will be 5
Years from the date of Government Order of allotment.
Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE
90
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee
(“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally
separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to
clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.
This material has been prepared by Deloitte Touche Tohmatsu India LLP (“DTTILLP”), a member of Deloitte
Touche Tohmatsu Limited, on a specific request from you and contains proprietary and confidential information.
This material may contain information sourced from publicly available information or other third party sources.
DTTILLP does not independently verify any such sources and is not responsible for any loss whatsoever caused
due to reliance placed on information sourced from such sources. The information contained in this material is
intended solely for you. Any disclosure, copying or further distribution of this material or its contents is strictly
prohibited.
Nothing in this material creates any contractual relationship between DTTILLP and you. Any mutually binding
legal obligations or rights may only be created between you and DTTILLP upon execution of a legally binding
contract. By using this material and any information contained in it, the user accepts this entire notice and terms
of use.
©2017 Deloitte Touche Tohmatsu India LLP. Member of Deloitte Touche Tohmatsu Limited
Deloitte Touche Tohmatsu India Private Limited (U74140MH199 5PTC093339), a private company limited by
shares, was converted into Deloitte Touche Tohmatsu India LLP, a limited liability partnership (LLP Identification
No. AAE-8458),with effect from October 1, 2015.